America’s Empty Apartments Are Finally Starting to Fill Up

The biggest apartment construction boom in four decades flooded the market with new supply over the past two years. Apartment owners had to contend with a surge in empty units.

That is starting to change.

The vacancy rate, or the share of apartment units that are empty, stopped rising for the first time in three years last quarter, as demand for apartments rose to its highest levels since 2021, according to CoStar .

The more than 1.2 million new apartment units that were built during the past two years are filling up. If that demand is sustained, if the economy remains strong and if housing prices remain near record highs, landlords likely will have more pricing power starting sometime next year. That could allow building owners to raise rents more than they have recently.

Some 672,000 new apartment units will have been completed by the end of this year, but only about half that number is expected in 2025, and even fewer in 2026, CoStar said.

“The worst of the pressures on pricing from new supply are likely behind us,” said Eric Bolton , chief executive of publicly traded landlord Mid-America Apartment Communities , on an October earnings call.

Housing affordability has become a hot-button election issue at the federal and local levels. Any sign that rents are poised to rise in 2025 could intensify pressure on the new administration to address housing costs. President Biden announced a plan over the summer to cap rent increases, though it would need to pass Congress.

Nationally, sales of apartment buildings have also started to pick up again, as investors become more confident that the market is bottoming and sellers are more willing to acquiesce on price.

Renters were hit hard by the historically high rent increases during the pandemic years, especially in Sunbelt cities, such as Phoenix and Tampa, Fla., where rents rose 20% or more during 12-month periods.

Rents for new leases nationwide have held close to flat for more than a year. That is due in part to a big split between supply-heavy Sunbelt cities, some of which have seen rent cuts, and the rest of the country, which hasn’t.

Renters who choose to renew their leases were still paying a 3.5% rent increase on average as of this past August, the most recent month data was available from Yardi Matrix.

Throughout this year, the places with the highest renewal rent growth have been on the coasts and in the Midwest. New York City, Los Angeles, Indianapolis and Columbus, Ohio, saw renewal rent increases of 5% or more in July, according to Yardi.

Increased return to office orders in major employment hubs may also start translating into even more urban rental demand soon, especially in coastal cities.

In Seattle, Equity Residential said in an October earnings call that it is seeing a pickup in leasing from Amazon employees, who are locking in apartments ahead of a five-day office attendance policy, scheduled to begin in January.

On the flip side is Austin, Texas, which has experienced a building boom after companies such as Tesla and Oracle moved offices there. Austin’s vacancy rate, if new buildings are included, is the highest in the country at over 15%, according to CoStar.

Rent growth for new leases in the Texas capital ranks last among major metros during the past year. Landlords of new luxury buildings are still offering big concessions, such as months of free rent, to fill up units. undefined undefined “Basically, the worst apartment market in the country right now is Austin,” said Matt Rosenthal , managing partner of multifamily investor Eastham Capital.

On an annual basis, apartment building sales have grown for two consecutive quarters, according to MSCI Real Assets. Places seeing some of the biggest increases in sales include Denver, San Francisco and the Washington, D.C. suburbs.

Apartment companies also continue to feel tailwinds from renters locked out of homeownership. Major owners have remarked on how few of their renters move out to purchase homes now, amid some of the worst conditions for home-purchase affordability in four decades. That is unlikely to change much in 2025.

“Probably the biggest story this year that we’ve seen [is] from people coming in the front door and then not leaving [out] the back door,” said Joe Fisher , president of publicly traded apartment owner UDR .

Australia’s housing crisis will not be solved by first-home buyer incentives or tax changes alone, with leading property figures warning governments must tackle supply constraints if affordability is to improve.

Speaking at the Kanebridge Quarterly Property Leadership Summit in Sydney last week, expert project marketing specialist Sam Elbanna, property investor and fund manager Paul Miron and property consultant Karla McNeice said that a lack of housing supply remained the central issue facing the market.

Elbanna, Director of CPM Realty with more than 30 years’ experience in project sales, argued that successive governments had focused too heavily on stimulating demand rather than addressing the barriers preventing new housing from being delivered.

“The misconception is that politicians think the way to solve the housing crisis is to drive demand,” he said.

“The reality is that’s not the way. This is a supply-side problem, and it needs to be solved on the supply side.”

Drawing on his experience in project sales, Elbanna said policies designed to help first-home buyers often had unintended consequences, pointing to previous grants that ultimately flowed through to higher property prices.

Instead, he said developers were facing increasing red tape, approval delays and rising costs, which were discouraging new housing supply.

“In the absence of stock, demand exceeds supply,” he said.

Miron, a Co-Founder and Fund Manager of Msquared Capital, said the housing debate had become overly focused on tax policy while overlooking broader structural issues.

He argued that affordability challenges stemmed from a combination of factors, including planning constraints, supply shortages, migration levels and interest rates.

“No-one can be 100 per cent certain on the real reason for property prices is going up,” he said.

“The reason why property prices are higher is a combination of interest rates, lack of supply, migration, vacancy rates and maybe taxes play a role.”

Miron was critical of recent federal housing policy changes, warning they could reduce the number of new homes being built and further constrain supply that was even highlighted in the budget.

He also highlighted the importance of the property sector to the broader economy, noting that residential real estate and related industries employed more than one million Australians.

McNeice, who advises developers on sales strategy and market intelligence, said understanding buyers had become increasingly important as affordability pressures intensified.

While affordability remained a major consideration, she said today’s buyers were focused on value rather than simply price.

“People are looking for value for money,” she said.

She said buyers were increasingly evaluating factors such as transport connections, walkability, nearby amenities and flexible living spaces that could accommodate changing family needs.

“What infrastructure is going on? Can I walk to the shops? Can I meet people at the local cafe?” she said.

The panel also discussed the mounting pressures facing developers, with Elbanna arguing that many projects become financially unviable from the moment a site is purchased.

“The viability of a development happens at the moment the site is bought,” he said.

He said rising construction costs, higher interest rates and overly optimistic feasibility assumptions had left some developers exposed as market conditions changed.

While acknowledging the growing number of smaller and first-time developers entering the market, Elbanna said property development required expertise across finance, construction, marketing and legal disciplines.

“It is actually a business that requires a level of expertise,” he said.

Looking ahead, the panel agreed opportunities remained in the market despite current challenges.

Miron said property should continue to be viewed as a long-term investment and cautioned against trying to time short-term market movements.

McNeice said success would increasingly depend on identifying projects that genuinely met changing buyer expectations.

Elbanna said affordable housing remained achievable, but developers needed to deliver more than just homes.

“We can provide affordable housing in this country,” he said.

“But we’ve got to wrap that affordable housing with the things that people want.”

As Australia’s housing affordability debate intensifies, the panellists agreed on one point: without a meaningful increase in housing supply, demand-side measures alone are unlikely to solve the nation’s property challenges.

America’s Empty Apartments Are Finally Starting to Fill Up

If that demand is sustained, landlords likely will have more pricing power starting sometime next year

Australia’s housing affordability crisis is being fuelled by chronic undersupply, planning delays and rising development costs, as politicians continue to focus on the wrong solutions.