America’s national rent crisis could be coming to an end. Rental prices have been elevated for years—and renters’ income hasn’t caught up to match—but per findings from the Waller, Weeks and Johnson Rental Index, rents are on the decline as of December 2023.
The Index is named for the professors who contribute to it: Dr. Benner Waller of the University of Alabama, Dr. Shelton Weeks of Florida Gulf Coast University, and Dr. Ken Johnson of Florida Atlantic University.
This Index tracks rents in the 100 most populated cities in the U.S. then lists results both from these cities and national conclusions. Differences between statistically projected rents (based on historical trends) and actual findings also contrasted. The difference is listed as a “premium/discount.”
RISMedia also spoke to Dr. Weeks for his firsthand perspective on this new data.
“Coming out of Covid, we were together (the) three of us at an academic conference, the American Real Estate Society, and we were talking about just what we were seeing anecdotally in markets in terms of the upward pressure in rents,” Weeks recounts. “Local media (had) been picking up the stories about dramatic rent increases, and we’re kicking the idea around and said, ‘Well, we really ought to be tracking this in some way.’”
The December 2023 edition of the Index found that, at the national level, the average rent is $1,957.39. This is slightly higher than it should be, per the report ($1,908.21), hence the premium/discount of 2.58%. The average rent represents a slight decline from November 2023 (-0.17%), but an increase since 2022 (3.33%).
Regional breakdown
The city-wide findings of the December 2023 index include:
New York City: Average rent of $3,132.05. This is a -0.60% change month-over-month, but a 3.87% increase year-over-year. The average rent “should” be $2,974.35, per economic conditions, meaning the city’s premium/discount is 5.3%.
Miami, Florida: Average rent of $2,707.49. This is a -0.11% change month-over-month, but a 2.43% increase year-over-year. The average rent “should” be $2,548.74, meaning the city’s premium/discount is 6.23%.
Denver, Colorado: Average rent is $1,991.91. This is a -0.56% change month-over-month, but a 3.11% increase year-over-year. The average rent “should” be $1,977.22, so the premium/discount is relatively small: 0.74%.
Los Angeles: Average rent is $2,858.24. This is a -0.36% change month-over-month, but a 1.89% increase year-over-year. The average rent “should” be $2,844.33, so the premium/discount is only 0.49%.
Austin, Texas: Average rent is $1,725.35. This is actually lower than rent “should be,” per the index ($1,771.65), so the premium/discount is in the negative (-2.61%). This figure is a decline both month-over-month (-0.61%) and year-over-year (-2.39%).
“(A market with a lower than projected rent is) a bit more favorable for consumers, and usually what it reflects is just a situation where it is not as tight of a market. So as a result, there’s more inventory to choose from, and as a result, prices have likely not grown as quickly as what we would anticipate,” Weeks explained.
However, saying the “rental crisis is over,” suggesting a long-term remedy, is too sweeping a declaration.
The Harvard Joint Center for Housing Studies’ 2024 Rental Report also found declines in rental prices, driven by supply outpacing demand. However, that report suggests that this will be short-lived due to demand from Gen Z renters being on track to grow. Moreover, households remain cost-burdened despite these small declines.
“As we come out of the rental crisis, we will enter a prolonged affordability crisis that will only be solved by building even more units and having wages catch up with costs,” Waller said.
Dr. Weeks concurs, saying inventory and the slow process of building more will lead to an ebb and flow.
“(Real estate markets are) inherently local. Then hand in hand with that, we have to remember that when we talk about adding supply in the housing market, there’s a very long lead time, especially if we’re talking about something like apartments where you have extended approval processes that you have to go through.”
If inventory is the solution, why isn’t more being done to increase capacity? Regrettably for consumers, it’s not that simple in practice.
“Very little has been done in markets across the country to alleviate the core problems that produced this outcome that we saw in the marketplace over the last couple of years. It’s still very challenging to bring new inventory to the market. It still takes a long time, and literally in much of the country you can’t add supply. When we look at the fact that there’s so much of the United States that developed areas around our cities that’s zoned and zoned only for single-family residential, that makes it very difficult for market participants to respond and add supply when you get surges in population or an area of benefits from end migration like we’ve seen in Florida.”
Asked how REALTORS® should be feeling about the news of declining rents, Dr. Weeks opined:
“I think it means that with the market softening a little bit in terms of upward pressure on rents, it’s going to make it easier, especially for first-time homebuyers to get to a position financially where they’re able to go out and finally enter the market to make purchases. It depends on which market you’re in, and realize, even if you’re in a market like southwest Florida where we’ve got a big wave of inventory hitting, it’s not going to last forever. I guarantee we’ll be back in a tight market situation again. It’s just the natural ebb and flow of the markets and the fact that it takes so long to respond and bring inventory to the market.”
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