A multifamily construction boom could, counter-intuitively, increase competition among property managers – or even have minimal effect on demand.

In March, 960,000 multifamily apartments were under construction nationwide, the highest number in 50 years. Typically, adding inventory drives down rent prices and gives renters additional housing alternatives. This trend is playing out to some extent, as month-over-month rent growth has notably decelerated nationwide.

However, it gets a little more complicated because of two factors: firstly, most of the multifamily construction boom is concentrated in metro areas, where existing inventory is in oversupply. Secondly, 70% of new rental units are classified as 'high-end' with rents exceeding $2,000. Consequently, rental prices in cities such as Austin, Atlanta, Miami, and New York are unchanged or even rising, meaning most tenants are unlikely to see a meaningful reduction in rent expenses.

Since most tenants can't afford these new units, rental growth for new leases is slowing, and renewal rent growth fell from an all-time high of 11% in July 2022 to 6.5% in May.

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