Of the largest 150 metros in the U.S., Austin, Texas saw the lowest rent growth in Q1 2025 at -4.2% year over year (YOY), according to data from CoStar. As many have noted, Austin has seen especially low rent growth over the past couple of years, beginning in 2022 and declining through Q2 2024.
Austin, however, hasn’t been the only metro to record decreasing rents. In fact, 33 of the largest 150 metros experienced negative rent growth in Q1 2025. In this Research Corner piece, we use Austin as a case study to explore what’s behind this post-COVID rent decline.
The overarching thread, which is worth saying explicitly before we dive in, is that Austin is not an exception to the rule; Austin is the rule.
Supply, Supply, Supply
The cause of Austin’s falling rent growth beginning in 2022 is not anything new: they built housing.
Looking at Figure 1 above, the period of falling rent growth coincides with an increase in supply. And although this chart focuses on Austin, that relationship is not at all unique to the city. Plotting national rent growth and national deliveries shows the same relationship, as it would for other metros.
This is not the first time we’ve written about this. Research Notes pieces from both December 2023 and June 2024 included the following chart, now brought forward again to Q1 2025.
As is still the case, metros that built more over the past 12 months have experienced lower rent growth. That includes Austin, but, as Figure 2 shows, it includes other metros as well. The mistake here would be to see negative rent growth in Austin but not nationally and conclude, “Well, there must be two different mechanisms at play.” There’s just one rule, and Austin is not an exception.
The Role of Regulation
It is worth considering that Austin might have been able to build so much because of changes to its regulatory framework, making it easier for developers to develop. That really doesn’t seem to be the case though.
Austin’s last substantive revision to its Land Development Code was in 1984, and if anything, it’s marked by restrictions like minimum lot size requirements and compatibility standards that inhibit development of multifamily housing, not help it. In recent years, Austin has adopted more pro-housing policy in its Home Options for Middle-income Empowerment (HOME) initiative—reducing minimum lot sizes and allowing up to three units on single-family lots—but these changes came after the large spike in development seen post COVID.
Although such changes will certainly make multifamily development easier in Austin—and although it’s true that Austin, and the state of Texas generally, still has a more favorable regulatory environment than much of the coasts, for examplei—those recent regulatory changes can’t explain the surge in development beginning in 2022 nor the corresponding decrease in rent growth.
Why Did Austin Build?
If not due to regulatory changes, then why has Austin built so much? This is where the demand side of the story becomes important.
Looking back to Figure 1, the period of sharply declining rent growth in Austin was preceded by a period of sharply increasing rent growth beginning in Q2 2020, peaking at 14.7% YOY in Q4 2021. High rent growth was a national phenomenon during the pandemic—from 5.7% YOY in New York, NY to 9.0% in Boston, MA and even as high 24.0% in Palm Beach, FL—with the national figure peaking at 9.6%.
The driving force behind that variation is demand, with the places experiencing higher rent growth having seen higher increases in their population (i.e., in-migration) during the pandemic.
Amongst the largest 150 metros, Austin saw the seventh largest increase in population (5.5%) between Q1 2020 and Q1 2022.ii Absent an increase in supply to accommodate additional demand, prices in any market will rise to efficiently allocate increasingly scarce resources. Again, Austin is not alone. Looking at Figure 3, those same markets with even higher levels of in-migration during COVID saw comparable, if not higher, rent growth than Austin.
High rent growth and strong fundamentals provide developers with a market signal, which in effect says, “build here.” Aided by relatively favorable regulatory conditions, those markets, including Austin, had a surge in development that led to declining rent growth.
Not the Exception, the Rule
Austin is not a unicorn. What occurred there follows precisely what we would expect given what we know about supply/demand dynamics in housing, which is to say what we know about supply/demand dynamics for any good being produced in a market economy. Developers respond to the market factors presented, and that development catalyzed the exact response in rent growth we would expect.
The U.S. faces a deepening housing shortage, and Austin stands as just one example of the general principle by which to address that—build more housing.
i A recent report published by the RAND Corporation notes, among other findings, that the time to completion for a multifamily development in California is more than 22 months longer than the average time in Texas.
ii Austin also saw the second largest increase in total employment (8.0%) during that period, another common proxy for demand.
About Ryan Hecker
Ryan Hecker is the team's Research Analyst, providing support for NMHC's research in housing and apartment industry trends. He graduated from the University of Rochester with a bachelor's degree in Economics and Political Science. Ryan's internship experience includes work on the Committee for a Responsible Federal Budget (CRFB)'s policy team and on FGS Global's government affairs team, where he aided in research on debt solutions and macroeconomic projections as well as covering of congressional hearings.
He can be reached at rhecker@nmhc.org.