Since mid-2023, rents in major US cities have risen in opposite directions, and changes in where Americans are moving and how much those cities have built in response could explain why.
Cities like New York and Chicago have seen them rents are risingwhile others, like Austin, have seen them fall by about 8%, according to a study by Aziz Sunderji, founder of Home Economics, a publication covering the U.S. housing market.
Sunderji found that an increase in supply in expensive markets with a reduced influx of new residents pushed down rents, while the local labor market, as measured by remote working and technology, had the least impact. That drop in rental prices could reflect what Sunderji called a “timing error by developers,” who responded to early spikes in demand without knowing it would calm down and result in excess inventory, he said.
Austin rents down about 8% since mid-2023. Migration to Austin from other parts of the US declined between 2021 and 2024, reducing demand for housing. Meanwhile, many residential buildings – with permits approved between 2021 and 2023 during a demand boom – began flooding the market, increasing supply. The research shows that a mismatch has led to a drop in rental prices. Moreover, rents also weakened more in areas where prices had risen unusually high relative to local incomes and their historical norms.
Sunderji said that “Austin is the extreme case in each part of the combination, but the combination is general.”
The slowdown in migration does not mean that people have been lost in these areas; “They just stopped getting them as quickly,” Sunderji said, causing the demand increases to slow down.
The decline in Austin roughly doubled the 4% decline in San Antonio, the city with the second-largest rent decline among the 21 cities he measured. The subways that saw rent drops — Austin, San Antonio, Denver, Phoenix, Dallas — all experienced high rental valuations and a slowdown in migration, except Denver, Sunderji said.
Other cities are struggling to achieve lower rents
American cities facing rising rents and high costs of living have been looking for policies to lower housing costs. For example, New York City has passed a rent freeze on rent-stabilized apartments, and New York Mayor Zohran Mamdani has Block by block plan The country wants to build 200,000 affordable homes in the next ten years. Still, Sunderji said the factors that have driven down rents in Austin, for example, weren’t caused by the policy.
Developers responded to a surge in demand that they didn’t know would stop and are now left with excess inventory with compressed margins, offering concessions and interest rate buydowns to move it, he said. ‘Technology that is not possible or desirable; you can’t plan a cycle,” he said.
In contrast, the three metros with the strongest rental growth since mid-2023 – New York, San Francisco and Chicago – had home valuations close to historical norms, while fewer residents moved to other parts of the country.
Sunderji also examined how rental prices were affected by places with warm winters and the number of remote areas technical workers in the cities. Remote work and tech jobs had the least impact on lowering rents, as New York, San Francisco, Seattle and Boston have high levels of tech and remote workers and saw large rent increases.
The warm winter factor served as a ‘proxy’, shedding light on the general trend of most people moving to warmer places, affecting migration flows in certain areas. Still, weather patterns did not play a major role in the study, Sunderji said.
