After years of record gains, apartment rents rose just 0.8% between June and July, one-third the growth seen during the same period one year ago, CNBC reports. Rents were up 12.2% year-over-year in July compared with 13.8% annual growth in June, so what’s causing the sudden dropoff?
For the past 20 years, rent growth has consistently outpaced income growth nationwide, but experts say that divide is now wider than ever thanks to the pandemic. Landlords are being forced to ease off on higher rates to accommodate lower-income tenants, and increasing apartment supply is cooling off heated competition within the rental market.
Landlords dramatically slashed rents in 2020, as renters fled urban areas only to return in 2021 and even more strongly this year. The new renters are younger and tend to have lower incomes, squeezing landlords to ease off on higher rates.
What’s more, a massive amount of new supply is flooding the market, with roughly 420,000 new apartment units expected to be completed this year, according to RentCafe. The last time completions passed 400,000 was in 1972. Much of that new inventory is in New York City, as well as in the Sunbelt region.