Good news first: U.S. rents grew by just 0.3% last year, the slowest rent growth since 2010, according to property data firm Yardi Matrix. And now the bad news: Most of the beneficiaries of lower rents are actually the wealthiest members of the market. In fact, the unaffordable housing crisis for those in low-, middle- and even higher-income levels isn’t getting better, at least not yet.

With more than 1.2 million new housing units under construction this year, the supply growth of new housing is at decades-long highs, but Yardi says that’s misleading as not all of them have come to market yet. Simple supply and demand means the wealthier renters, and not those on lower incomes, can afford the remaining units, and developers are offering them deals as the prime demographic.

Middle- and lower-class renters, on the other hand, saw rent increases of 2% in 2023, according to the firm—and that’s on top of roughly 20% increases since the pandemic. The silver lining is that Yardi projects 2024 being a “peak year for deliveries”—a lot more rental supply, in other words. 

But now there’s another problem, Yardi points out: Too much new rental housing is for those looking for luxury. The surplus of houses tailored to the upper-class demographic means there’s more supply than renter’s demand, which in turn incentivizes landlords and developers to slash prices and offer deals that make very expensive housing slightly less so. In Austin, renters can secure houses that would go for $5,000 to $8,000 a month for 20% off, according to the Wall Street Journal, which previously reported on the Yardi data. In Chicago, new apartment towers offer months of free rent, the outlet reported. 

Yardi expects about 510,000 more units to be completed this year and also predicts that construction will decline in 2025. Underscoring how it’s an affluent person’s market, new construction is heaviest in markets that have been targeted for corporate job growth, the report states, including metropolitan areas like Austin, Raleigh, Charlotte, Miami, Nashville, Denver, and Phoenix. In Austin, only 111 apartments are listed on real estate website Redfin for those who are bound by a $1,000 rent budget, while a budget of $2,000 or less opens the pool of options to more than a thousand apartments.  

Other regions with more balanced levels of supply-demand for new housing, like Indianapolis, Kansas City, and Minneapolis, can expect more houses built.

The aftermath of the 1980s property boom and ‘secular stagnation’

More than 1.4 million housing units were completed in 2023, about 4.5% more than what was built in 2022, according to the U.S. Census Bureau. That number will likely grow this year too. According to Yardi, whose study was previously reported on by the Wall Street Journal, there are 1.2 million apartment units currently under construction across the country, the most since the property boom of the 1980s. That period coincided with what the Federal Reserve calls the Great Moderation, a roughly 40-year period after raging inflation subsided and the economy had low interest rates but also low rates of growth. Housing was typically the best investment for buyers, and certainly for homebuilders too. (Years later, Harvard economist and multiple Democratic administration member Larry Summers called this era “secular stagnation,” popularizing a preexisting phrase.)

These eras also caused painful outcomes that many today are still familiar with: skyrocketing inequality and the formation of bubbles throughout the economy on a macro scale; and in the micro, huge household debts, failed banks, and forced government interventions in housing. 

Since 2008, when the last great bubble burst (if you disregard the Crypto Winter of 2022), the housing situation has been getting more dire as chronic inventory shortages have plagued homebuyers ever since. When COVID lockdowns ushered in the remote-work revolution and sparked a massive housing boom, this inventory shortage reached absurd new extremes. 

Luxury housing is typically defined as a combination of attractiveness and, although the price may be too pretty, other perks like location, privacy, amenities, building materials, and provenance of the architect, which can all hike up a home’s rental price into tens of thousands of dollars. More than 400,000 luxury units were completed in the country in 2022, and housing experts believe they were built with the most wealthy customers in mind. 

To be clear, even new houses that aren’t luxury homes aren’t affordable for the masses.  

As of October last year, occupancy rates nationally were down about 1.3% from the middle of 2022, and it was down even more in regions that have a high-supply of new homes. 

The growth of new housing, the report states, “is both needed and an impediment to rent growth in the short term in some markets,” which helps explain how there’s a shortage of affordable housing and an excess of luxury housing that the majority of Americans can’t afford. Despite new buildings cropping up, “the U.S. is short several million units” that people can actually afford, and it’s deepening an unaffordability crisis on lots of levels. 

Unaffordability is at an all-time high 

More than half of American renters spend more than 30% of their income on rent, according to a Harvard Joint Center for Housing Studies report last month. Unaffordable housing, homelessness, and eviction rates are all surging and in some cases are at all-time highs. 

Harvard’s report found that cost-burdened renters, or those who surrender 30%–50% of their incomes to afford rent, rose to 50%, up 3% from 2019, and affects households that annually earn between $30,000 and $74,999 the most. Of households that bring in less than $30,000, 65%, an all-time high, are experiencing severe price burdens. 

The number of people now homeless has also hit an all-time high last year of more than 653,000 people–compared to 582,000 homeless Americans in 2022. People who live in unsheltered locations hit an all-time high, too, according to Harvard’s report. 

Expensive rent is still cheaper than buying 

Yardi data found that property sales have dramatically dropped by almost 70% since 2022.  

The reasons include a cycle of lower property values due to supply and demand chains, and high interest and mortgage rates. 

Other factors are driving up the demand for housing, like the country’s deepening reliance on remote work. But the price point, which at the end of 2023 meant that homeownership was 50% more expensive than renting, is still a big reason fewer tenants are buying homes.