U.S. Rental Housing Trends and Challenges

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Introduction

The U.S. rental housing market is at an inflection point in the mid-2020s, marked by a cooling in rents after a period of pandemic-era overheating, alongside a worsening affordability crisis. After two years of record rent increases in 2021–2022, rent growth has essentially stalled in 2023. Vacancy rates, which hit historic lows during the pandemic, have ticked back up to normal levels as a wave of new multifamily supply comes online. This cooling offers some relief to middle-income renters but comes after a surge in housing costs that pushed renter cost burdens to all-time highs. Today, roughly half of U.S. renter households are considered cost-burdened (paying over 30% of income on rent), a record share that underscores the depth of the affordability crunch. At the same time, homelessness has climbed to unprecedented levels, reflecting the severe strain on the nation’s housing safety net. Policymakers at all levels are grappling with how to increase affordable housing supply and bolster rental assistance programs, even as developers and property owners face high interest rates, rising expenses, and aging buildings in need of upgrades. This article examines these converging trends – from the cooling rental market and affordability challenges to homelessness, policy responses, investment hurdles, and innovations – and looks ahead to how rental housing might evolve between now and 2030.

Cooling of the Rental Market

After an extraordinary run-up in rents during the pandemic, the rental market is finally cooling. As of mid-2023, asking rents for professionally managed apartments were rising at an annual rate of just 0.4%, a dramatic slowdown from the 15%+ annual rent hikes seen a year earlier. In fact, rent growth has plummeted from its record-breaking pace: in early 2022, upscale “Class A” apartments saw rents surge by 18% year-over-year, but by Q3 2023 Class A rent growth had slowed to under 1%. Similar deceleration occurred in mid-tier Class B and lower-tier Class C units, which saw rent increases drop to essentially zero. Even the single-family rental segment has cooled – after spiking over 14% in 2022, single-family home rents were up a more normal 2.9% year-over-year as of August 2023.

A key factor taming rents is the rise in vacancy rates. The national rental vacancy rate climbed back to 6.6% in Q3 2023, up from the pandemic low of 5.6% in late 2021 and roughly on par with the pre-pandemic average. For professionally managed apartments, vacancies jumped even more – from an extremely tight 2.5% in early 2022 to 5.5% by late 2023. In Sunbelt markets and expensive Western metros that led the pandemic rent boom, supply has caught up to demand, resulting in flat or even declining rents. By mid-2023, 32% of metro areas were seeing year-over-year rent declines (something unheard of a year prior), especially in formerly red-hot markets like Boise, Phoenix, Austin, and Las Vegas. In contrast, a few cheaper midsize markets in the Midwest and Northeast still registered modest rent gains in 2023, but overall the frenzy has subsided.

Booming construction of new rentals has been pivotal in easing the pressure. Multifamily housing completions have been running near historic highs, flooding many cities with new apartments and thus moderating rent growth. RealPage analytics confirm that markets with above-average new supply in 2023 generally saw notable rent cooling. However, there are signs this building spree may be cresting. As interest rates shot up, developers began pulling back: after averaging over 530,000 units (annualized) in early 2023, multifamily housing starts fell sharply by mid-year. By late 2023, multifamily starts were down significantly from their peak, indicating that the pipeline of new rentals will shrink going forward. In short, today’s renters are benefiting from a temporary glut of new units and stabilizing demand, which together have brought rent inflation down from its once-scorching pace. But most of the new supply has been concentrated at the high end of the market, and if construction slows in a high-interest-rate environment, this period of relief may be short-lived.

The Affordability Crisis: Cost Burdens and Low-Cost Housing Shortages

Even as rent growth cools, the affordability crisis for renters remains more severe than ever. The pandemic housing boom pushed the number of cost-burdened renters to unprecedented heights. In 2022, 22.4 million renter households – roughly half of all renters – were paying over 30% of their income on rent and utilities. This was up sharply from 20.4 million cost-burdened renters in 2019, wiping out prior improvements and reaching the highest count on record. Especially alarming is the rise in severely cost-burdened renters (those paying over 50% of income on housing): that figure hit 12.1 million households in 2022, also an all-time high and about 1.5 million more than before the pandemic. In percentage terms, over one-quarter of all renter households are now severely burdened – a level of housing stress that leaves little money for other essentials.

This affordability squeeze has been decades in the making, but it intensified recently as rents far outpaced incomes. Adjusted for inflation, median rents rose 21% between 2001 and 2022 while median renter income crept up only 2% in that period. The result is that each year, housing costs consume a larger share of paychecks. What’s more, high rents have climbed the income ladder: cost burdens are no longer just a low-income problem. Middle-income renters have increasingly struggled, with rising cost-burden rates even among those earning $45,000–$75,000. For example, a startling 67% of renter households earning $30,000–$44,999 were cost-burdened in 2022. Even renters in the $45,000–$75,000 bracket – traditionally considered moderate-income – saw the fastest growth in burden rates during the pandemic. In short, rising rents have eroded affordability across virtually all income levels, not just among the poorest households.

The crunch is worst for those with the lowest incomes, who have essentially been priced out of the private market. A dwindling supply of low-cost rentals is a major culprit. In 2022, the nation had only 7.2 million units with rents under $600, the level considered affordable to the 26% of renter households earning under $24,000 per year. This represents a loss of 2.1 million low-rent units since 2012 (inflation-adjusted) – a decline accelerated by the pandemic-era rent spike, which alone wiped out over half a million low-cost units from 2019 to 2022. Put simply, affordable rentals are disappearing: some age out of the market (lost to disrepair or conversion), while others “filter up” to higher rent tiers due to upgrades or simply high demand. With far fewer inexpensive apartments available, low-income renters face intense competition for what remains, often ending up paying far more than they can afford. By 2022, 86% of renters with incomes under $30,000 in large metro areas were cost-burdened – an astounding share that highlights the near impossibility of finding affordable housing in most cities.

The consequences for renters’ finances and well-being are dire. When housing claims an excessive share of income, tenants must cut back on other necessities. The median renter earning under $30,000 had just $310 left each month after paying rent in 2022 – half the residual income they had in 2001 after adjusting for inflation. Among those lowest-income renters who are severely cost-burdened, median non-housing disposable income was a mere $170 per month. Research shows such households drastically scale down basic expenditures: the poorest renters with severe burdens spend on average 39% less on food and 42% less on health care than their peers with affordable rents. Others double up in overcrowded units or accept substandard living conditions because it’s all they can afford. In sum, America’s rental affordability crisis has reached new extremes – too many renters are one financial setback away from eviction or hardship, with rent bills that leave little room for anything else.

Growing Homelessness and Housing Instability

The most visible and tragic manifestation of the housing crisis is the rise in homelessness. After years of modest declines, the homeless population has surged amid the post-pandemic affordability squeeze. As pandemic eviction moratoriums and emergency aid programs wound down in 2022, many vulnerable households had no cushion against rising rents and economic strain. The result: the number of people experiencing homelessness jumped by nearly 71,000 in a single year, according to federal point-in-time counts. In 2023, homelessness reached its highest level since tracking began – well over half a million people on any given night. Particularly alarming was the rise in unsheltered homelessness (people living on streets, in cars, tents, or other places not meant for habitation). The unsheltered count hit 256,600 people in 2023, the most ever recorded, after increasing by about 22,800 in one year. This continues a longer trend: the unsheltered homeless population is 48% higher than in 2015, a spike concentrated in high-cost states like California, Washington, and Oregon, but also evident in states like Arizona, Ohio, Tennessee, and Texas as housing costs outstrip incomes. Many emergency shelter systems are overwhelmed, leaving more individuals and families with no choice but to endure life without housing.

Evictions are a key trigger of homelessness, and after a brief reprieve, eviction filings are rebounding to pre-pandemic levels. During 2020–2021, eviction moratoriums and an unprecedented $46.5 billion in federal Emergency Rental Assistance (ERA) prevented countless evictions – filings were an estimated 58% lower than normal during that period. But these pandemic-era protections were temporary. By mid-2023, most ERA funds had been depleted and almost all eviction bans had expired. Accordingly, landlords resumed filings in force – by 2023 the volume of eviction cases had returned to roughly the 2019 baseline in many jurisdictions. The resumption of evictions disproportionately affects low-income renters who fell behind on rent during COVID or who simply cannot keep up with today’s high rents. Each eviction not only displaces a household but can initiate a downward spiral leading to job loss, poor health, and, in the worst case, homelessness.

To their credit, some state and local governments have learned lessons from the pandemic and are trying to bolster tenant protections. Roughly half of the programs that distributed federal rent aid plan to continue operating in some form with state/local funds, aiming to provide ongoing emergency rental assistance even after the federal money is gone. Since 2021, at least 3 states and 12 cities have enacted “right-to-counsel” policies that provide free legal representation to tenants facing eviction, an intervention proven to reduce wrongful evictions. These initiatives, while promising, reach only a fraction of at-risk renters. Overall, the housing instability trend is worrying: with pandemic supports evaporated, many lower-income renters are again one paycheck away from eviction, and our shelters and safety nets are straining under the weight of need.

On the homelessness front, the federal government and many states have injected new resources, but so far it’s not sufficient to reverse the trend. The Biden Administration has provided an unprecedented $3.1 billion boost to HUD’s Continuum of Care homelessness programs, and the 2021 American Rescue Plan Act devoted $5 billion (through HOME-ARP) for housing and services for homeless individuals, plus funded 70,000 emergency housing vouchers to help move people out of shelters. State and local governments also steered at least $3.8 billion of their COVID recovery funds into homelessness relief and housing programs. These efforts have undoubtedly helped thousands of people – for example, the emergency vouchers quickly housed many vulnerable families. However, the scale of homelessness has grown so large that much more will be required to reduce the numbers appreciably. Experts agree that substantially expanding the supply of affordable and supportive housing, along with rental assistance, is crucial to prevent more people from falling into homelessness and to rehouse those currently unhoused. Without broader housing affordability solutions, emergency measures alone are treating the symptoms rather than the cause.

Strains on the Housing Safety Net

The recent spike in housing instability lays bare the longstanding weaknesses in America’s housing safety net. Unlike some social programs, rental assistance in the U.S. is not an entitlement – only a limited pool of funding is available each year. As a result, only about 1 in 4 income-eligible low-income renters actually receives federal rental assistance such as housing vouchers or subsidized housing. The rest linger on waiting lists or simply go without help. This gap has been growing: from 2001 to 2021, the number of very low-income renter households (those most likely to qualify for aid) swelled by 4.4 million, yet the number of assisted households in that category increased by less than 1 million. In practical terms, millions more needy renters have entered the market over two decades, but housing assistance has failed to keep pace – pushing the unassisted, struggling population to record highs.

One way HUD measures this unmet need is through “worst-case housing needs,” defined as very low-income renters who either pay more than half their income on rent or live in severely substandard conditions (or both). By 2021, about 8.5 million renter households met this worst-case needs definition, up from 5.0 million in 2001. In percentage terms, a staggering 60% of all very low-income renter households who weren’t getting assistance had these severe housing problems. This signals that the limited housing aid available is utterly overwhelmed by the level of need – the majority of the poorest renters are effectively left to fend for themselves, often with calamitous results (extreme rent burdens or unsafe living conditions).

The main federal rental assistance programs face challenges of their own. The public housing stock, which provides affordable units for around 835,000 households, is literally crumbling – many developments are decades old and suffer from disinvestment. The nationwide capital repair backlog for public housing exceeds $90 billion. Congress funds only a fraction of needed repairs each year, leading to units gradually becoming uninhabitable. To address this, HUD’s Rental Assistance Demonstration (RAD) program has been allowing public housing agencies to convert properties to Section 8 contracts and attract private financing for renovations. Over 225,000 public housing units have converted under RAD, unlocking funds for improvements. While helpful, RAD alone can’t rescue all projects – far more resources are required to revitalize or replace aging public housing and preserve it as a source of affordable units.

Other pillars of the affordable housing supply are also tenuous. The Low-Income Housing Tax Credit (LIHTC) program has been the workhorse of subsidized housing production for decades, creating over 3.6 million affordable rental units since 1986. However, LIHTC units come with minimum affordability periods (typically 30 years). A wave of older projects is reaching the end of their compliance periods: more than 325,000 LIHTC units will see their affordability restrictions expire between 2024 and 2029. Once restrictions lift, owners may convert these units to market-rate, eliminating them from the affordable stock. In addition, some LIHTC owners use a loophole (qualified contracts) to exit the program after just 15 years, costing about 7,000 affordable units annually. Similarly, in rural America, the USDA Section 515 rental program (378,000 units) faces a wave of mortgage maturities that could remove units from affordability unless preservation steps are taken. Put simply, the subsidized housing inventory is at risk of attrition in the coming years, even as demand for these units is higher than ever.

The Housing Choice Voucher program (Section 8 vouchers) is the largest federal rental aid effort – it assists around 2.3 million households by paying the portion of rent that exceeds 30% of their income. Vouchers are critical for helping low-income families rent decent housing in the private market. However, the program’s success depends on private landlords choosing to accept vouchers, and there are multiple friction points. Landlords in many areas are not required to take vouchers and may be reluctant due to bureaucratic hurdles like unit inspections, paperwork delays, or stigma. In tight rental markets, owners often prefer cash-paying tenants with higher incomes, leaving voucher holders struggling to find apartments. In fact, about 40% of families awarded a voucher are unable to lease a unit in time and end up forfeiting the assistance. This high “voucher attrition” rate reflects how challenging it can be for low-income renters to actually use a voucher before it expires. Efforts are underway in some cities to encourage more landlord participation (for instance, by streamlining inspections or offering signing bonuses), but many voucher holders still face an uphill battle.

With federal solutions falling short, state and local governments have tried to fill the gaps within their limited means. In 2020, state and municipal housing agencies issued a record $17.2 billion in tax-exempt bonds to finance affordable multifamily development, supplementing their LIHTC allocations. States and cities also collectively generate roughly $3 billion a year for housing via local housing trust funds. These funds often support projects for extremely low-income or homeless households that federal programs struggle to reach. During the pandemic recovery, jurisdictions also poured some of their stimulus dollars into housing – for example, states used portions of the Fiscal Recovery Funds from the American Rescue Plan to preserve and create affordable housing. All these efforts are crucial. But, as the Harvard Joint Center for Housing Studies bluntly notes, they still fall short of the growing need. Without a stronger federal commitment, state and local initiatives are essentially playing catch-up. The enormity of the affordability gap – millions of unassisted, cost-burdened renters – suggests that a substantial expansion of rental assistance and affordable housing investment would be needed to truly turn the tide. Absent that, the housing safety net will continue to fray under pressure, with many households teetering between housing instability and homelessness.

Investment Challenges and Opportunities in a High-Rate Environment

For developers and property owners, the rental housing landscape of the mid-2020s is a double-edged sword. On one hand, tenant demand remains relatively robust and long-term returns in rental real estate have been strong, keeping investors interested in the sector. On the other hand, soaring interest rates and high expenses are squeezing project finances and property incomes, creating a challenging climate for new construction and operations. The Federal Reserve’s rate hikes beginning in 2022 led to a sharp increase in financing costs: yields on 10-year Treasury notes (a benchmark for real estate debt) climbed to around 3.6% in mid-2023 – nearly 3 percentage points higher than in the early pandemic. Consequently, multifamily mortgage rates jumped into the mid-5% range by mid-2023, a drastic change from the rock-bottom rates of 2020. The cost of equity also rose as investors demanded higher returns to beat safer bonds. These shifts mean developers must achieve much higher rents or lower costs for a project to pencil out at the same profit level – a difficult task when rent growth is slowing and construction costs have been elevated. In short, high capital costs are putting many developments on hold, as the math simply doesn’t work unless economic conditions improve.

Lenders and investors have responded by tightening purse strings. By early 2023, more than half of banks reported falling demand for multifamily loans, and nearly two-thirds had stiffened their underwriting standards amid uncertainty about property performance. Developers, sensing the headwinds, pulled back on loan applications. The overall volume of multifamily mortgage borrowing plummeted 48% year-over-year in Q2 2023. Deals that would have been routine a couple of years ago are now hard to finance. The spike in borrowing costs has even begun to deflate property values. For the first time in over a decade, apartment building prices fell year-over-year in 2023; by Q3 2023, values were down roughly 13% from a year prior, a whiplash from the 20%+ annual price gains seen in early 2022. Rising capitalization rates – averaging about 5.8% in late 2023, up nearly a full point from a year earlier – signal that investors are requiring better yields to justify purchases. Indeed, in the current environment a risky multifamily investment can look less attractive relative to stable Treasury bonds, a stark reversal from the low-rate era.

Property owners are also feeling the profit squeeze. Operating costs have jumped due to inflation in utilities, maintenance, insurance, and labor. One index of multifamily operating expenses showed a 9% year-over-year increase as of mid-2023, far above normal. Meanwhile, rent growth has decelerated, so net operating income (NOI) growth for landlords has dwindled. After a surge in 2021, when many owners saw NOI climb 20–25%, growth in net income slowed to about 3% in 2023. For highly leveraged owners, this combination of flattening income and rising costs raises concerns about meeting debt service. So far, a wave of defaults has not materialized – most owners built up significant equity cushions from the prior boom, and many have long-term fixed financing that shields them from immediate rate shocks. Delinquency rates on multifamily loans remain low, only inching up from historic lows. But if high interest rates persist and rents plateau, some weaker operators or recent buyers with short-term loans could face trouble when refinancing.

For now, the sector’s solid fundamentals and track record continue to attract investment, albeit at a slower pace. Rental housing still offers relatively good returns compared to other real estate classes like offices or retail, which have their own challenges. The consistent demand for housing – everyone needs a place to live – gives apartments a defensive quality in investors’ eyes. Indeed, over the past two decades, multifamily assets delivered strong and steady performance, which has drawn new investors into the rental market, including institutions and professional landlords. While the majority of rental properties are still owned by individuals or small private landlords, there is a clear trend toward professionalization. Many mom-and-pop landlords have converted their holdings to LLCs or partnerships, and larger investors (like real estate investment trusts and private equity firms) have expanded their portfolios of rental properties.

One notable area of investor interest has been single-family rentals (SFR) – houses rented out, including those specifically built for rent. In recent years, institutional investors increased their share of the single-family rental market to around 25%, up from 17% two decades ago. Big firms have bought thousands of suburban homes, especially in high-growth Sunbelt metros, viewing them as attractive rental assets. Developers have even started building new subdivisions of homes intended solely as rentals (the “build-to-rent” model). Completions of single-family homes built as rentals have climbed rapidly – single-family rental housing starts hit a record high annual rate of 70,000 units in late 2023. This reflects confidence that demand for family-sized rentals will remain strong, as many young families cannot afford homeownership and prefer a house over an apartment. However, here too the high cost of capital has recently chilled the frenzy. Institutional purchases of single-family homes fell by 30% year-over-year in Q3 2023, as investors became more cautious given rising rates and some softening of rents. Whether growth in the SFR sector resumes will depend on interest rates and housing market conditions in coming years.

Looking ahead, the investment outlook is mixed. High interest rates are likely to remain a “considerable challenge for the apartment industry” in the near term, deterring new construction and acquisitions until financing becomes more favorable. If developers continue to pull back, the current glut of new apartments could give way to another supply crunch a few years down the road, especially if demand stays steady. That would put upward pressure on rents again, erasing the recent rent relief at the high end of the market. Additionally, the burden of rising operating and insurance costs is an ongoing worry. Property insurance premiums in particular have soared in disaster-prone regions, and some insurers have even stopped issuing policies in high-risk areas (e.g. parts of California and Florida), making it harder and costlier to protect rental assets. Smaller landlords and owners of affordable/subsidized housing are most vulnerable – with thin profit margins, they may struggle to absorb cost increases and could be forced to defer maintenance or sell properties. This could jeopardize the condition and preservation of existing affordable rentals. On the flip side, any cooling of inflation and interest rates in the coming years would improve the math for investors and developers, potentially unleashing a new wave of rental housing investment. Given the persistent demand for rentals, capital is poised to return once the financial headwinds abate. In sum, the 2020s are forcing the rental industry to navigate a high-expense, high-rate climate it hasn’t seen in many years, requiring adaptation and patience from market players.

An Aging Housing Stock in Need of Upgrades

Not only is it expensive to build new housing, but a large share of America’s existing rental stock is aging and in need of reinvestment. The median age of renter-occupied housing has steadily increased to around 44 years as of 2021, up from 34 years at the turn of the century. This reflects both a construction lull in the 1990s and 2000s and the simple fact that millions of mid-century buildings are still in service. While today’s building codes and past renovations have improved basic safety and quality in many units, there are still nearly 4 million renter households living in physically inadequate homes – places suffering from issues like serious structural damage, persistent leaks and plumbing problems, unreliable heat or electricity, or other substandard conditions. Even among units that meet the bare definition of “adequate,” there are often significant deferred maintenance needs. A 2023 Federal Reserve study estimated it would cost $51.5 billion just to address the identified physical deficiencies in the occupied rental stock nationwide. This backlog includes everything from replacing leaky roofs and failing boilers to remedying environmental hazards like lead paint – crucial work to keep aging homes habitable.

Another growing concern is whether the housing stock meets the accessibility needs of an aging population and people with disabilities. As the large Baby Boomer generation enters their retirement years, more renters will require features that enable safe, independent living – things like zero-step entrances, grab bars and accessible bathrooms, wider doorways, and elevators in multi-story buildings. Yet much of our housing was not built with these considerations. According to a 2023 Freddie Mac survey, nearly half of renters with disabilities reported that their home is minimally or not at all accessible to them. Common needs include bathroom mobility aids, no-step entryways, and accessible electrical outlets and controls. Without modifications, many seniors and disabled renters find their homes difficult to navigate or even unsafe (for example, a wheelchair user in a building with only stairs, or an elderly tenant in a bathroom without grab bars). Retrofitting older units for accessibility can be costly, but it will be increasingly important as the renter population skews older. Communities will need to find ways to incentivize adding accessibility features, or else face a mismatch between housing supply and the needs of residents.

Improving energy efficiency and climate resiliency in rental housing is another urgent challenge for the coming decade. Rental homes – especially older single-family and small multifamily structures – tend to use more energy per square foot than newer or owner-occupied homes. Many have outdated heating, cooling, or insulation systems, which not only drive up carbon emissions but also saddle low-income tenants with disproportionately high utility bills. Modernizing these units with better insulation, efficient appliances, and possibly electrification (shifting from oil/gas to electric heat pumps, for example) could significantly cut energy costs and environmental impact. The federal government has started to address this: the 2021 Infrastructure Investment and Jobs Act included a one-time infusion of $3.5 billion into the Weatherization Assistance Program to help low-income households – renters included – make energy efficiency upgrades. More recently, the 2022 Inflation Reduction Act devoted $8.8 billion for efficiency and electrification rebates that also apply to rental properties, plus $1 billion specifically to upgrade the energy performance of HUD-subsidized affordable housing. These funds will support measures like better insulation, new HVAC systems, and installing solar panels or electric appliances in some homes. However, given the sheer size of the rental stock (44 million units nationally), these programs can only reach a fraction of properties. Much greater scale and additional incentives will be needed to retrofit older rentals en masse and to ensure new construction meets high efficiency standards. The benefits of such investments are twofold: lower utility costs (critical for low-income renters) and progress toward climate goals.

Climate resilience is another aspect of housing quality now coming to the forefront. With the frequency of extreme weather events on the rise, a significant share of rental housing is exposed to hazards like hurricanes, floods, wildfires, and extreme heat. More than 18 million rental units (about 41% of all rentals) are located in counties with substantial expected losses from natural disasters – a proportion slightly higher than that for owner-occupied homes. Recent disasters have highlighted the vulnerability of older, poorly maintained housing to destruction or severe damage. Moreover, the insurance market is reacting: in states like California, Florida, and Louisiana, some major insurers have pulled back coverage in high-risk areas, or premiums have spiked, making it increasingly difficult and expensive for landlords (and even renters’ insurance for tenants) to cover these risks. The implication is that without intervention, many at-risk rental properties could become uninsurable or unaffordable to insure, potentially leading landlords to walk away or pass on costs to tenants. To avoid catastrophic losses – both human and financial – state and local governments will need to promote hazard mitigation and climate adaptation measures for housing. This could include stricter building codes (e.g. elevating structures in flood zones, fire-proofing in wildfire areas), incentivizing upgrades like storm shutters or backup power, and developing community-level resilience infrastructure. It’s an enormous undertaking, but one that climate change makes increasingly pressing.

Innovations and Reforms in Zoning and Land-Use Regulations

A significant barrier to expanding the rental housing supply – especially affordable units – has long been restrictive zoning and land-use rules. In many communities across the U.S., local zoning codes heavily favor single-family homes on large lots and prohibit multifamily buildings in most residential areas. In fact, an estimated 75% of land in major American cities is zoned exclusively for single-family detached housing. This means apartment buildings, townhouses, duplexes, and other more affordable housing types are outlawed on the vast majority of residential land. Such exclusionary zoning has constrained development, driving up housing costs by limiting supply and “locking out” lower-cost housing from many neighborhoods.

Recently, however, there has been growing momentum to reform these rules. Several states have enacted laws to override local zoning barriers and allow a greater variety of housing. Notably, California, Oregon, and Maine in the last few years each passed sweeping legislation effectively ending single-family-only zoning – requiring cities to permit duplexes or even fourplexes in neighborhoods that used to be one-home-per-lot. Building on that trend, in 2023 another wave of states took action: Montana, Vermont, and Washington State all approved bills to preempt local zoning and legalize modest multifamily housing (duplexes, triplexes, ADUs, etc.) in previously single-family zones. These reforms mean that in those states, cities can no longer bar small apartment buildings or accessory units in residential districts – a significant step toward opening up more land for rental housing construction. The details vary by state (for instance, Montana’s law allows fourplexes in all cities above a certain size; Washington’s law requires cities to allow duplexes and fourplexes in most neighborhoods, with larger allowances near transit). But the common thread is a shift toward allowing more housing types “by right”, reducing the need for case-by-case approvals that often stymie development.

At the local level, too, many cities are revisiting their zoning codes to address housing affordability. For example, in 2020 the city of Cambridge, Massachusetts adopted an innovative 100% Affordable Housing Overlay, which relaxes zoning restrictions (like density limits and height caps) for projects that are entirely comprised of affordable housing. This policy makes it easier for nonprofit housing developers to site and build subsidized apartments in neighborhoods that would otherwise disallow them. Other cities – from Minneapolis to Portland to Fayetteville – have eliminated single-family zoning within their boundaries, enabling duplexes and triplexes on residential lots that used to allow only one house. Many jurisdictions are also cutting red tape by easing parking requirements, speeding up permitting, or offering density bonuses for projects that include affordable units. These changes are aimed at reducing the regulatory costs and barriers to constructing multifamily housing, particularly the types of smaller-scale infill development that can blend into existing neighborhoods.

Zoning reform is no silver bullet – by itself, changing the rules doesn’t guarantee developers will build more units, especially if market conditions are unfavorable. However, it removes a fundamental obstacle. By opening up new locations for apartments or duplexes (often in desirable, job-rich areas), these reforms create opportunities for growth that were previously off-limits. Over time, if combined with incentives and favorable economics, they could yield a meaningful increase in housing supply. The federal government has even thrown its weight behind these efforts: the FY2023 federal omnibus budget included a new $85 million “Yes In My Back Yard” grant program to reward jurisdictions that streamline zoning and land-use policies for housing. This program, modeled after successful state initiatives, is designed to encourage more localities to voluntarily overhaul exclusionary zoning. The early adopters like Oregon and Minneapolis have shown it’s politically feasible to reform zoning – and as the housing crisis worsens, more state and city leaders appear willing to embrace the once-controversial idea of upzoning. The coming years may see broader adoption of zoning changes as a tool to boost rental housing construction and moderate price growth. While loosening zoning alone won’t ensure new units are affordable to low-income renters, it is a critical precondition for increasing overall housing stock and creating the potential for more inclusive neighborhoods.

The Role of Digitalization and Sustainable Development in Rental Housing

Technology and sustainability are two forces increasingly shaping the future of rental housing. Digitalization in the real estate industry – often dubbed “PropTech” (property technology) – has accelerated in recent years, changing how rentals are built, marketed, and managed. The COVID-19 pandemic, in particular, pushed many landlords and property managers to adopt online and contactless solutions, from virtual apartment tours to fully digital lease signing. What were once cutting-edge innovations have quickly become standard practice across much of the multifamily sector. For example, renters today expect to be able to search listings online with detailed photos or 3D walkthroughs, submit rental applications digitally, pay rent through web portals, and request maintenance via smartphone apps. In a recent survey, 94% of renters said they expect full transparency on fees and terms upfront online, and most now prefer a digital-first leasing process (applications, payments, e-signatures) rather than paper-based or in-person transactions. Property managers are responding: investing in user-friendly online platforms is now seen as a necessity to attract tech-savvy modern tenants. Indeed, digital solutions are no longer optional – they’re essential for efficient property management and tenant satisfaction in 2025 and beyond.

Technology is also enhancing the rental experience inside the unit. Smart home features – once a luxury novelty – are becoming highly desired amenities for renters. According to a 2025 nationwide renter survey, over half of renters (54%) expect modern apartments to include smart home devices such as smart locks, smart thermostats, and security cameras. More than 65% said properties offering smart-home technology are more appealing, and a significant number would even prioritize those rentals over similar units without tech upgrades. In fact, many renters are willing to pay a premium for these conveniences: roughly two-thirds indicated they’d pay extra rent each month for a unit equipped with smart features, with over 50% comfortable paying more than $20 monthly for a tech-enabled home. The most in-demand features relate to security and control – for instance, keyless entry systems, remote thermostat control, app-based access to building services, and smart security systems that let residents monitor their unit. One survey found that feeling safer was the top reason renters wanted smart technology, ranking above even energy savings or convenience. Property owners are taking note: installing smart locks or Wi-Fi thermostats, once seen as high-end perks, can now give a rental a competitive edge in the market. Moreover, tech like sensor-based leak detectors or smart HVAC controls can help owners prevent damage and reduce utility waste, delivering long-term cost benefits.

Behind the scenes, digitalization is streamlining property operations. Many management companies are embracing software and AI to automate routine tasks and make data-driven decisions. For example, advanced property management systems can now centralize back-office functions (like processing leases, rent payments, or maintenance requests) across an entire portfolio, increasing efficiency and even allowing some staff to work remotely. Artificial intelligence tools are being deployed to screen rental applications (flagging fraud or verifying income documents) – a response to the rise in fraudulent applications that over 70% of large landlords reported in the past year. AI chatbots are also handling prospective tenant inquiries and even assisting with routine tenant communications, freeing up on-site managers’ time. Predictive analytics software can crunch data on everything from local rent trends to a building’s maintenance records to anticipate issues – for instance, predicting when an HVAC unit is likely to fail or identifying which residents might not renew their leases. These innovations help landlords optimize pricing, reduce vacancies, and schedule preventative maintenance, ultimately improving net operating income. Of course, the human touch remains important in property management, but the integration of AI and analytics provides powerful tools to augment decision-making. By 2030, one can expect digital and possibly even AI-driven management to be the norm, enabling landlords to operate more efficiently and renters to enjoy more seamless service.

Parallel to digitalization, sustainable development practices are increasingly influencing rental housing, driven by both environmental concerns and market demand. “Green” or energy-efficient building design has moved mainstream as developers respond to climate change and high energy costs. Many new multifamily buildings now pursue green building certifications (like LEED or ENERGY STAR) and incorporate features such as solar panels, high-efficiency HVAC systems, LED lighting, and water-saving fixtures. These sustainable design choices can lower utility bills for landlords and tenants alike and are attractive to environmentally conscious renters. In some markets, sustainability itself has become a selling point – a recent industry survey noted that marketing a building’s eco-friendly features (like solar power, recycling programs, or community gardens) can help draw tenants and even allow for slightly higher rents, as a segment of renters is willing to pay more for greener living options. Moreover, large institutional investors often have Environmental, Social, and Governance (ESG) criteria and favor housing assets that meet certain sustainability benchmarks. This provides an additional nudge for developers to incorporate sustainable technologies and materials from the outset.

In existing buildings, we’ve discussed the big push for energy retrofits using federal Weatherization and IRA funds. Going forward, we may see more mandates for efficiency as well – for example, cities like New York have passed laws (such as Local Law 97) that set carbon emission caps on large buildings, which will force apartment owners to improve energy performance or face fines. Likewise, a number of jurisdictions are implementing policies to phase out fossil fuels in buildings (requiring electric heat or banning natural gas hookups in new construction). This transition toward electrification and renewable energy is part of making the housing stock more sustainable and resilient in the face of climate change. Sustainable development in rentals also extends to site selection and construction methods: some developers are turning to adaptive reuse, converting old office buildings or warehouses into apartments – a trend that recycles existing structures (cutting down on new materials) while also addressing the oversupply of office space post-COVID. Others are exploring modular construction and prefab techniques that can reduce waste and carbon footprint during building. All told, the drive for sustainability is reshaping how rentals are built and operated, aiming to minimize environmental impact and promote long-term affordability through lower operating costs.

Forward-Looking Trends and Projections (2025–2030)

Looking ahead to the next five to ten years, the U.S. rental housing sector will be shaped by the interplay of demographic forces, economic conditions, technological advances, and policy responses discussed above. Demand for rental housing is likely to remain strong through 2030. Demographic shifts point to a sustained renter pool: the Millennial generation (now mostly in their 30s and early 40s) has delayed homeownership longer than previous cohorts, in part due to high housing costs, so many are still renting as they raise families. Meanwhile, Generation Z is entering their prime renting years in large numbers. The median age of renters has been climbing (from 36 in 2000 to about 42 by 2023), reflecting that people are renting until later in life. Some older adults (empty nest Baby Boomers) are also downsizing from owner-occupied houses to rentals for convenience, adding to demand. Additionally, immigration – a key source of household growth – rebounded after the pandemic and will contribute to rental housing needs, particularly in gateway cities and growing Sunbelt metros. If homeownership remains out of reach for many (due to high mortgage rates and home prices), the rental sector may even see higher-income households renting by choice or necessity, which could further boost demand for upscale rentals and single-family homes for rent.

On the supply side, the late 2020s will tell a story of whether we can build enough and preserve enough housing to meet that demand. In the immediate term, the large number of apartments completed in 2022–2024 has created some slack in the market, but the steep drop-off in housing starts during 2023 hints at leaner times ahead for new supply. Should interest rates remain elevated into 2024 and 2025, new construction will likely continue at a slower pace, and some developers will await lower financing costs. This could set the stage for tighter markets by 2026–2027 if the economy grows and renter household formation stays solid – essentially a boom-bust building cycle. However, if inflation cools and the Federal Reserve eases policy by the mid to late 2020s, we could see a resurgence of construction starts as pent-up projects move forward. Public policy will also influence supply: the spread of zoning reforms may open more land for development and shorten approval times. By 2030, it’s possible that many urban regions will have more “missing middle” housing (duplexes, fourplexes, ADUs) being built in formerly single-family neighborhoods due to these reforms, incrementally adding to rental stock. In parallel, conversions of underutilized commercial buildings (like offices or malls) into apartments could become more common, especially if remote work leaves lasting office vacancies – a trend some cities are actively incentivizing to create new housing downtown.

Despite these potential boosts, the affordability challenge will likely persist as a central issue through 2030. In fact, if construction lags and the economy remains reasonably strong, rent growth could accelerate again later in the decade as demand outstrips supply – eroding the short-term relief renters have seen and potentially worsening cost burdens. Lower-income renters will continue to face the gravest struggles. Even with robust development, new units skew toward the higher end (luxury and market-rate rentals) due to cost factors, and without substantial subsidies, the private market on its own will not produce rental housing inexpensive enough for the poorest households. Thus, by 2030 a significant expansion of rental assistance or new affordable housing programs would be needed just to maintain the status quo, let alone improve it. There are some hopeful signs: housing affordability has gained political salience, and some policymakers have proposed bold ideas (for instance, making housing vouchers an entitlement for all who qualify, or large-scale funding for social housing). If economic inequality and rent burdens continue on their current trajectory, public pressure for systemic solutions could mount by the late 2020s. Short of a major federal intervention, we will likely see more patchwork local approaches – rent control measures, eviction protections, inclusionary zoning requirements, and state housing trust funds – as communities try to shield tenants from the harshest effects of the market. Indeed, more cities might adopt rent stabilization ordinances if rents spike again; already, about half of states have at least one jurisdiction with some form of rent control, and this could grow as the renter voting bloc expands.

Technology and innovation will also play a forward-looking role. By 2030, the integration of AI in property management could transform how rental business is conducted – from algorithmic pricing of rent (adjusting rates in real time like airline tickets) to AI-driven maintenance that predicts and addresses issues proactively. The “smart apartment” of 2030 may have a suite of interconnected devices that not only enhance resident comfort but also help owners manage buildings more efficiently (e.g., detecting water leaks early or optimizing energy use based on occupancy patterns). Construction technology might advance as well: we may see more 3D-printed homes or modular construction lowering building costs at scale, which could help supply. Digital platforms could make the rental market more transparent – for example, blockchain-based rental contracts or expanded use of tenant-portable credit histories (as rental payment reporting to credit bureaus becomes more common, helping renters build credit). All of these could smooth some friction in the market and improve access.

In the realm of sustainability, by 2030 newer rental buildings will likely be even greener and more resilient. Net-zero energy buildings (which produce as much energy as they consume) might become feasible templates, at least for high-end developments, as solar, battery storage, and heat pump technologies improve. We might also witness greater adoption of cool roof materials, on-site water recycling, and other climate-adaptive features in response to extreme weather trends. Importantly, the cost of inaction on these fronts is rising: failing to invest in affordable housing or climate-proofing now could lead to much higher social and economic costs later. By 2030, if current trends hold, the nation could be spending more on emergency healthcare, disaster recovery, and homelessness services – essentially paying for the housing crisis in indirect ways – unless we proactively address the root causes (housing supply and affordability).

In summary, the period from 2025 to 2030 will be crucial for setting the trajectory of U.S. rental housing. Will we leverage the lessons of the pandemic and the current spotlight on housing to make lasting reforms? There are reasons for optimism: the crisis has elevated housing to a top-tier policy issue, and we have seen unprecedented cooperation (and funding) during COVID to keep people housed. That demonstrated what is possible – for example, the rapid rollout of rental aid and eviction moratoria saved many from homelessness, showing that with political will, we can act decisively to ensure housing stability. If stakeholders at all levels commit to building more housing (through zoning and innovation), preserving affordable units, expanding subsidies, and investing in the resilience and efficiency of homes, we could move toward a more balanced rental market that provides decent, safe, and affordable housing for all. Failing that, the issues we face now – extreme rent burdens, a widening affordability gap, and increasing homelessness – will likely intensify. The next few years will reveal whether America can muster a “fuller commitment,” as experts call for, to tackle the rental housing challenges before us. The stakes are high: housing is not just a commodity, but the foundation for healthy families and communities. Ensuring a stable supply of affordable, quality rental housing will be key to the nation’s social and economic well-being as we head into 2030 and beyond.

Sources: 

• Joint Center for Housing Studies of Harvard University,

• America’s Rental Housing 2024;

• U.S. Department of Housing and Urban Development;

• National Low Income Housing Coalition;

• Eviction Lab;

• National Multifamily Housing Council;

• and other industry research.