Zillow Reports Rent Affordability Hits Four-Year High
(Photo credit: Mike Sorohan)
A new forecast from Zillow promises increased affordability relief for renters this year.
Zillow forecasts multifamily rents will dip 0.2% this year—a sharp slowdown from the rapid increases of recent years—as higher vacancy rates and more new apartment units coming online improve the bargaining position of renters and subdue rent growth.
The typical U.S. asking rent in January was $1,895, according to the Zillow Observed Rent Index, essentially unchanged from December and up 2% from a year earlier. That represents the slowest annual rent growth since December 2020, as the market has settled into a steadier pace after the rapid increases seen during the pandemic housing boom.
Multifamily rents rose just 1.4% from a year ago amid a historic construction boom, while incomes increased at a faster pace. As a result, affordability for apartment renters who earn the median household income has improved beyond pre-pandemic levels: A median-income household would now spend 24.3% of its income on the typical apartment rent, down slightly from 25% in February 2020. With Zillow forecasting multifamily rents to dip, affordability could improve further by year’s end.
“Renters are operating in a very different environment than they were just a few years ago,” noted Orphe Divounguy, senior economist at Zillow. “When supply expands and vacancies rise, property managers have to adjust on both price and terms.”
Divounguy said rental concessions are approaching record highs, “keeping rent growth modest and creating meaningful opportunities for renters.”
Much of the shift comes down to supply, the Zillow report noted. Although the flow of newly completed apartment buildings peaked in the summer of 2024, more buildings are still being added to the stock of available rental units. At the same time, a cooling labor market is helping keep the number of vacancies elevated. With more options available, renters now have more negotiating power for renewals and new leases than they have had in a long time.
“Flexibility in lease terms is another sign of the shift,” the report said. “In January, just below 40% of rental listings on Zillow included at least one concession, such as a free month of rent or a reduced deposit. Though slightly below last January’s record high of 41.1%, that share remains elevated compared to historical norms, underscoring the degree to which property managers are competing for tenants.”
