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Rent has dropped in some of the fastest-growing cities in the United States amid new construction.

Updated: Nov 13, 2023

new housing construction in fast growing cities
new construction

According to Jay Parsons, chief economist at RealPage, apartment development has been more moderate outside of the Sun Belt (Southern and Southwestern US states).


Rent has dropped in some U.S. fastest-growing cities, especially in the Sun Belt, thanks to a rise in new construction in the housing sector. Certain cities have seen substantial changes, but in general, rental prices have remained stable in the country.


The growth in apartment construction, and therefore supply, normally translates into relief for tenants' pockets. This has been the result of the latest report on the increase in housing new construction in cities such as: Atlanta, Phoenix and Austin. About 16,000 units (an increase of 5.6%) per city last year. Meanwhile, Boise City in Idaho now has approximately 1,600 new units (a 5.3% increase), resulting in a 6.2% drop in rental costs.


On the contrary, some cities saw little growth in housing construction and therefore, rents spiked. Rochester, New York, added only 233 new housing construction thus causing rents to increase more than 5%. In Midland-Odessa, Texas, rents rose quickly to nearly 14%, although that market is volatile because of its ties to energy production. The Springfield, Massachusetts area saw no new supply and rents increased nearly 9%.

In conclusion, Parsons said that in order for low-income population to feel true relief, rents would need to drop to one-third of the current average amount. Although these new developments have been positive, it is a relatively modest change.


Lowering housing rents can play a significant role in curbing inflation. This is because housing costs, which include rents, are a major component of the Consumer Price Index (CPI), a key indicator used to measure inflation. When rents decrease, they directly reduce the housing component of the CPI. This reduction can have a ripple effect on the overall inflation rate, as housing is a substantial expense for most households. Lower rent costs can increase disposable income for renters, allowing them to spend more on other goods and services, potentially stimulating economic growth. Additionally, lower rents can reduce wage pressure, as workers may not demand higher salaries to cope with high living costs. This in turn can help in controlling cost-push inflation, where higher production costs lead to increased prices for consumers. In summary, reducing housing rents can be an effective tool in managing overall inflation by directly impacting a significant portion of consumer expenses and indirectly influencing economic activities.


Source: Bloomberg

By Michael Sasso


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