The Rental Market is Softening, But Many Are Still Struggling

Rental markets are beginning to “soften,” and rent growth has nearly come to a halt after historically high increases in 2021 and 2022, according to the 2024 America’s Rental Housing report led and presented by Whitney Airgood-Obrycki, a senior research associate at the Harvard Joint Center for Housing Studies.

Supply is now outpacing demand for the first time in many years, however, statistics countrywide show those cost-burdened—reaping the unfortunate impacts of COVID—and facing evictions and homelessness have grown to record-high levels. It’s likely that deceleration in the rental market will not remain long-term due to strong demand from younger generations.

2023’s third quarter bore witness to professionally managed apartments dropping from 15.3% in the beginning months of 2022 to 0.4%.

“This abrupt deceleration was geographically widespread, with rents even falling in some markets,” said Airgood-Obrycki.

While rent growth has significantly slowed, the drastic increase in prices during the COVID pandemic brought those who are cost-burdened to countrywide highs, and its impact is still lingering. At the end of 2022, 22.4 million renters spent over 30% of their income on rent and other related expenses—an increase of 2 million in a three-year span.

It comes as no shock that cost-burden rates are still skyrocketing, and depending on location, it can be because of high rents, and elsewhere, low incomes.

In the Midwest and South for example, median rents are the lowest, but cost-burdened rates are 46% and 50%, respectively, because median incomes are lower, too. Likewise, the Northeast and West have higher median incomes, although cost-burdened rates are still heightened at 50% and 52%, respectively, as a result of high housing costs.

Despite its many presented hardships, the pandemic brought with it consistent financial protections and support—creating greater housing stability for many. Unfortunately, evictions are rising again. 

From the early days of COVID until the end of 2021, The Eviction Lab calculated that eviction filings fell by 58%, which was aided by the Emergency Rental Assistance program (ERA) and federal and state moratoriums.

The ERA program had dispersed $46.55 billion throughout 43 states, although this, along with other programs have nearly concluded, or aren’t going to be implemented any longer. Now, eviction rates are moving back toward pre-COVID levels.

But, nearly half of ERA administrators who were surveyed by the National Low Income Housing Coalition claim they are looking to resume operations after federal allocations run out.

The pandemic brought housing concerns to the forefront of many governments at the hyperlocal level, as 12 local governments—in addition to three states—enacted right-to-counsel programs.

The report also took a look at the way in which younger generations—Gen Z and millennials specifically—have contributed to the uptick of rental households in recent years.

The millennial generation (those born between 1980 and 1984) drove an abundance of renter growth up until 2016. Due to the Great Recession, a lack of available jobs and low wages, millions postponed ownership, with a 6.2 million renter increase headed by millennials between 2009 and 2019—reaching 16.2 million renters at peak.

Now, millennials are evolving into their home-buying and homeownership years of adulthood, and are not driving statistical growth in national rentals as they once were—dropping 797,000 from 2019 to 2022. Additionally, during this timeframe, their homeownership rate increased by nine percentage points.

While millennials will undoubtedly still contribute to rental demand to some extent in the coming future, it’s those from Gen Z—born between 1995 and 2009—who are the current primitive factors. Gen Z headed 7.9 million rental households in 2022.

Forthcoming, growth in renter households will rely on Gen Z and their ability to prevail in the midst of the inevitable decline of older renters, which millennials were able to do at the same age.

It may be true that Gen Z follows a different path than millennials however, being that they already have higher ownership rates to boast.

The challenge of affordable rental housing is consistent, and not a new obstacle for millions of Americans—though one that is getting worse. Prior to the pandemic, housing costs rose across various income levels, and heavily in high-cost markets, with low-income renters facing consistent high burdens. The pandemic intensified these concerns, leading to high rising rents and an increase in evictions, especially now that programs like the ERA are beginning to dwindle.

A gap still exists between low-income affordable housing and housing costs, which has highlighted the push for government action and the need to expand housing subsidies.

To view the full report, click here.

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