In the modern world, prices always seem to be rising. With the exception of technology and maybe a few other industries, no one wonders whether prices will rise. The only question is how much they will go up.
But in recent years, the housing market has been challenging this trend. Believe it or not, average rental rates are actually going down. “October 2025 marks the 27th straight month of year-over-year rent decline for 0-2 bedroom properties,” notes a recent report from Realtor.com. “…Asking rents dipped by $29, or -1.7 percent, year-over-year.”
“The median asking rent in the 50 largest metros registered at $1,696, $63 (-3.6 percent) lower than its August 2022 peak,” the report continues. True, we are still above pre-pandemic levels, but the fact that rents are lower than they were three years ago is still something to celebrate. The report also notes that rents are down across all size categories, including studio, 1-bedroom, and 2-bedroom units.
Naturally, this change is not uniform across the US. Some areas are seeing bigger drops in rental rates, while others are seeing smaller drops or even increases. In a September article, Realtor.com highlighted three metros that are seeing the biggest declines.
“Rents in Las Vegas (-13.6 percent), Atlanta (-13.6 percent), and Austin, TX (-13.4 percent), are seeing the largest price cuts from their peaks, highlighting prime opportunities in these markets,” writes Joy Dumandan. She notes that median rents in these cities in August were $1,443, $1,572, and $1,436, respectively, dropping from peaks of $1,671, $1,820, and $1,659, respectively. The peaks for these cities, as with most of the US rental market, were set between 2021 and 2022.
Economist Jiayi Xu offered an explanation for these trends.
“Las Vegas, Austin, and Atlanta saw the largest rent declines from their peaks due to rapid rent growth during the pandemic, when many people moved to warm Sun Belt areas, creating a high starting point for corrections,” she said. “Migration trends have slowed, and significant new multifamily supply has increased options for renters, exerting downward pressure on prices,” she continued. “Combined, these factors have pushed rents down more sharply than in other markets.”
Xu’s comment about “significant new multifamily supply” is key. Like all prices, rents are ultimately determined by supply and demand. If cities build more housing, economic reasoning says that this will put downward pressure on the cost of housing.
If this is correct, then we would expect that the cities with the biggest price drops would also be among the cities that are building the most housing. As it happens, that’s exactly what we’re seeing.
Austin and Atlanta provide especially good case studies.
Austin, Texas
An August report from RentCafe looked at new apartment construction in 2025 across the US and identified the places that are building the most units. The South overall had a strong showing, accounting for 52.5 percent of the 506,353 units that are expected to be opened nationwide by the end of the year. Within the South, Texas is experiencing some of the biggest housing growth, fueled especially by growth in Austin.
The report presented a ranking of the US cities that are building the most housing this year, as well as a separate ranking for US metros. Austin took the top spot in the country on the city level, with an estimated 15,195 units expected to be completed this year. Austin came third in the country on the metro level with 26,715 units expected to be built, behind Dallas (28,958) and New York City (30,023).
The impetus for all this building is an influx of demand. “From 2020 to 2024, Austin’s population grew by 10.9 percent, making it the fastest-growing large metro in the US,” the report notes. What’s crazy is that, despite this surge in demand, rental prices in Austin are still seeing big drops.
This suggests Austin is building so fast that its supply growth is well outpacing its demand growth.
Atlanta, Georgia
Atlanta is another city where nation-leading rent reductions are being accompanied by nation-leading supply growth. Atlanta came sixth in the country on RentCafe’s list of cities, with 6,359 new units expected to be completed this year. The Atlanta metro area took fifth place on the metros list, with 17,512 units expected.
Atlanta’s recent supply growth is no accident; it’s the result of a deliberate decision on the part of the city to make building more housing a priority. In May 2022, a few months after assuming office, Mayor Andre Dickens created the Affordable Housing Strike Force, bringing together a wide variety of stakeholders with the aim of finding innovative solutions to the housing issue. “Housing is foundational to a community’s health, and simply put, Atlanta doesn’t have enough of it,” he said. The goal was to build or preserve 20,000 units of affordable housing by 2030.
Atlanta has made significant strides with this approach, partly thanks to some creative maneuvering. In one story highlighted by Realtor.com, the city realized it was using a valuable 10-acre lot to store new trash cans, which could easily be stored elsewhere. They decided to move the cans so that the land could be redeveloped. “It’s not the highest and best use of the land,” said Josh Humphries, the mayor’s senior policy adviser on housing.
Realtor.com also pointed to a story where “a downtown fire department that desperately needed a renovation agreed for the city to build 30 stories of housing units above it in exchange for the rehab.”
According to recent studies, Atlanta is making good progress toward its goal. Referring to the 20,000-unit target, a November report from JPMorgan Chase notes that “In less than four years, over 12,000 units have been completed, with funding secured for thousands more.”
The Manufacture of Scarcity
The cities of Austin and Atlanta show us the real-world impact of economics. It’s easy to think of supply and demand as concepts that only live in economics textbooks, but the truth is that they are all around us, shaping the prices we pay for the things we need — and hence, the cost of living. If we want housing prices to come down, adding more supply needs to be a big part of that conversation.
How can we add more supply? One of the best ways is deregulation. As economist Bryan Caplan explains in his recent illustrated book Build, Baby, Build, the main reason housing is so expensive is because of manufactured scarcity — restrictions on the supply of housing created by government regulations.
“Housing prices stay high in desirable areas,” Caplan writes, “because most governments strictly regulate new construction.”
Caplan anticipates a common reaction: “Sounds more like Right Wing Ideology 101 to me.” This is understandable, but Caplan stresses that housing deregulation is a bipartisan issue that even non-right-wingers should be able to champion. He points to progressive thinkers like Paul Krugman, Obama-advisor Jason Furman, and Matt Yglesias as people whose left-wing credentials are not in doubt, yet who acknowledge that strict regulation really is a big part of America’s housing problem.
Rents coming down is not just a happy stroke of luck. It is a policy choice, one that is available to every municipality and township in the country. There is no economic mystery to be solved. We know what works. The only question is whether we care enough about the cost of housing to administer the treatment that will cure the disease.
