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Apartment Owners Face a Smaller Renewal Rent Cushion in 2027
Article originally posted on Globe St on Oct 8 2026
Apartment owners preparing their 2027 budgets face a harder question than when new-lease rents will recover. They also need to determine how much longer they can count on existing tenants to pay more. Renewal increases have helped offset falling new-lease rents, but Yardi Matrix’s latest data suggest that protection is weakening.
During Yardi Matrix’s recent multifamily outlook webcast, Paul Fiorilla, director of research, said the latest national renewal reading had reached its weakest level since before the pandemic. Jeff Adler, vice president of Yardi Matrix, described earlier renewal gains as a major reason financial stress had not translated into more distress in the investment market. Their comments put a key budget assumption under scrutiny: whether the renewal increases that helped sustain revenue remain achievable next year.
The Renewal Cushion Is Shrinking
For several years, owners in markets with declining new-lease rents had another source of revenue growth. Existing residents renewed at higher rents, helping properties absorb the weaker pricing available when apartments turned over.
“We had that period of a few years where rents were going down in some markets, but they were compensating by getting good renewal rates,” Fiorilla said.
Now, he said, renewal rents are flattening in many markets, weakening a source of support that “really has been holding things up on a financial basis.”
The speakers did not provide a numerical value for the latest national renewal reading. But the comparison with the pre-pandemic period marked a change from the data Adler presented through August, when renewal trade-outs were still positive in the 2% to 3% range even where new-lease trade-outs were negative.
Trade-outs measure the change in rent between leases. Adler said Yardi’s comparisons are made lease to lease and unit to unit on a net effective rent basis. That means the earlier renewal gains reflected achieved leasing results, not simply higher advertised asking rents.
A Financial Buffer Comes Under Pressure
The divergence between new leases and renewals helps explain why falling market rents have not produced an equivalent decline in property revenue. Owners were accepting less on some new leases while still collecting increases from residents who stayed.
“Renewals have kind of carried the day,” Adler said, identifying that performance as one reason the market had not seen more stress or distress emerge in asset valuations and transactions.
Yardi’s forecasts illustrated the effect. When the firm blended renewals into its new-lease outlook, it still projected modest revenue growth across much of the Sun Belt despite negative asking-rent forecasts. Adler identified Austin and Phoenix as exceptions in 2026. Those projections, he cautioned, were before the impact of higher financing costs on refinancing or floating-rate debt.
The latest renewal data raise a question about how durable that support will be. A property does not need renewal rents to decline outright to lose part of its financial buffer. Smaller increases provide less revenue to offset negative new-lease trade-outs. That is the budget risk behind Fiorilla’s warning about flattening renewals.
Local Competition Will Shape Renewal Results
Adler did not suggest that renewals would immediately lose their advantage everywhere. He expected them to continue outperforming new leases until markets recovered and the historical pattern returned. But he acknowledged that September’s data could indicate the gap was closing.
In San Francisco, Chicago and New York, Adler said new-lease trade-outs were accelerating faster than renewals—a return toward the more typical pattern in which new leases achieve stronger increases. Elsewhere, Fiorilla warned that renewal growth was flattening while owners still contended with weak new-lease pricing.
Supply helps explain the difference. Adler said markets with substantial inventories of apartments still in lease-up take longer to turn demand into pricing power. Where less new inventory competes for residents, even a modest increase in demand can translate into faster rent growth.
For investors evaluating a property’s 2027 revenue assumptions, those distinctions make the national renewal trend a warning rather than a uniform forecast. A budget that anticipates continued renewal increases needs support from the property’s leasing results and competitive market, not simply from the gains owners achieved earlier in the cycle.