[UNITED STATES] The U.S. housing market is on the cusp of a major shift, with apartment supply becoming increasingly scarce. Over the past few years, renters have benefitted from a historic surge in apartment construction, which helped keep rental prices relatively stable and even lowered them in some regions. However, as construction costs skyrocket and developers pull back on new projects, America is about to face a significant apartment crunch.
The End of the Rental Bargain
For renters, 2025 is shaping up to be a turning point. According to a recent report from RealPage, the available inventory of rental housing units may soon tighten significantly. In simple terms, fewer new apartments will be available, pushing rents higher. Developers have been scaling back their construction plans due to increased building costs, and fewer cranes are now dotting city skylines. As Yardi Matrix notes, 2025 is set to be "a year fraught with change," signaling the end of the golden years for renters.
One of the main factors contributing to this shift is the cost of construction. Developers are finding it more expensive to build due to rising material costs, labor shortages, and interest rates. These factors are making it harder to secure financing for new developments. As a result, construction starts have dropped, and the number of new apartments entering the market is expected to slow down significantly by 2026.
"The available inventory of rental housing units may quickly tighten," warned experts. This means renters will have fewer options and may face higher rents, especially in high-demand urban areas. While the supply is still expected to grow by approximately half a million units in 2025, this is a sharp decline from previous years when over 580,000 units were delivered in 2024 alone.
The Recent Boom in Apartment Construction
From 2020 to 2024, the U.S. saw an unprecedented boom in apartment construction, with developers racing to meet the skyrocketing demand for rental units. A combination of factors contributed to this surge, including a shift in household formation and a high demand for larger living spaces. Many renters upgraded from smaller apartments, and a wave of young adults left their parents’ homes or ditched roommates to live alone.
In fact, 2024 saw a record number of units completed, with over 588,000 new apartments hitting the market. This helped to cool down rental prices, which had previously surged by more than 20% between 2020 and 2022, according to Zillow. In 2023, developers completed 440,000 units, and in 2025, another 500,000 are expected. However, the number of new builds in the pipeline is set to dwindle.
The Impact on Renters
The influx of new apartments over the last two years has been a boon for renters. As new units entered the market, landlords competed to attract tenants, offering enticing concessions such as free rent, gift cards, or parking. This has led to lower rent growth, with year-over-year rent increases remaining under 1% over the past 16 months, a stark contrast to the double-digit hikes seen in 2022.
"The new supply did what supply is supposed to do," said housing economist Jay Parsons, referring to the cooling effect new construction has had on rental prices. This environment made it easier for renters to find deals and secure affordable apartments, but that’s likely to change as the construction pipeline slows.
By the end of 2024, almost 13% of units nationwide were offering some form of concession, a trend that harkens back to the early days of the pandemic when landlords had to sweeten the deal to keep tenants. With fewer new units coming online in 2025 and beyond, however, these concessions may start to disappear, and rent prices may once again rise sharply.
A Looming Shortage
Looking ahead to 2026 and beyond, the shortage of new apartments is expected to intensify. The construction slowdown is already becoming apparent, as developers break ground on the fewest units in over a decade. While apartment builders completed nearly 600,000 units in 2024, they initiated only a fraction of that number in new projects last year.
This tightening supply is likely to exacerbate the housing affordability crisis, particularly in cities with high demand for rental properties. As demand continues to outpace supply, renters will face more competition for available units, leading to increased prices and fewer rental concessions.
“Apartment construction has a tendency to be way too cyclical,” said industry experts, underscoring the boom-and-bust nature of the housing market. The current slowdown in construction could be the beginning of a new cycle that places more pressure on renters and results in higher rents across the country.
What Renters Can Expect
Renters should be prepared for a shift in the rental market. While 2025 may offer some relief with the completion of additional units, the longer-term outlook isn’t promising. As available units dwindle and demand remains high, rental prices will likely climb.
Renters who have enjoyed relatively stable prices and attractive perks over the last few years may soon find themselves facing higher rents and fewer concessions. If you’re looking to move or lock in a rental agreement, it may be wise to act sooner rather than later, as the apartment crunch is likely to make finding an affordable place more challenging.
The apartment crunch is on the horizon, and renters need to be aware of the changes coming to the housing market. With fewer new apartments being built and demand remaining strong, rental prices are expected to rise once again. While 2025 may still offer some relatively affordable options, the slowdown in construction projects signals a tougher rental landscape in the years to come.
For now, renters can enjoy a brief reprieve, but those who hope to secure favorable rental terms should act quickly before the full impact of the apartment shortage hits. The next few years may mark the beginning of a new era in the rental market, one where affordability becomes a much harder commodity to find.
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