Pandemic’s Record Apartment Rent Growth Eases

Article originally posted on CoStar on December 18, 2023

A dramatic acceleration of multifamily rent growth in 2021 and into early 2022 highlighted concerns of rental affordability, prompting calls for rent control. But since late 2022, apartment rent growth has slowed dramatically and, in some major markets across the nation, even dropped.

This roller coaster performance resulted in a handful of markets seeing outsized rent gains. In contrast, others have average apartment rents below where they would have been under more typical rent growth projections before the pandemic hit.

Examining multifamily rents on an absolute basis shows the average national asking multifamily rent is just $65 a month higher these days than it would have been had the growth rate for apartment rents remained similar to the five-year pre-pandemic rate. Most markets with the largest differences between today’s actual rents and where they would have been been under the previous trend growth are in Florida, joined by Orange County in California, where there was also meaningful rent acceleration in the past four years.

Palm Beach, Florida, has the largest rent difference, with average overall rents of $362 per month higher these days than they would have expected to be had the pandemic not occurred and disrupted the previous rent trend.

On the opposite end of the spectrum, several large coastal California markets have average apartment rents that are significantly lower than what they would expect to be had the pandemic not struck. San Francisco rents are $448 lower these days than they otherwise would have expected to be. And its two Bay Area neighbors, San Jose and East Bay, apartment rents are $265 and $262 lower, respectively, than previous trends would indicate. Minneapolis is the lone geographic outlier, with average asking rents $74 lower today than would have been anticipated.

The differences in rents at the market level between current rents and what they would have been these days had the pre-pandemic rent growth rate prevailed hide major variations between rental price points. Four- and five-star properties have registered the greatest absolute differences, both positive and negative.

In Miami, average apartment rents today are $391 per month higher than would have been projected pre-pandemic, and in Orange County, California, the difference is $355. However, San Francisco’s most expensive units are $603 cheaper per month today than they would have been had the pandemic not occurred.

At lower price points, one- and two-star rents are only $8 higher these days than they were forecast to be without the pandemic. In many cases, renter households of the least expensive apartment units are paying only slightly more than would have been anticipated — and in a handful of markets are actually paying less.

Bay Area markets stand out for having asking rents for one- and two-star properties that are $303 to $216 lower at the end of 2023 than if rents had remained at their pre-pandemic pace. In contrast, one- and two-star asking rents in Palm Beach are $151 higher than estimated.