Austin, Texas, has emerged as the leading major U.S. city for falling rents, with a significant nearly 9% year-over-year decrease in median asking rent, according to a Redfin analysis published in early June. This substantial decline, marking the lowest rent figures in the city since February 2021, is largely attributed to a surge in housing supply driven by recent and sweeping changes to the city's land use policies.
The dramatic shift in Austin's rental market follows a period of aggressive housing policy reforms. In December 2023, the Austin City Council approved measures allowing up to three housing units, such as duplexes and triplexes, on most lots previously zoned exclusively for single-family homes. Further reforms have included reducing minimum lot sizes and eliminating compatibility standards that previously restricted apartment construction near single-family residences.
These policy adjustments, part of initiatives like the "Home Options for Mobility and Equity" (HOME) program, aimed to address Austin's long-standing housing affordability crisis. The city's leadership has focused on increasing density and streamlining permitting processes to encourage more construction. "We let builders BUILD and Austin is now the #1 major city with falling rents," stated Caleb Hammer in a recent tweet, emphasizing the direct link between construction and affordability.
The influx of new rental units has led to an oversupplied market, with rising vacancy rates. Data indicates that Austin's occupancy has fallen to around 84%, and the average rental rate is down 5% since the beginning of the year. This increased supply has provided renters with more negotiating power and access to concessions.
While the downward trend in rents has been consistent for over 19 months, experts note that the pace of new construction is beginning to slow as developers respond to the current market conditions and rising interest rates. Despite the recent declines, housing costs in the Austin region remain high compared to pre-pandemic levels. The long-term impact on affordability and the sustainability of this trend will depend on continued policy support and market dynamics.