The new year has brought steady rent growth across the country, with the typical U.S. asking rent climbing to $1,968, according to the Zillow Observed Rent Index — an increase of 0.2% from last month and 3.5% since last year. These trends align with seasonal norms. The extraordinary rent surge seen in 2022, when growth was four times higher, was a historical outlier. The income needed for renters to comfortably afford housing continues to slowly climb along with rents, now reaching $78,722. 

Nationwide, rent growth is largely driven by single-family rents, with the typical asking rent reaching $2,179 — 20% higher than that of multifamily units. Single-family rent growth remains strong as elevated mortgage rates keep potential buyers out of the sales market. Construction of single-family homes continues to carry a generational shortfall – the remaining legacy of the housing crash in the late 2000s failing to meet the needs of today’s new adults. While elevated, construction of single-family homes did not increase by the same magnitude as apartments over the past five years. Under a robust labor market, without noteworthy mortgage rate relief unlocking the door to buying, demand for single-family rentals is expected to hold strong.

Conversely, the multifamily sector’s progress in apartment construction is helping to keep costs lower. Although the pace of newly built apartments exceeds the previous record levels seen during the 1970s construction boom, as rent softens, the rate at which apartments are being built is slowing down. Currently, the typical asking rent for multifamily homes stands at $1,820, reflecting a 0.2% increase from the previous month.

Compared to last year, rents have risen in 47 of the 50 largest metro areas, with the most significant increases seen in the Midwest and Northeast.  At the forefront of these annual rent gains are Hartford (7.8%), Cleveland (7.3%), Providence (6.5%), St. Louis (5.8%), and Chicago (5.7%). However, contrary to national trends, the rental market has yet to wake from its winter slumber in 11 major metros, where rents have fallen on a monthly basis. Denver registered the largest decline at 0.4%, closely followed by Cincinnati at 0.2%.

While most metros are seeing rent growth, landlords are increasingly offering concessions to attract renters, with more than 41% of Zillow rental listings featuring incentives in January — a record high in Zillow data. However, there are signs these concessions may decline in the coming months. While the share of rental listings on Zillow offering a concession grew from December, it only rose by 0.2%, a much smaller increase than the previous five months. As more people move and competition in the rental market heats up, landlords typically reduce the freebies they offer. 

As rental costs continue to climb, the median household must now allocate 29.1% of its income to secure the typical rental, up from 26.8% before the pandemic, highlighting the growing strain on affordability. The 30% threshold typically used to define affordable housing is well surpassed in markets like Miami (40%) and the New York City metro area (38%). 

Rents

• The typical asking rent is $1,968 in January, up 0.2% month-over-month. The pre-pandemic average month-over-month change for this time of year is 0.3%. 
• Since the beginning of the pandemic, rents have increased by 33.4%.
• Rents are now 3.5% up from last year.
• Rents fell, on a monthly basis, in 11 major metro areas. The largest monthly drops are in Denver (-0.4%), Cincinnati (-0.2%), Birmingham (-0.2%), Portland (-0.1%), and Salt Lake City (-0.1%).
• Rents are up from year-ago levels in 47 of the 50 largest metro areas. Annual rent increases are highest in Hartford (7.8%), Cleveland (7.3%), Providence (6.5%), St. Louis (5.8%), and Chicago (5.7%).

Single-Family Rents

• The typical asking rent for single-family homes is $2,179 in January, up 0.3% month over month. 
• Since the beginning of the pandemic, single-family rents have increased by 41%.
• Single-family rents are now up 4.4% from last year.
• Single-family rents fell, on a monthly basis, in 10 major metro areas. The largest monthly drops in single-family rents are in Louisville (-0.4%), San Diego (-0.3%), Buffalo (-0.3%), Detroit (-0.2%), and Salt Lake City (-0.2%).
• Single-family rents are up from year-ago levels in all of the 50 largest metro areas. Annual single-family rent increases are highest in St. Louis (7.7%), Cleveland (7.6%), Hartford (6.9%), Chicago (6.8%), and Providence (6.8%).

Multifamily Rents

• The typical asking rent for multifamily homes is $1,820 in January, up 0.2% month over month. 
• Since the beginning of the pandemic, multifamily rents have increased by 26.5%.
• Multifamily rents are now up 2.7% from last year.
• Multifamily rents fell, on a monthly basis, in 14 major metro areas. The largest monthly drops in multifamily rents are in Cincinnati (-0.5%), Denver (-0.5%), Birmingham (-0.4%), New Orleans (-0.3%), and Austin (-0.3%).
• Multifamily rents are up from year-ago levels in 42 of the 50 largest metro areas. Annual multifamily rent increases are highest in Hartford (8.4%), Cleveland (6.7%), Providence (6.6%), Virginia Beach (5.6%), and Chicago (5.3%).

Rent Concessions

• 41.1% of rentals on Zillow offered concessions in January.
• The share of rental listings offering concessions increased by 0.2 percentage points (ppts) month over month in January.
• The share of rental listings offering concessions increased by 9.2ppts from last year.
• The share of rentals with concessions is lower, on a monthly basis, in 24 major metro areas. The largest monthly drops in the share of rentals with concessions are in San Jose (-9.9 percentage points), Los Angeles (-4.7ppts), Louisville (-4ppts), San Diego (-3.6ppts), and Chicago (-3.5ppts).
• The share of rentals with concessions is higher, on a monthly basis, in 25 major metro areas. The largest monthly increases in the share of rentals with concessions are in Riverside (3.8ppts), Nashville (3.5ppts), Charlotte (3.4ppts), St. Louis (3.3ppts), and Kansas City (3.2ppts).
• Rent concessions are up from year-ago levels in 48 of the 50 largest metro areas. The annual increase in share of rental listings with concessions is highest in Denver (20.7ppts), Nashville (17.2ppts), Atlanta (16.6ppts), Louisville (16ppts), and Houston (15.7ppts).

Rent Affordability

• The median household would spend 29.1% of their income on a new rental in January.
• The pre-pandemic share of median household income spent on rent was 26.8%.
• The most affordable metro areas for rents are Austin (19.4%), Minneapolis (19.7%), Salt Lake City (19.9%), St. Louis (20.2%), and Raleigh (20.4%).
• The least affordable metro areas for rents are Miami (40.0%), New York (38.0%), Los Angeles (36.5%), San Diego (32.9%), and Riverside (32.8%).
• Income needed to afford rent increased by 3.5% year-over-year in January to $78,722. 
• Since pre-pandemic, the income needed to afford rent has increased by 33.9%.