RubinBrown Apartment Stats 2025

EXECUTIVE SUMMARY

Multifamily Market: Resilience Amidst Headwinds The multifamily sector continues to demonstrate resilience, managing near-term pressures from elevated supply and higher interest rates. According to RealPage, the market sustained modest year-over-year rent growth of 0.3% and a stable occupancy rate of 94.4% as of the third quarter of 2024. This performance reflects exceptionally strong demand. Renter household formation was robust in 2024, with an increase of 848,000 households, and accelerated further in early 2025, climbing by 1.1 million to reach 46.1 million renter households. This surge has sharply absorbed the influx of new units, with nearly 490,000 apartments leased in the year ending in Q3 2024—well above the pre pandemic norm of roughly 300,000 units and surpassed only during the peak pandemic boom. Even so, the sector faces a pronounced supply peak. Record-low interest rates and strong fundamentals in 2021–2022 spurred development, leading to the highest level of completions since the mid-1980s. Developers delivered 608,000 units in 2024 alone, more than double the long-term annual average of 298,000. However, the pipeline is set to contract sharply. Financing constraints pushed multifamily starts in the first three quarters of 2024 to their lowest level in a decade—a 25.0% drop from the prior year. As a result, supply is expected to decline materially after 2025. Looking ahead, assuming a soft economic landing, the baseline outlook for 2025 is subdued but positive: projected rent growth of 2.2% and a modest vacancy increase to 6.2%. Market performance will diverge by metro. Areas with limited new supply since the pandemic are positioned to outperform, while markets that saw a construction surge are likely to face weaker results. Broader Housing Challenges: Affordability Crisis Deepens Resilience in multifamily must be viewed within the broader context of a worsening housing affordability crisis. Elevated home prices and mortgage rates have pushed homebuying to its lowest level since the mid-1990s, redirecting many households into the rental market.

As a result, renter cost burdens have reached record levels. In 2023, 22.6 million renter households—half of all renters—spent more than 30.0% of income on housing and utilities, including 12.1 million who were severely burdened, devoting over half of income to housing. Homeowners have also felt the strain, with 20.3 million households now cost-burdened, driven by rising insurance premiums and property taxes, which increased an average of 12.0% between 2021 and 2023. The composition of the housing stock has further exacerbated affordability challenges. While overall rental supply has grown, the number of low-rent units has reduced. From 2013 to 2023, inflation-adjusted units renting below $1,000.00 per month fell by more than 30%, dropping from 24.8 million to 17.2 million. In contrast, higher-end construction has expanded significantly, nearly tripling the stock of units renting for $2,000.00 or more, from 3.6 million to 9.1 million. The result is a widening gap in affordable options for lower income households. Outlook & Policy Implications Housing market outcomes are increasingly tied to federal policy and economic conditions. Demand for housing assistance continues to outpace supply, with only one in four income-eligible renters receiving subsidies. Roughly 5.1 million households rely on federal programs, yet proposed funding reductions could limit support further. In the near term, slowing construction paired with sustained demand is expected to tighten rental markets, placing upward pressure on rents and intensifying affordability concerns. Over the longer term, multifamily remains well-positioned. Favorable demographics, a resilient labor market, and a persistent national housing shortage suggest the sector will continue to attract capital and remain a core asset class.

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