Some Good News? More Rentals Are Now Vacant Nationwide

Lately, whenever Harvard’s Joint Center for Housing Studies (JCHS) releases its annual State of the Nation’s Housing report, it’s somewhat of a blow to morale. The report, which takes the pulse of the U.S. housing market, isn’t like the usual trickle of news about high mortgage rates or the tight homeownership market; instead, it maps underlying factors that influence who can access housing, cost burdens associated with renting and ownership, and broader impacts of homeownership, like racial wealth gaps. Is it fascinating? Yes. In our current market, is it also depressing? Absolutely.   

But in this year’s report, released last week, there was one small, bright light amid the ongoing not-great housing news. In the rental sphere, vacancy rates are up nationwide—a good sign that new multifamily construction is bringing some relief to tight markets. Though vacancy is just one of many factors that play into the housing market’s health, it can also be a harbinger of what’s to come. And in a presidential election year, when housing is a topic on national stages, vacancy rates highlight work to be done to ensure that this good news isn’t just a blip in a long, dismal housing story. 

Back to the good news: The JCHS team analyzed census data and found that the rental vacancy rate in early 2024 hovered at 6.6 percent, up from 5.6 percent in early 2022. They also analyzed data from RealPage, a real estate software company focusing mostly on larger building management companies, and found 5.9 percent of professionally managed units were vacant at the start of 2024, up from 2.5 percent in the first quarter of 2022. And though in some postindustrial cities like Chicago and St. Louis, "vacancy" conjures images of empty buildings left behind by white flight and disinvestment, some vacancy can be an indicator of a healthy market, says Alex Hermann, a senior researcher at JCHS who helped lead the housing report. 

"If one-hundred percent of units were always occupied, that means it would be impossible for someone to relocate or move. Low vacancies, those pretty close to what we saw during the pandemic, can cause a lot of stress in the rental market," he says.

In New York, where the recent census found an extremely low vacancy rate of 1.4 percent, tenant advocates have found that these rates are exacerbated by landlords withholding potentially more than 60,000 rent-stabilized units in 2021, according to The City. Hermann adds that high demand yields tight rental markets but notes that between 2019 and 2023, there wasn’t a "sizable increase" in the number of multifamily building permits in the metro area (which Hermann says ranges between 40,000 and 60,000). 

In contrast, in Austin, Texas, he says, there were 14,000 multifamily permits issued in 2019, which nearly doubled to almost 26,000 in 2021. This has led to a huge decline in Austin’s rents, according to The Real Deal, which fell, "to $1,577 in March, marking a 4.7 percent year-over-year decline."  

The JCHS report finds a nationwide rent softening: "According to CoreLogic’s Single-Family Rent Index, rents grew by just 3.4 percent annually in March 2024, much closer to pre-pandemic norms and a sharp retreat from the 14.0 percent annual peak growth rate recorded in April 2022." Nearly one million new units are currently in the national pipeline, too, says Hermann, which could further cool rent growth.

But at the same time, he continues, the number of new multifamily projects now getting started is low. This is because, "you have much higher interest rates, you have some tighter financing on the lending side," Hermann says. "Banks can look around and see what’s happening." What banks are seeing are cooling rents and higher operating costs—especially skyrocketing insurance premiums. "Banks that finance that development are seeing all these conditions, and they’re pulled back considerably." 

This could mean that in a couple years, there will be fewer multifamily projects coming to market, and we could all be feeling the effects of today’s vacancy rates and construction trends. More Zoomers are entering the market and adding new demand, and the uncertain homeownership market keeping many Millennials from buying their first home could further strain rentals. Coupled with underfunded affordable housing initiatives and a lack of what the JCHS report calls a "housing social safety net," the outlook still feels precarious. The housing ecosystem, in which young people "graduate" from studio apartments to homeownership, has been damaged by past recessions and anti-housing policy that could perpetuate future "busts." In some ways, we’re stuck in what Hermann calls a "reactive" state, one that could be alleviated by better housing policy that addresses housing’s long and short-term problems with pluralistic solutions. But for now, at least, many American renters can see a small glimmer of hope—likely short-lived, but still, it’s something.  

Related reading: 
How Will the Next President Fix the Housing Crisis? 
Is Rent Getting Cheaper in 2024? It’s Complicated

Cover Image: Jim Watson/AFP via Getty Images