For the past two years, renters across the United States have enjoyed a relatively stable market. A historic surge in apartment construction helped curb the rapid rent increases seen during the pandemic, as landlords competed to fill new high-rise units with enticing discounts and perks. However, this period of affordability may soon come to an end. Rising construction costs and higher interest rates have discouraged developers from launching new projects, setting the stage for a potential apartment shortage in the coming years.
The rental market has recently been in renters’ favor. A record-breaking 588,900 new units were completed in 2024, following 440,000 in 2023. Another 500,000 apartments are expected to be added in 2025. This influx of supply has helped stabilize rents and even prompted landlords to offer concessions such as free rent and parking. Analysts suggest that 2025 may still be a favourable year for tenants as property managers focus on maintaining high occupancy rather than increasing prices.
Despite the recent apartment boom, the pipeline for new developments has significantly shrunk. The number of new projects started in 2024 was the lowest in over a decade, reflecting a broader hesitation among developers. Several factors contribute to this pullback, including rising interest rates, higher construction costs, and stricter financing conditions. Unlike in previous years when developers had easier access to capital, the current economic environment has made new apartment projects less financially viable.
By 2026, the number of newly completed apartments is projected to drop sharply. Estimates indicate that while 524,000 new units may be available in 2025, the supply will shrink to 414,000 in 2026 and further decline in 2027. Some forecasts predict an even steeper fall, with new completions potentially dropping to just 265,000 in 2026.
The effects of this construction slowdown will not be felt equally across the country. Cities that have experienced a construction boom in recent years—such as Austin, Atlanta, Phoenix, and Houston—may see a more gradual increase inrents due to their relatively higher supply. Conversely, major coastal cities like New York, Boston, and San Francisco, where land constraints and permitting challenges already limit development, are likely to experience steeper rent hikes.
One silver lining is that construction delays may push some of the anticipated 2025 supply into 2026 or beyond, potentially easing the immediate impact on renters. However, the long-term trend still points toward tightening availability and rising costs.
As the construction pipeline slows, demand for apartments remains strong. Factors such as economic improvements, demographic shifts, and lifestyle changes continue to drive rental demand. Leasing activity has already shown signs of increasing, suggesting that competition for available units may heat up in the coming years.
Without policy interventions or innovative financing solutions, the cyclical nature of apartment construction could lead to another period of soaring rents. Some industry experts suggest that a national construction fund—designed to provide developers with more accessible financing options—could help smooth out these fluctuations and create a more stable housing market.
For those currently in the market for a rental, the message is clear: take advantage of today’s deals while they last. With rents still relatively stable and landlord incentives widely available, now may be the best time to secure a favourable lease before the expected supply crunch drives up prices. While the full impact of the slowdown will take time to materialize, the trends indicate that the era of abundant rental options may soon be coming to an end.
Disclaimer: This information is for general knowledge and informational purposes only and does not constitute financial,investment, or other professional advice.
