As members of the Gen Z generation age into their 20s and 30s, they represent a strong cohort for renter demand that will last through 2042, according to Kimberly Byrum, Zonda’s managing principal of multifamily advisory services, during Zonda’s Multifamily Market Update on May 14, 2025. In addition, millennials continued delay reaching milestones such as getting married, having children and buying a home contributes to renter demand.
“When you compare 2000 to 2025, we have 4.7 million more people in the U.S. who are not homeowners, which translates to about 3.9 million additional renter households now compared to 2000,” Byrum said.
Demand Drivers for Rentals
Affordability issues for homeownership contribute to ongoing rental demand, with Zonda researchers pointing out that less than one-fourth of homebuyers today are moving from rental housing. More homebuyers today need the equity from their current home to buy, according to Julia Bunch, senior manager of multifamily research for Zonda, and renters continually mention their lack of financial resources to become homeowners.
Nearly one-third of renters out-earn the average income for their location, but given the high cost of buying a home, 65% of tenants say they’re renters by necessity, according to Zonda’s research. A little more than one-third (35%) say they are renters by choice.
Another trend driving rental demand, based on data Zonda analyzed from multifamily REITs, is that renters are staying in place longer. REITs are experiencing record low turnover and record low move-outs to buy a home.
In addition, according to Bunch, REITs are reporting that they’ve seen little impact among current tenants or prospects from job losses and layoffs.
Residents are typically signing extended lease renewals, which are up an average of 16 days since 2019. Burch also found that most renters are accepting rent increases.
Zonda’s researchers anticipate job growth to average about 60,000 per month in 2026 and 85,000 per month in 2027, which will help normalize occupancy rates to approximately 95% by 2028.
Supply Shift Brings Back Seasonality
Byrum expects the fourth quarter of 2026 to be the inflection point when the supply backlog is absorbed and the multifamily market transitions from oversupply to scarcity. The anticipated annualized apartment supply in the fourth quarter of 2026 will be the lowest level of supply since the fourth quarter of 2018.
Seasonality for absorption rates is coming back into play, Byrum says. Historically, the first quarter of each year tends to be weaker for absorption. Absorption rates have been stronger since the third quarter of 2025. An absorption rate of 100,000 units during the first quarter of 2026, which is strong compared to typical absorption during that quarter, bodes well for the rest of this year, she says. Absorption of 300,000 to 325,000 units in 2026 should help stabilize multifamily markets that have struggled with oversupply.
Slower absorption rates in 2022 and 2023 contributed to the supply overhang in 2024 and 2025, according to Zonda’s research.
Rent Growth Ahead
Byrum predicts that these fundamentals will result in 2% rent growth in 2026.
“We’ve seen a little bit of rent growth every month so far in 2026,” Bunch said. “So far to date, we’re coming in above 2023 and above 2024.”
Concessions have held steady in the last few quarters for stabilized Class A properties, which Bunch emphasized doesn’t mean there are fewer concessions, just not an increase. However, concessions are more severe in Class B multifamily properties and especially in Class C.
For new buildings, Zonda anticipates a 21% decline in concessions as buildings lease-up, attributed to the decline in excess supply and the level of 2026 building completions.
Urban vs. Suburban Shifts
Historically, urban core markets get more new supply of multifamily properties than suburban markets, according to Zonda. But in the last building cycle, the suburbs were getting more supply. Since 2014, suburban apartments were delivered at twice the normal pace, while urban apartments were delivered at a pace slightly less than average.
In the top 20 markets in the South and Southeast with high supply in 2025, 65% were in the suburbs and 35% were in urban core markets.
Now, for the first time since 2014, urban fundamentals are stronger than suburban fundamentals, according to Zonda, although rent growth and occupancy rates continue to be subdued everywhere. The slightly better performance in urban markets appears to be a result of successful return to office mandates.
Some locations without a robust return to office mandate actually had more remote workers in 2024 than in 2021, such as Los Angeles and Dallas. In Los Angeles, which had 25% more remote workers in 2024 compared to 2021, rent declined 1.5% year-over-year from March 2025 to March 2026. Similarly, Dallas, which had 17% more remote workers in 2024 compared to 2021, rent declined 3.4% year-over-year from 2025 to 2026. Rent recovery is generally slower than in markets with more successful return to office mandates. For example, in New York City, which had 45% fewer remote workers in 2024 than in 2021, rent growth year-over-year from 2025 to 2026 is 3.2%. In San Francisco, which had 42% fewer remote workers in 2024 compared to 2021, rent growth year-over-year from 2025 to 2026 is 9.2%.
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