Luxury Apartment Influx Pushes Down Rents In Older Units

A barrage of luxury apartment deliveries is driving down rents at older multifamily properties in some of the nation’s biggest cities. 

Reduced rents in Sun Belt cities like Austin, Denver and Phoenix, as well as vacation spots like Myrtle Beach, South Carolina, and Naples, Florida, pushed down the average rental rate in the U.S. by nearly 0.2% in November, Bloomberg reported. That drop was the most significant monthly decline in more than 15 years. 

Sun Belt cities saw an influx of new multifamily projects during the pandemic as office workers moved to warmer climates and remote work rose to prominence. By 2024, luxury community openings were peaking.

Austin had more than 10,000 new units open that year, and Phoenix had almost 8,000 apartments become available for renters. Denver’s luxury openings peaked at the beginning of 2024 with more than 5,000 apartments coming online. 

As new multifamily openings enticed wealthy renters to leave their older apartments, landlords at those properties had to drop rents to attract new tenants. Rents for older apartments have declined by as much as 11%, with some falling below the rates of units deemed “affordable.”

Cities with the most significant rent declines among older properties saw new multifamily development at a rate well above the national average. Those that built at a rate lower than the national average experienced very little change in rents. 

“This is a generational development cycle,” CoStar National Director of Multifamily Analytics Grant Montgomery said to Bloomberg. “We haven’t seen a peak like this since the mid-1980s.”

Declining rents due to new luxury multifamily deliveries have eased affordability issues in those cities despite the slow pace of affordable housing development. National Multifamily Housing Council President Sharon Wilson Géno said additional supply is the “answer to housing affordability.”

However, the continued development of luxury multifamily projects shouldn’t be seen as a long-term solution for the nation’s historic housing crisis. Developers have already shifted plans for new projects away from cities that have experienced the most significant rent declines, Bloomberg reported. 

The nation’s overall multifamily pipeline has also decelerated, with the number of new apartment openings in 2026 expected to be half of what it was during its 2024 peak. 

During Camden Property Trust’s third-quarter earnings call in November, Chairman Ric Campo said the company was focused on “occupancy instead of rental increases” since new supply had driven down rents. 

Still, the decline in new deliveries in 2026 should allow developers to raise rents as supply tightens. 

“Apartments and our shares are on sale, but not for much longer,” Campo said.

Smaller multifamily REITs have struggled with the asset class as rent growth dipped into negative territory for the year.

Aimco and Elme are liquidating, selling their portfolios to return capital to shareholders rather than continue on, while Centerspace is evaluating its options in one of the most challenging operating environments for apartments in years.