Multifamily REITs Ready To Reap Higher Rents As Construction Falls Sharply

The number of new apartments hitting markets across the U.S. is projected to decline sharply in the coming months, leaving the executives of the country’s biggest multifamily real estate investment trusts optimistic about their ability to raise rents.

They are bolstered by a housing market that continues to be prohibitively expensive for the average renter to buy a home — with several REITs reporting retention rates higher than their historical average.

“Relative affordability versus alternative housing options remains decidedly in our favor,” Joseph Fisher, UDR’s chief financial officer and chief investment officer, said during the company’s earnings call this month. “We do not expect this dynamic to change.”

Multifamily housing starts fell by 13.5% last month compared to a year prior, per Census Bureau data. The figures reveal just how quickly the pace of construction has come down after 2024 saw record levels of new deliveries.

“New supply deliveries continue to be a headwind in many of our markets, but the trends support expected improvement throughout 2025, laying the groundwork for an even stronger 2026,” Tim Argo, Mid-America Apartments' executive vice president and chief strategy and analysis officer, said during the REIT’s Q4 call. 

Annual growth was modest for the biggest multifamily REITs during 2024. Revenues grew by 3% year-over-year for Equity Residential, 3.2% for AvalonBay Communities and 2.5% for UDR, but just 1.3% for Camden Property Trust and 0.5% for MAA. 

Oversupply was weighing on executives’ minds as recently as this past summer, but those concerns have mostly evaporated — especially among REITs with portfolios concentrated on the West Coast, Northeast and Midwest, according to an analysis of multifamily REITs’ fourth-quarter earnings calls. 

“With the supply of housing already tight in most of our markets, we see this setup as very positive for our business,” Equity Residential CEO Mark Parrell said on a call with analysts.

Equity Residential said its 2024 and 2025 starts were both at “about half of normal levels,” with apartment deliveries in 2026 expected to be around 30% lower than their prepandemic average. The REIT is projecting revenue growth from its existing assets coming in somewhere between 2.3% and 3.3% for the coming year. 

UDR expects dwindling apartment deliveries to add to rent growth, CEO Thomas Toomey said. The REIT is projecting almost 2.3% in revenue growth on existing assets by the middle of this year. 

The high cost of owning property versus renting, driven by stubbornly high mortgage rates that aren't projected to meaningfully drop, means renters will likely keep signing leases over the next year and beyond, executives said in calls.

But that optimism may be undercut by political uncertainty introduced by a landslide of federal policy shifts. Particularly concerning are what tariffs, immigration crackdowns and continued inflation may do to the economy, executives said.

“We certainly acknowledge that there is a higher level of uncertainty in the forward path of the economy than usual, given various recent governmental actions relating to tariffs and other matters,” Parrell said. “The impact of these actions on the larger economy and our business is hard to estimate currently.”

If economic policy chaos leads to consumer costs running rampant, the REITs may be on the rough end of a dice roll, executives said.

“If we have a recession in 2025, then I think all bets are off,” Camden Property Trust’s Ric Campo said during the company’s Q4 earnings call. “That's probably the bigger risk when you think about how '25 could play out.”

Predictions of rent growth are farther off in the Sun Belt than on the coasts. Nashville and Austin especially are still working through a crush of new supply, executives for UDR and Camden Property Trust said, predicting lower revenue growth from those markets due to upcoming deliveries.

But the REIT leaders all signaled plans to continue to invest in the region.

AvalonBay Communities spent $185.5M on two acquisitions during the quarter: a 126-unit townhome community in Austin and a 347-unit apartment building in Denver. Camden Property Trust also made an Austin acquisition, buying a 352-home apartment community for $67.7M, and Equity Residential spent $274.3M on three acquisitions spanning 795 units in Atlanta and Denver.

Investors have spent the past few years pouring capital into Sun Belt markets, CBRE Investment Management Portfolio Manager Elisabeth Troni told Bisnow, and gateway markets like San Francisco, New York and Chicago now have stronger underlying fundamentals.

“Nothing about the tailwinds behind a market like Austin has fundamentally changed. We've just overdelivered on the supply,” she said. “People still want to move in Austin.”

The REITs, too, are confident that they can weather the near-term future and push rents up soon.

“We're pretty confident that, certainly over the next few months, we're in a good spot with occupancy to where we can — particularly to get into the spring — can start to push on that pricing,” Argo said.