What's Happening?
The U.S. rental market is experiencing a decline in rent prices for the 24th consecutive month, with the median asking rent for 0-2 bedroom properties in major metros falling to $1,712 in July. Despite this trend, new tariffs on construction materials like aluminum and steel, coupled with rising construction costs, are causing a pullback in multifamily development. This could lead to a future shortfall in rental supply. Multifamily completions have dropped significantly, with a 38.1% year-over-year decrease in June 2025. The Midwest and South regions have seen the steepest declines in completions, indicating potential challenges for renters and developers.
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Why It's Important?
The ongoing decline in rent prices provides temporary relief for renters, offering more financial flexibility. However, the pullback in multifamily development due to increased construction costs and tariffs could reverse this trend, leading to a shortage in rental supply. This situation may result in higher rents and reduced availability in the future, impacting affordability and accessibility for renters across the U.S. Developers face shrinking profit margins, which could further discourage new projects, exacerbating the rental market's challenges.
What's Next?
As construction costs continue to rise and tariffs remain in place, developers may further reduce their investment in new rental properties. This could lead to increased competition for existing rental units, driving up prices and limiting options for renters. Policymakers and industry stakeholders may need to address these challenges by exploring solutions to mitigate the impact of tariffs and support affordable housing development.
