Why is rent so expensive? Slowest rent growth in 14 years disguises trends

Good news first: U.S. rents grew by just 0.3% last year, the slowest rent growth since 2010, according to property data firm Yardi Matrix. And now the bad news: most of the beneficiaries of lower rents are actually the wealthiest members of the market. In fact, the unaffordable housing crisis for those in low, middle and even higher-income levels isn’t getting better, at least not yet.

With more than 1.2 million new housing units under construction this year, the supply growth of new housing is at decades-long highs, but Yardi says that’s misleading as not all of them have come to market yet. Simple supply and demand means the wealthier renters, and not those on lower incomes, can afford the remaining units, and developers are offering them deals as the prime demographic.

Middle and lower-class renters, on the other hand, saw rent increases of 2% in 2023, according to the firm—and that’s on top of roughly 20% increases since the pandemic. The silver lining is that Yardi projects 2024 being a “peak year for deliveries”—a lot more rental supply, in other words. 

But now there’s another problem, Yardi points out: Too much new rental housing is for those looking for luxury. The surplus of houses tailored to the upper-class demographic means there’s more supply than renter’s demand, which in turn incentivises landlords and developers to slash prices and offer deals that make very expensive housing slightly less so. In Austin, renters can secure houses that would go for $5,000 to $8,000 a month for 20% off, according to the Wall Street Journal, which previously reported on the Yardi data. In Chicago, new apartment towers offer months of free rent, the outlet reported. 

Yardi expects about 510,000 more units to be completed this year and also predicts that…