The U.S. apartment market posted its strongest quarter in nearly two years, as renter demand outpaced a shrinking construction pipeline, commercial real estate firm Cushman & Wakefield reported.
Apartment demand continues to show resilience, although the broader economy did not do renters any obvious favors. Job growth stayed weak, and fewer people have been moving to the U.S., or being born here, than in prior years.
Renters filled 124,600 more units than they vacated during the second quarter – the fifth-busiest stretch for apartment leasing in almost 25 years, Cushman’s report showed. That volume added up to an 8% jump from the same time last year. Apartment vacancy nationally dropped below 9% for the first time in two years.
Over the past full year, renters absorbed more apartments than were delivered for the first time since early 2022, suggesting that a glut of empty units may have reached its apex.
Construction pipeline continues to slow
Skyrocketing interest rates and construction costs dampened new development and construction, which peaked in 2022. Cushman shows that only 88,000 new apartments were finished during the quarter – the slowest Q2 since 2022, and down 27% from a year earlier. Now, only 3.5% of the existing apartment stock is under construction, half of its level at the 2023 peak and the lowest share since 2013.
Meanwhile, another “leading indicator” proxy for pre-shovel-ready multifamily development, the Architecture Billing Index, suggests continuing sluggishness in new ground-up apartment projects. “Architecture firms remain mired in one of the longest-running downturns in the 30-plus year history of the ABI, which now stretches to 41 months without a majority of firms reporting billings growth.”
Consequently, rents nudged up 1.5% year-over-year, a modest but real pickup from 1.1% the previous quarter and the first sign of rents accelerating in about a year.
“Pricing power lags the occupancy recovery, so while rent growth remains below long-term norms, recent trends suggest the market is beginning to recover,” the report noted.
Housing reform impact on rents
The apartment market’s performance cuts across competing and complementary housing narratives. Housing advocates and free-market supporters push legislative reforms to increase housing supply to lower prices. Other advocates see rent control as the solution for affordability despite research showing it harms the supply side.
Debate over rent stabilization early this year centered on a rent-control measure that landed on the November ballot in Massachusetts. The state’s top court ended that move on a technicality. But the debate raged on when a New York City board recently froze rent increases for rent-stabilized units.
Most of the construction burst – developed and financed before 2020 – came during COVID-19, notably in Sun Belt states. Rent growth hit double digits in Florida, prompting Gov. Ron DeSantis to push the Live Local Act, aimed at making workforce housing more plentiful and affordable.
Still, much of the new construction served the higher end of the market. Industry economists contend that more at the higher end means older apartments become less pricey as renters move up.
In his second-quarter analysis, Carl Whitaker, chief economist at apartment analytics firm RealPage, wrote that Class A rents rose 1.6% while Class C rents fell 2.5%, the 11th consecutive quarter of declines.
“Class B is seeing its performance bend more heavily towards Class A than Class C,” he added.
Austin sets the reform bar
Economists and pro-housing groups present Austin as the chief example of how housing reform can effectively catalyze supply that lowers prices. Cushman’s report shows another quarterly rent rate decline. Prices fell by 1.2%.
Austin still has more than 15,000 apartment units in the construction pipeline, which equates to 4.6% of inventory. The Texas capital‘s new development pipeline is the fourth highest of the 90 metropolitan areas Cushman tracks. New York City, Dallas and Charlotte, North Carolina, are the top three.
For perspective, Austin’s pipeline equates to 4.6% of the market’s total institutional-grade units, higher than Dallas’s 3.3%. Dallas has a larger inventory of 50-unit and larger institutional-grade units, nearly 905,000, than New York City.
Meanwhile, in California, where state-level housing reform has been the order of the day, construction is still a relative trickle, and rent growth is reaching pandemic levels seen in Florida before the construction pipeline boomed.
San Francisco’s rents rose 13%, and San Jose rose 7%, both leading the nation in rent growth.
The slowdown in construction in once-oversupplied cities like Charleston and Colorado Springs is showing an impact on rent prices. Both markets saw rents tick higher in the second quarter.
“There’s no doubt that the nation still has work to do before returning to more normal levels of revenue growth,” Whitaker wrote.
He added that the key uncertainty for the rest of 2026 is whether the market can avoid a repeat of last year’s slide. Rents dropped 2.0% in the final six months of 2025. That was the sharpest such decline since the early 2000s.
Tenant retention has been a bright spot and is still improving. Whitaker wrote that higher retention “suggests demand is sticky and that householders are not ‘doubling up.’”