Declining multifamily construction permits could lead to rising rents in major metropolitan areas despite recent rent declines, according to the latest Realtor.com February rent report. The report reveals that only 294,000 multifamily units were issued construction permits across the top 50 metros in 2024, a drop from the pandemic peak of 318,000 units in 2020.

This reduction in new housing supply is expected to put upward pressure on rental prices in cities that are already seeing rent growth.

Nine major metros are particularly vulnerable to future rent hikes due to the combination of rising rents and shrinking construction permits.

New York leads the way with a 6.8% year-over-year rent increase, while multifamily permits in the city have dropped 9.5% compared to the five-year baseline. Other cities facing similar conditions include Kansas City, Detroit, Washington D.C., San Jose, Baltimore, Boston, St. Louis, and Charlotte. Washington D.C., for instance, saw a 35% decline in permits while rents grew by 3.3%.

Danielle Hale, Chief Economist at Realtor.com, explained the current market dynamics that are shaping these trends:

“During the pandemic, rent prices surged significantly,” Hale said. “While there has been a gradual correction, the current trend of declining rents over the past 19 months and a still-sizable number of multifamily units under construction have impacted builders’ enthusiasm for new projects.”

The report also emphasized that in markets where permitting activity increased, rents have tended to decline. For example, Birmingham, Alabama, saw a 5.4% decrease in rent, while permitting grew by 22.1%. Similarly, Cincinnati and Cleveland both saw rent declines of 3.3% and 3.0%, respectively, alongside an increase in permits.

Despite concerns that federal layoffs might affect rental markets, the impact has been minimal so far. Among the five metros with the highest concentration of federal workers, rent trends vary. Washington D.C. saw a 3.3% rent increase, while San Diego experienced a sharp 6% decline.

The data also revealed that larger rental units, especially two-bedroom units, continue to see strong demand, as fewer renters transition to homeownership. Over the past five years, two-bedroom units have seen the most significant long-term growth, rising by 18.3%, compared to 14.3% for one-bedroom units and just 9.7% for studios.

The national median rent stood at $1,691 in February 2025, representing a slight year-over-year decline of 0.9%. However, it reflects a substantial 14.4% increase over the past five years.

“There’s a 3.8 million home shortfall in the nation according to Realtor.com research,” Hale added. “As builders attempt to adjust their construction pipelines amid shifting economic and policy conditions, multifamily builders have made progress, as evidenced by rising vacancy rates. However, the shortfall remains inconsistent across different markets and regions.”

She further noted, “The low level of permitting for multifamily housing, particularly in areas where rents are still climbing, could drive future rent increases.”
The combination of lagging construction and fewer available multifamily units in key metropolitan areas underscores the growing imbalance between housing demand and supply. The lack of construction permits is particularly concerning as it could compound the existing housing shortage across the nation. Builders are faced with the challenge of navigating shifting economic conditions, which have impacted both supply chains and construction timelines.

While rent growth has slowed in certain markets, the drop in multifamily construction permits suggests that a further supply crunch may exacerbate future rent pressures in areas where demand for housing continues to rise. This, coupled with regional variances in rent trends, means that renters in cities with declining permit activity may experience steeper price hikes in the near future.

Conclusion

‍As the multifamily housing shortage persists and construction permits remain low, major cities may see rent increases sooner than expected. The long-term effects of the pandemic-driven rent surge, coupled with the ongoing challenges in the construction sector, indicate that renters should be prepared for fluctuating prices across various regions. As Hale noted, “The shortfall varies by market and region,” making it essential for prospective renters and builders to keep an eye on local permit activity and rent trends.

Originally reported by Rowan Crosby in Elite Agent.