Today’s edition sponsored by: JPI, Madera Residential, X-Caliber, Authentic, Mason Joseph and TeleCloud.

The Roller Coaster Has Slowed from High-Speed Loopy Loops to a Low-Speed Dark Tunnel.

From 2020 to 2023, I used (overused?) the term “roller coaster” to describe the state of the apartment and single-family rental markets. I wasn’t the only one. But in the past couple years, the roller coaster has found flat ground. It’s like we went from high-speed loopy loops to a low-speed dark tunnel.

It kinda feels like every time we think we see light at the end of the tunnel, we find out it’s just another turn inside the tunnel. The key phrase has gone from “roller coaster” to “uncertainty.”

The latest twist: Iran, oil prices, and the potential fallout on the U.S. economy. That follows still-nagging uncertainty around the U.S. job market, interest rates, lease-up velocity, immigration, plus ever-changing regulatory risks, among other things.

When do we get out of it? Well, I don’t have a crystal ball. I wish I did. If you opened up this newsletter expecting “THE ANSWER,” you will be disappointed.

The reality is this: We’re in an extended period of uncertainty. Uncertainty stinks. Investors hate uncertainty. Consumers hate uncertainty. Employers hate uncertainty. Uncertainty has a freezing effect on major decisions like individuals relocating (and signing a new lease) or companies hiring new employees. That’s the reality, and I’ll recap some of the clouds of uncertainty here in a bit.

But first, let’s start with the positives for once, shall we?

But here’s one certainty: Uncertainty doesn’t last forever. Or, more accurately: The feeling of uncertainty doesn’t last forever — and it’s that lingering feeling that crushes consumer confidence and business hiring, etc.

And there’s this: There’s less uncertainty around the long-term drivers for rental housing. Let’s highlight three of them here.

If you need some (near) certainty amidst all the uncertainty of today, consider this:

1. Rental housing is essential, and (believe it or not), we still have a structural shortage.

I know it doesn’t feel like it (especially in high-supplied markets across the Sun Belt and Mountain states), but nearly every serious housing researcher believes we still have a structural housing shortage.

Estimates of the housing shortage range anywhere from 1 million to 8 million homes. Here are some examples: Freddie Mac, Zillow, Up for Growth, Goldman Sachs, Urban Institute, AEI, Center for American Progress, Brookings Institute, U.S. Chamber of Commerce, Realtor.com, National Low Income Housing Coalition, National Association of Homebuilders, McKinsey & Co., etc.

In other words: It’s not like the housing shortage is fed by industry propaganda hunting for development capital. Academic think tanks and financial institutions (with plenty of options on where to place capital) are saying the same things.

Cynics oversimplify the issue as if pent-up demand is measured by the number of people standing in a line, homeless for now but able to pay once a home is available. That’s not the real world. People have temporary living arrangements or less-than-ideal situations they settle in until the timing is right. In the meantime, many of these markets will continue to see inbound migration from relocators, as well as kids aging into adulthood needing their own place.

So why is vacancy elevated in higher-supplied markets? I’ve used this analogy before, and I’ll use it again: It’s like opening up a fire hydrant in a town suffering a drought. It takes time to figure it out. And it’s also a very nuanced topic (more nuanced than I’ll get into here).

Additionally, America’s rental housing stock is older than ever (with a median age of 45 years old). That means more investment will be needed to maintain existing homes, and even to build new ones. Remember: The next generation of renters may not want to live in the same units in the same neighborhoods built for their grandparents.

2. The renting stage of life is elongating

Americans are renting longer, and not just because of high mortgage rates. This is a trend dating back 40+ years, and it correlates with so-called “delayed adulthood” — waiting longer to get married, have kids, and establish roots through homeownership. Younger Americans increasingly value the flexibility of renting over the semi-permanence of owning. At the same time, the widening gap in the costs of owning versus renting (+$1k/month vs. SFR and +$1.8k/month vs. apartments) adds another driver, even if it’s not the primary driver.

This is one reason why the excellent demographers at John Burns Research & Consulting continue to forecast strong growth in renter household formation over the next decade, even as the median renter age ticks upward.

3. Market-rate rental affordability is improving (counter to narratives)

Wage growth has topped rent growth for 3+ years and counting. Rent-to-income ratios among market-rate renters in professionally managed rentals are back to pre-pandemic levels in the low 20% range by most accounts. We’ve seen far more of a flight to quality than a flight to affordability. The REITs and their private sector peers are talking about affordability as a tailwind.

Rental affordability is a nuanced topic that is widely misunderstood. Two things are true at the same time: We’ve seen ample demand for market-rate rentals from higher-income households who can afford the rent, while at the same time we have pent-up demand for subsidized affordable housing from lower-income households.

But let’s also acknowledge the obvious: Uncertainty hangs over the market like a cloud that won’t go away.

First it was inflation. Then rates, jobs, tariffs, rents, jobs again, rates again, absorption, rents, and now … oil? It’s like a mystery book called “Uncertainty” with a new plot twist each chapter.

Uncertainty, Chapter 1: When will interest rates come down?

That was a big question of 2024 and most of 2025. Rate compression would trigger the return of capital. But rates came down slower and more moderately than everyone (including the Fed's own dot plot surveys) expected.

• Related subplots of this chapter: tariffs (which so far have proven less worrisome than first feared), lender patience on maturing loans, and investors waiting on a wave of Class A/B distress that has yet to arrive.

Uncertainty, Chapter 2: What's happening in the job market?

For a while, the headlines every month were along the lines of "job gains beat economists' expectations." But more recently, job growth has been tepid -- particularly for young adults coming out of college. DOGE and the federal shutdown triggered softening in previously hot markets like D.C. and Boston, plus immigration policy could be having some impact as well. And questions around AI's impact add a twist to the job uncertainty.

Uncertainty, Chapter 3: When will all this apartment and BTR supply lease up?

It's the biggest supply wave in nearly a half century. Its arrival was no mystery. But predicting the absorption of that supply is trickier. Macro absorption has been strong, just not enough to keep pace with supply -- though that could change now that supply is dropping off.

• Related subplot: When will rents rebound? We saw some promise in spring 2025, only to see the market lose its footing over the summer.

Uncertainty, Chapter 4: The ever-changing regulatory environment

There's little investors hate more than regulatory uncertainty, where the rules of the game are ever-moving targets. It's a supply killer, and increasingly a driver of redlines of certain cities -- particularly "tenant protections" that make rent payment essentially optional, as well as transfer taxes plus local quirks like DC's infamous TOPA laws.

The latest twist: The SFR market now wears a bullseye, with lawmakers targeting a federal ban on institutional homebuying so far-reaching it would kill most BTR construction.

Uncertainty, Chapter 5: Iran and oil prices

The latest drama. The surge in oil prices is triggering fears about the impact to job growth, inflation, and capital markets. And for good reason. It’s still early in this chapter, but the downside risks to the U.S. economy seem rather obvious unless the situation clears up quickly.

Epilogue: These headwinds of uncertainty impact nearly all types of investments.

It’s important to remember most clouds of uncertainty hang over nearly all investment types — not just rental housing. There is no structural shift suggesting materially reduced need for rental housing. It’s more likely the opposite.

Long term, there's a lot still to like. Short term, uncertainty remains the story.

— My Latest Posts on LinkedIn —

Here are some recent posts if you missed them:

• The rise of the accidental landlord is putting more supply in the rental market, thereby putting downward pressure on rent growth.

• The best way to “stick it” to housing investors? Follow the example of Austin and build a lot of housing, as a new Pew study shows.

• America’s rental housing stock is aging, with the median age now 45 years old.

• Rental affordability is a deeply bifurcated issue of haves and have nots, as the latest Harvard report on rental housing shows.

• Who remembers ranch apartments? Equity Residential used to have a lot of them.

• The relationship between supply and rents is undeniably obvious, looking at the markets leading the nation for rent growth and rent cuts.

• Concessions are more available today than at any point since the early 2010s.

• Why not give a “first look” to individual homebuyers instead of install a complex regulatory regime over the SFR market?

• In supply-heavy markets, market-rate rents have fallen below affordable housing’s max allowable rents at 60% AMI.

• The story of Morgan Properties is an incredible American success story.

• Pro-housing legislation was hijacked by conspiracy theorists, and the result will be less rental housing if the bill is enacted.

• SFR rent growth just dropped below 2% for the first time since 2013. So much for the (always wrong) theory that rents would soar due to a stalled-out homebuyer market.

• Is America becoming a renter nation? The answer is “no” based on all available data, despite vibes suggesting otherwise.

• Here are the MSAs where apartments built since 2020 represent the highest share of the total supply.

• The WSJ says rents could rebound in Austin. But how soon?

• Veris Residential is set to become the latest apartment REIT to get taken private.

• Flight to quality, not a flight to affordability. Apartment demand has shifted up market to pricier units.

• Where are rents for NEW apartments falling most? Here’s the top 15.

• Most policymakers (and most Americans, too) probably have no idea that the U.S. LOST more than 1 million single-family rental homes over the past decade.

— Now Spinning on The Rent Roll Podcast —

For 2025, The Rent Roll with Jay Parsons podcast ranked in Spotify’s top 2% of podcasts for minutes played and in the top 1% for most shared shows. Additionally, The Rent Roll continues to frequently rank on Apple’s charts for investing-themed podcasts, and was recently ranked as the third-best podcast in all commercial real estate (and #1 in housing) by the readers of CRE Daily!

Thank you to everyone who’s made The Rent Roll part of your weekly routine! New episodes are released every Thursday morning.

Find us on YouTube, Spotify, Apple and Amazon. Recent episodes:

COMING THURSDAY: Episode 77: Sub-Institutional Multifamily Update, with Adaptive Realty’s Moses Kagan and ReSeed Partners’ Rhett Bennett

Episode 76: Affordable Housing Isn’t What You Think with Dominium’s Nick Andersen

Episode 75: The Evolution of Equity Residential with EQR’s Mark Parrell

Episode 74: Inside Multifamily’s Biggest Family Business with Morgan Properties’ Jason Morgan

Episode 73: Takeaways from SFR REIT Calls + the Outlook for Rental Housing Investment with Principal’s Rich Hill

Episode 72: Debacle: NYC Rent Stabilized Apartments with New York Apartment Association’s Kenny Burgos

Episode 71: 7 Takeaways from Apartment REIT Calls with Bank of America’s Jana Galan

Episode 70: 5 Takeaways from NMHC Annual Meeting with Northmarq’s Jeff Weidell

Episode 69: Where’s All the Distress? with Benefit Street Partners’ Michael Comparato

Episode 68: Q1’26 Multifamily Update and Outlook with RealPage’s Carl Whitaker

Episode 67: Top 10 Myths About Institutional Investors in Housing with Baruch College’s Joshua Coven.

Disclaimer: The contents of this newsletter are for informational purposes, not investment advice. No recommendation or advice is being given. The content — including commentaries, sponsorships, ads and affiliate links — is not financial advice or endorsements. We are not responsible for any losses from relying on this information.

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