Houston Rental Market Sees Supply Surge, Stalls Rents

**Houston’s Rental Market Swings in Favor of Renters Amid Record Apartment Boom**

Houston’s competitive rental market, long a challenge for prospective tenants, is undergoing a dramatic shift, ushering in an era of more options and stabilizing prices. After years of soaring rents and tight availability, the market is largely returning to pre-pandemic norms, offering renters increased bargaining power not seen since before 2021.

The primary catalyst for this turnaround is an unprecedented wave of new apartment construction across the Houston metropolitan area. By July 2023, a staggering 67,000 multifamily units were actively under construction, according to data from ApartmentData.com. Marcus & Millichap, a commercial real estate brokerage firm, projects that approximately 29,700 of these units will be delivered by the end of 2023, followed by an additional 38,400 units in 2024. This volume marks a record high for construction activity in the region.

This substantial influx of new supply is directly impacting vacancy rates, which have risen significantly. In July 2023, Houston’s overall multifamily vacancy rate climbed to 10.9%. This represents a notable increase from the pre-pandemic average of 7.6% and stands in stark contrast to the pandemic-era low of 4.8% recorded in March 2022. Patrick Barry, Vice President of Research at Marcus & Millichap, forecasts that this rate could peak around 11.5% by early 2024, indicating continued upward pressure on availability.

Consequently, the rapid rent growth that characterized 2021 and 2022 has largely stalled. ApartmentData.com reported a -0.1% year-over-year rent change for Houston overall in July 2023. This is a dramatic reversal from the approximately 10% rent increases experienced in both 2021 and 2022. Marcus & Millichap projects only a modest 0.5% rent growth for the entirety of 2023, rising slightly to 0.7% in 2024, signaling a much calmer pricing environment for renters.

New apartment communities are emerging across the metro area, catering to diverse preferences. Developments are concentrated in bustling Inner Loop neighborhoods such as Montrose, the Museum District, The Heights, and the Galleria. Simultaneously, expanding suburban areas like Katy, Spring, Cypress, The Woodlands, Conroe, Webster, Pearland, and League City are also seeing a significant increase in housing options. For example, Mill Creek Residential completed The Adaline, a 305-unit community in The Woodlands, early in 2023. Despite the broader market shift, this property reportedly found strong demand, highlighting that well-located, high-quality developments can still attract tenants.

For renters, this evolving market translates directly into increased bargaining power. Bruce McClenny, president of ApartmentData.com, noted that over 50% of Houston apartment communities were offering concessions in July 2023. These incentives commonly include offers of four to six weeks of free rent, providing a tangible benefit to new tenants.

While the current landscape presents challenges for landlords, with rising vacancy rates and stagnating rents impacting profitability, the long-term outlook for Houston’s rental market remains robust. Underlying factors such as consistent job growth and a continuous influx of new residents continue to drive fundamental demand for housing in the region. According to the Greater Houston Partnership, the Houston region added over 80,000 jobs in the 12 months ending June 2023, further underscoring the metro’s economic vitality and its enduring appeal to new residents who will eventually seek rental accommodations. This underlying strength is expected to prevent a severe downturn, even as the market adjusts to its new equilibrium.