The construction boom in the U.S. is resulting in lower rents and benefits for tenants.

• In July, at least one rent concession was offered by more than a third, or 33.2%, of landlords, according to Zillow Group.
• Since 2020, the median asking rent prices for all bedroom counts have been on a steady decline, with July marking the first time this has happened, according to Redfin, a real estate brokerage site.

The construction boom in the U.S. has led to reduced rents and other advantages for tenants.

The completion of more multi-family units in June than in any month in nearly 50 years, according to Zillow Group, indicates that the pandemic has led to an increase in record-construction activity, resulting in more inventory being available for renters.

Landlords are providing incentives, such as discounts or perks, to attract new renters, including free weeks of rent or free parking.

In July 2021, approximately one-third or 33.2% of landlords in the U.S. provided at least one rent concession, an increase from 25.4% in the previous year, according to Zillow's research.

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Since 2020, the median asking rent prices for all bedroom counts have been on a steady decline, with July marking the first time this has happened, according to Redfin, a real estate brokerage site.

According to Redfin data, the median asking rent price for a studio or one-bedroom apartment decreased by 0.1% to $1,498 a month, while two-bedroom apartments saw a 0.3% decrease to $1,730. Additionally, units with three bedrooms or more experienced a 2% decline in median asking rent, landing at $2,010 per month.

Rent growth has flattened, which is good news for renters, according to Chen Zhao, head of the economics team at Redfin. Despite the high rents due to the pandemic's price increase, this trend is a positive development for renters.

Sun Belt states are leading the trend

Since the pandemic, newly built apartments in metro areas of Florida and Texas, two Sun Belt states, are experiencing significant rent price declines due to an increase in available units, according to Redfin.

In July, the median asking rent price in Austin, Texas, decreased by 16.9% compared to the previous year, according to Redfin. This was the largest decline among all metro areas analyzed in the national report.

In the same timeframe, the median asking rent price in Jacksonville, Florida, decreased by 14.3% to $1,465, according to Redfin.

According to Zillow, the median rent price in Texas is $1,950, while in Florida it is $2,500.

In 45 out of the 50 largest metropolitan areas in the U.S., the cost of renting concessions has increased compared to a year ago, according to Zillow.

According to Zillow data, the highest increase in the share of rental listings offering concessions occurred in Jacksonville, Florida, with a 17 percentage point rise, followed by Charlotte, North Carolina (15.7 percentage points), Raleigh, North Carolina (14.7 percentage points), Atlanta (14.5 percentage points), and Austin, Texas (14.1 percentage points).

How wage growth helps rent costs

According to Zillow's Economic Research team senior economist Orphe Divounguy, there has been a strong correlation between wage growth and rent growth throughout history.

The tightness of the labor market can predict the tightness of the housing market, he explained.

The labor market is experiencing a decline as the number of job seekers exceeds the number of job openings. In July, nonfarm payroll increased by only 114,000, down from 179,000 in June, according to the Bureau of Labor Statistics. As a result, the unemployment rate rose to 4.3%, the highest level since October 2021.

"As the labor market tightens, we anticipate the rental market to become more competitive."

According to Zhao, wages are growing at a rate of 4% to 5% annually, which means that rents are falling relative to wages. This implies that your wages are increasing at a faster rate than rents.

The Bureau of Labor Statistics reports that wage growth has slowed down, with a 5.1% increase in wages and salaries for the 12-month period ending in June 2024, compared to a 4.7% increase a year ago.

According to the Indeed Hiring Lab Institute, wage growth peaked at 9.3% in January 2022 and has since decreased to 3.1% by mid-June, returning to pre-pandemic wage levels.