Rent Growth Moderating in Cities Where the Most Apartments Are Being Built

The rollercoaster of residential rental prices in the U.S. that took place between 2020 and 2022 has moderated significantly over the past 12 months. A record number of apartments are being constructed across the country, with 1.2 million apartments brought to market in the last three years alone. Many housing economists believe that rent growth decreases when the housing supply increases. So far this year, rent growth nationwide is up just 0.2 percent, a figure that has been slowing over the past two years. For comparison, In the two years pre-pandemic, between 2017 and 2019, rent growth averaged 2.9 percent. To get a better idea of how new construction can really slow rent growth on a local level, we looked at average annual rent growth figures in the top areas for apartment construction over the last five years.

Washington, D.C.

In RentCafe’s compilation of the top places in the U.S. where apartments were completed as ranked by zip code, two zip codes in Washington, D.C., came in at number one and two on the list. The neighborhoods within 20002 and 20003 include Capitol Hill and the Navy Yard, two areas that have seen a huge influx of new apartments. More than 14,500 apartment units were built in the zip codes between 2017 and 2022, a growth of 73.1 percent in Capital Hill and 122.2 percent in the Navy Yard. Meanwhile, between 2019 and 2023, the average annual median rent growth in DC was 1.6 percent, according to Apartment List data. Like most other cities on the list, that average is somewhat skewed by the significant dip in rent growth in 2020 and the subsequent spike in 2021 that was seen in markets across the country. More recently, 2022 and 2023 (year-to-date) annual median rent growth in the D.C. metro area averaged 2.3 percent, while nationally, rent growth year-to-date is 0.2 percent. Looking at the numbers, it appears that the sharp increase in new units coming to market did slow down rent growth compared to other cities around the country. The city’s stalled growth in new residents might also have something to do with it. The population boom D.C. experienced between 2010 and 2020 was already beginning to slow before the pandemic, leading many residents to leave.  

Queens, NY

Residential towers rising on the Queens waterfront in New York City have been a fixture of the city’s new development scene for the last decade, so it’s unsurprising to see Queens rank high in terms of new apartment construction. Between 2018 and 2022, a total of 7,081 apartments were built in the zip code 11101, which encompasses the Long Island City neighborhood. During nearly the same time period, between 2019 and 2023, average median rents in New York City grew 5.5 percent every year. The largest spike in that time period was in 2021, when rents surged 34.9 percent, a sharp rebound from the previous year when rents decreased 22.1 percent. More recently, median rent growth is 5.9 percent year-to-date in 2023. The higher-than-average rent growth Queens is still experiencing could be due to its continuously expanding population. Long Island City’s population skyrocketed 40 percent in the decade between 2010 and 2020, a growth rate five times higher than the rest of New York City. At the same time, the influx of new apartments tends to be in luxury high rises, where rent prices are high. Additionally, data from a recent report shows that foot traffic in Long Island City’s commercial corridors went up 5 percent from 2019 to 2022, whereas foot traffic in Manhattan’s Midtown and Lower Manhattan areas is still down more than 30 percent since pre-pandemic times.

Nashville, TN

The Tennessee city of Nashville is one of the fastest-growing cities in the country and has been one of the hottest job markets in the Sunbelt over the past few years. Between 2018 and 2022, 6,806 apartment units were built in the city’s 37203 zip code, which encompasses much of the city’s downtown area. The average annual median growth between 2019 and 2023 is 4.3 percent, but the 2021 surge in rent growth skewed the numbers. Unlike many cities around the country, Nashville did not experience a major drop in rent growth in 2020, recording just a 2.6 percent decrease. The following year, rent growth soared 20.6 percent before dropping to 2.9 percent in 2022 and year-to-date, -3.2 percent. Prior to the pandemic, average annual rent growth was 4.1 percent in 2019. Nashville’s population is still growing, with Census Bureau data showing that the city added an average of 98 new residents a day last year. But the big influx of apartments has helped cool off rent growth recently.

Frisco, TX

The DFW-area town of Frisco has been one of the fastest-growing cities in the U.S. for years. As its population has expanded, new multifamily has also cropped up at a fast pace. Between 2018 and 2022, 5,872 apartment units were built in Frisco’s 75034 zip code, which includes most of the town. At the same time, between 2019 and 2023, the average annual median rent growth was 4.7 percent. Like many other cities, Frisco experienced a major rent growth jump in 2021, when annual median rent growth rose 22.4 percent. It has since moderated, dropping to 1.7 percent in 2022 and year-to-date, -2.7 percent. Still, the median rent in Frisco is 31.9 percent higher than prices in the rest of the Dallas metro area. Rents across the DFW metro area have cooled off after peaking during the pandemic, including in Frisco, where a lot of apartments are coming to market. But Frisco’s population is still fast-growing, and there are nearly a dozen major development projects in the works, including a new Universal theme park, which will likely keep rents competitive.

Tempe, AZ

City leaders in Tempe, the Arizona city just east of Phoenix, are anticipating its population to grow by 38 percent by 2060. The fast-growing city has been building a ton of new apartments to support its expanding population, with 5,667 new apartments built in the city’s central 85281 zip code between 2018 and 2022. While the average annual median rent growth between 2019 and 2023 was 6.4 percent, the figure was heavily altered by numbers recorded in 2019 and 2021. Rent growth in the city was high just before the pandemic, with the average annual median rent growth reaching 8.9 percent in 2019. That figure only dropped by 0.9 percent in 2020 before shooting up 28.2 percent in 2021. However, rent growth has moderated significantly in the last two years, with median rent prices decreasing -2.9 percent in both 2022 and 2023. The high number of new apartments coming to market is likely one of the reasons why rent growth has cooled off recently in Tempe, as well as the seasonal rise and fall in demand generated by the city’s largest college, Arizona State University.

It can be difficult to say definitively if more supply equals less rent growth in a lot of markets. Other factors are almost always at play, most notably with the pandemic years of 2020 and 2021 skewing the numbers. Supply and demand needs and cost of living can vary widely in different markets, and what’s considered “normal” for annual rent growth can also be debated. Looking at median rent growth and apartment construction over several years is certainly more helpful than looking at just the past year, and it shows that in cities with the highest number of apartments being built, like Washington, D.C., Nashville, and Frisco, rent growth has slowed. Identifying more of a pattern between an influx of supply and rent growth will become easier with more yearly figures to look at, but what can be taken away from looking at figures from the past five years is that more supply can have a moderating effect on rent growth.