More than 500,000 rental units will be completed in 2024 as the U.S. sets a record in new apartment construction, RentCafe says in a new report.
This is the first year in history the construction of new units has passed the 500,000 mark.
Leading the new construction charge along with New York are the Dallas and Austin metros. The Texas cities will account for roughly 10 percent of all the new construction by the end of the year.
Supply wave of new rentals meets high demand
Even with record new construction of rental units, demand for rentals continues to outstrip the supply, the report says.
“The supply wave has brought 50-year high deliveries to certain metros … but the increased competition is slowing rent growth, especially in booming Sun Belt markets,” Doug Ressler, senior analyst and manager of business intelligence at Yardi Matrix, said in the report. And despite falling rents in the Sun Belt, demand for apartments has remained strong.
Most of the apartments built in the last five years, as well as those under construction, are high-end and cater mainly to upper-middle- and high-income renters. This focus on high-end apartments — combined with the concentration of new units in the largest U.S. metros — means that renters in smaller markets may continue to have limited affordable options, the report says.
New apartment construction locations vary across the country
Nearly 60% of the new apartments expected to open in 2024 “are clustered in the top 20 metros in our ranking,” RentCafe says in the report.
“The overall impact on the number of developers might vary by region. In places like Texas, for instance, the demand for apartments remains robust due to factors like corporate migration and high home prices. On the other hand, some markets are seeing a slowdown in new construction starts due to the economic environment,” Ressler said in the report.
Looking ahead to 2025 and beyond, the apartment construction landscape is shaping up slightly differently. “Most markets won’t see the impact of rapidly falling starts translating to lower completion levels until the second half of 2025, and more likely in 2026,” Ressler explained. “All said, this massive drawdown in starts across all regions sets the stage for a very different industry trajectory come 2026 and 2027.”
Read the full report here.
