Rent Prices Keep Rising Amid Inflation, Low Inventory

Updated on May 14.

Over the past few years, it’s become more expensive than ever to rent — especially since the beginning of the pandemic. In fact, rents were unaffordable in 2023 for 22.6 million households that paid rent — an all-time high — according to a report on America’s Rental Housing by the Joint Center for Housing Studies of Harvard University released in December.

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Spending 30% of your income on rent means a household is “moderately rent burdened,” but spending 50% or more means a household is “severely rent burdened” by federal standards. The Harvard study found that in 2023, half of all renters spent 30% or more of their income on rent and utilities, while more than a quarter of all renters spent 50% or more of their income on housing costs^[0]

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Why is rent so high?

Rent prices have spiked since 2020 because of a combination of factors, including inflation, low inventory, barriers to homeownership and shifts in tenant demand. Here’s how those factors have played out:

Inflation. Higher costs across the board mean landlords pass on higher costs (such as rising wages for maintenance workers or repair costs) to renters. Higher rent costs contribute to inflation and the cycle repeats.

Lack of inventory. There is a shortage of vacant rental properties in general, and of affordable ones in particular.

Barriers to homeownership. Prospective homeowners remain renters for longer as they face high demand and low inventory of existing homes, rising mortgage interest rates, as well as supply chain disruptions that have made it more expensive and difficult to construct new homes.

Expired rent freezes and discounts. Landlords made up for pandemic-era rent freezes and steep discounts in urban areas by hiking prices on new units and lease renewals.

A shifting workforce. As the pandemic increased the popularity of remote work, deep-pocketed renters sought larger homes in areas that had been previously relatively low-cost. This migration increased rents in suburban areas more than it lowered them in urban ones, yielding a net increase in rents.

More demand to live alone. Prospective renters are increasingly looking for studio and one-bedroom apartments, driving up demand for available housing.

Another thing to consider is that wages are rising slower than rents, which can make rent feel even more expensive. Since 2019, rent prices have risen at a rate 1.5 times that of wages, according to a May 7 analysis by Zillow, a real estate website.

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Rent prices are still going up

Typical asking rent was $2,024 in April, according to the most recent rental market report from Zillow^[0]

The pace has slowed from the major spikes of 2022, and Zillow data shows rental price growth is slightly below pre-pandemic averages. Still, rent prices are 35.4% higher than they were before the pandemic.

But whether rent is rising for you (and by how much) depends on where you live and the type of housing you live in, according to Zillow:

• Rent prices are up from a year ago in 47 of the 50 biggest metro areas in the country. Rising the most is Hartford, Conn., with an annual increase of 6%, followed by Cleveland (6%), Chicago (5.9%), Providence, R.I. (5.3%) and Kansas City (5.3%). 

• Rent prices are down year-over-year in a few metros, most of which are located in the Sun Belt. The biggest decline is in Austin, where prices have dropped 2.3% in the past year, followed by Cape Coral, Florida (-1.5%), Denver (-0.9%) and San Antonio (-0.2%).

• Multifamily rental prices rose 2.9% over the past year compared to a 4% rise in single-family rentals.

• About 34.8% of rental listings on Zillow offered concessions — or discounts for renters — in March. They appeared more frequently than they did a year ago in 31 of the 50 largest metro areas. The increase is highest in Denver, Orlando, Indianapolis, Houston and Austin.

The latest consumer price index report from the Bureau of Labor Statistics released on May 13 tells a similar story: In April, the shelter index, which includes rent, continued to outpace annual inflation. But housing price growth is slowing down.

Over the 12-month period ending in April, rent alone was up 4%, according to the BLS. That’s in line with the overall 12-month increase for shelter (also 4%).

It’s worth noting that rent increases in the CPI look different from data reported by rental websites like Zillow because there’s a lag in how rent data is reflected in the CPI. That means it takes longer for rental shifts in the market to show up in the report. Zillow calculates changes in asking rents using its Zillow Observed Rent Index, which is based on its rental database. Properties are weighted so that the index reflects the rental market as a whole.

The lag is primarily due to the cycle of renewals for leases. Since most leases last around a year, a renter’s costs will stay the same all year long. It’s only when the lease ends that a better understanding of the rental market emerges.

When will rent prices go down?

Prices have come down in some major U.S. cities, and that trend could become more widespread as apartment projects started in recent years become available to rent.

In 2024, developers completed construction on more than half a million new apartments nationwide, according to research firm Yardi Matrix — the second year in a row that the number of completed apartments hit a new record, according to an August 2024 report by the rental listing service RentCafe. The report also projected that developers would finish another 2 million units by 2028^[0]

A new supply of housing is likely to slow overall rent growth or even reverse it. That’s been the story in cities like Austin, where a significant chunk of apartments finished in 2024 are located. And since many cities require inclusionary housing — meaning a portion of new housing must be affordable — new construction also means new affordable housing.