Analyst notes renters are now seeing the benefits of the construction boom
New data from Zillow revealed an uptick in rental concessions in July across the United States, providing renters more options and better deals. In addition, the latest figures show that over 60,000 multifamily units were completed nationwide in June, marking the highest monthly completion rate in more than 50 years.
Zillow’s report highlighted that landlords are increasingly offering perks to attract tenants. In July, 33.2% of rental listings on Zillow included concessions, such as free rent for several weeks or complimentary parking, up from 25.4% a year earlier. The trend is particularly pronounced in southern and western cities like Atlanta, Phoenix, and Austin, where more than half of the listings offered some form of concession.
“Builders have stepped up and built an incredible number of homes in response to soaring rents during the pandemic, and renters are now seeing the benefits,” said Skylar Olsen, Zillow’s chief economist. Olsen noted that the current market conditions, including a cooling job market and lower mortgage rates, could continue to drive down rents if these trends persist.
More options for renters
The construction boom has provided much-needed relief for renters, who faced steep rent hikes in the years following the pandemic. The pace of rent growth has slowed significantly, with multifamily rents increasing by 5.1% since July 2022, a far cry from the 22.3% surge seen in the previous two years.
The increase in rental supply is also helping to ease inflation pressures. Nationwide, shelter inflation dropped to 5.4% in June, down from a peak of over 8% last year, according to Bloomberg. This decline is expected to contribute to lower overall inflation rates, potentially strengthening the Federal Reserve’s case for reducing interest rates.
Despite the recent influx of new units, the construction boom may have peaked. The number of multifamily units under construction, while still high, has been gradually declining over the past eight months, a media release noted. Nevertheless, the rental vacancy rate has remained stable at 6.6% for the past year, the highest since winter 2021.
Zillow’s data also shows that rental markets in some major metros are becoming more competitive. For example, San Jose, Baltimore, and Milwaukee saw a decrease in the share of listings offering concessions, indicating that demand is still outpacing supply in these areas.
As the construction frenzy continues to play out, renters in cities like Raleigh, Charlotte, and Salt Lake City are particularly well-positioned to take advantage of the market’s offerings. Over 50% of rental listings in these cities now include concessions, providing renters with more opportunities to find affordable housing.
In contrast, some cities are seeing less of a shift. Markets such as New York and Los Angeles, while offering concessions, have not seen as significant a rise in these offers as other regions. Renters in these cities may find it more challenging to secure the same level of deals.
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