Rent prices across the United States are climbing again, with some cities experiencing sharp increases as the housing market faces a growing affordability crisis. According to a new report by Redfin, the median asking rent has risen by 1.7% in July compared to the previous year, marking the largest increase since January 2023.
The rental market in the US is under significant strain as the demand for housing remains high, while supply is becoming increasingly limited. These rising rents have made it more difficult for many renters to secure affordable housing, with millions already facing cost burdens. As homeownership becomes out of reach for more Americans, renting is increasingly the only viable option, further inflating rental prices.
Shrinking Supply Pushing Rent Prices Higher
The current surge in rent prices can be largely attributed to a shrinking supply of rental units, which is intensifying the competition for available properties. According to Redfin, the slowdown in apartment construction, following a pandemic-era building boom, has left fewer new units coming onto the market. The number of permits for multifamily housing projects has fallen by 23.1% since the peak of the pandemic, limiting the overall availability of rental properties.
“Rents may be climbing because shrinking apartment supply is coinciding with growing renter demand, which is being fueled by the high cost of homeownership,” said Sheharyar Bokhari, Senior Economist at Redfin. This shortage has resulted in landlords regaining the upper hand in negotiations, shifting the power dynamics from renters to property owners, who are increasingly able to raise asking prices.
Metropolitan Areas Facing the Sharpest Rent Hikes
Certain US cities are feeling the impact of this growing supply crisis more than others, with some experiencing double-digit rent increases. San Jose, California, saw the most significant rise in rent, with median asking prices jumping by 8.8% in July, according to Redfin.
Chicago followed closely with an 8.6% increase, while Washington D.C. saw rents climb by 8.5%. These cities have witnessed sharp declines in new apartment construction, with San Jose seeing a 74.5% drop in building permits since the pandemic, and Philadelphia experiencing a 62.1% reduction.
Conversely, cities with more construction activity, like Jacksonville, Florida, and Austin, Texas, have seen rents decline or stabilise. In Jacksonville, rents fell by 3.5%, while Austin saw a decrease of 2.6%. These areas are benefiting from a higher influx of new rental properties, easing the pressure on the rental market. The rising rents and shrinking supply are contributing to an increasingly challenging situation for renters, particularly in larger urban centres where costs are escalating the fastest.
