Renters in the South are finally catching a break. After years of relentless increases, rents are easing in 15 out of 21 major Southern and Sun Belt markets. This welcome shift is primarily due to a significant surge in apartment construction, a trend that offers valuable lessons for other regions struggling with housing affordability.
The Southern Building Boom and its Impact on Rents
Over the past five years, an astounding two-thirds (67%) of all new apartment units built nationwide have been constructed in the Sun Belt. Cities like Dallas, Phoenix, Raleigh, Charlotte, Nashville, and Austin have led this construction boom, according to real estate analytics firm CoStar. This influx of new units, facilitated by relatively relaxed land-use regulations and a favorable regulatory environment, has flooded the market with an estimated 500,000 units this year alone. The result? A 1.4% average rent decrease in Southern markets over the past year, a stark contrast to rent increases seen in other parts of the country. Harvard’s Joint Center for Housing Studies corroborates this trend.
A Tale of Two Markets: Luxury vs. Affordability
While the increased supply has undoubtedly tempered rent growth, the solution isn’t without its flaws. The majority of new apartments are luxury units. Soaring land, material, and labor costs have incentivized developers to focus on high-end projects, leaving a significant gap in the market for mid-priced and affordable rentals. As Jay Lybik from CoStar aptly pointed out to Business Insider, developers are primarily “building at the top end of the price point.” This means that while average rents have fallen slightly, they remain considerably higher than pre-pandemic levels, having jumped 33% from October 2019 to October 2024 in Southern cities. Those seeking affordable housing may need to consider less central, suburban locations where more budget-friendly apartments are being built.
The Unmet Needs: Size and Family Housing
Another key issue is the predominance of smaller units – studios and one-bedrooms – in new constructions. While suitable for young professionals and couples, this leaves a critical shortage of larger, family-friendly units (two- or three-bedroom apartments). This gap in the market exacerbates the housing challenges for families, who struggle to find suitable and affordable accommodation.
A Stark Contrast: The Northeast and Midwest
The situation is markedly different in the Northeast and Midwest, where rents continue to climb. Cities like Cleveland and Boston are failing to keep pace with demand, particularly in desirable, walkable urban areas. Cleveland’s efforts to revitalize its downtown have made it more attractive, but the lack of new housing supply has driven rents sharply upwards, highlighting the crucial role of sufficient construction in managing affordability. The lesson is clear: strategic planning and investment in diverse housing options are essential to creating truly affordable and accessible housing markets.
Looking Ahead:
The Southern experience demonstrates that increased housing supply can alleviate some rental pressures, but only if that supply caters to the diverse needs of the population. A focus solely on luxury units exacerbates existing inequalities and fails to address the widespread need for affordable family housing. For other regions struggling with rising rents, the Southern experience provides both encouragement and a crucial cautionary tale: building more isn’t enough; building the right kind of housing is paramount.
