Rents have been declining for nearly two years in the top 50 metros, but low multifamily permitting may send rents higher in the future, according to the February rent report from Realtor. Only 294,000 multifamily units were permitted last year, well below the 318,000 units approved in 2020 at the peak of the pandemic.

“While there has been a gradual correction, the current trend of declining rents over the past 19 months and a still-sizable number of multifamily units under construction have impacted builders' enthusiasm for new projects,” said Realtor chief economist Danielle Hale, who noted the nation is short 3.8 million homes. “As builders attempt to right-size their construction pipelines amid shifting economic and policy cross currents, multifamily builders nationwide have made headway, evidenced by vacancy rates trending up.”

In markets where demand is high and rent is already growing, low levels of multifamily housing permitting will cause further supply constraints and could push rents up in the future, said Realtor. Nine of the top 50 markets studied by the marketplace have experienced lower multifamily approvals and rising prices. These include New York, where rents are up 6.8% as permits are down 9.5%; Kansas City where rents are up 6% and permits are down 6%; and Detroit where rents are up 3.6% and permits are down 11.6%. Other markets following this trend include Washington, D.C.; San Jose; Baltimore; Boston; St. Louis; and Charlotte.