US Rent Prices Drop for First Time Since 2020

Austin, Texas, has experienced the most significant drop in rental prices, with a 16.9 percent decrease year-over-year, according to a recent report from real estate brokerage Redfin. This decline marks the first decrease in asking rents for zero- to three-bedroom apartments in over four years, attributed to an oversupply of new apartments constructed since the COVID-19 pandemic. In July, the median asking rent for zero- to one-bedroom apartments fell by 0.1 percent, two-bedroom units by 0.3 percent, and three-bedroom-plus apartments by 2.4 percent, with all categories down by at least $50 from their previous highs. Despite the overall decline in rents across various apartment types, the combined rent for all units rose by 0.4 percent in July compared to the previous year. This phenomenon illustrates Simpson’s Paradox, where trends in subgroups can differ when combined. Nationally, rents have surged nearly 33 percent since the pandemic began, with the typical U.S. rent reaching $2,054 in June. Households are now spending an average of 30 percent of their income on rent, up from 28.4 percent before the pandemic. In response to rising rental costs, proposals have emerged to limit rent increases, particularly targeting corporate landlords. Under the proposed regulations, these landlords would only benefit from accelerated depreciation write-offs if they cap annual rent hikes at less than 5 percent. However, experts express skepticism about the effectiveness of such measures, noting that rent control often leads to more frequent rent increases rather than alleviating the burden on tenants.