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Multifamily in Houston has shifted from a landlord-friendly to a tenant-friendly market. Average occupancy has fallen below 90 percent or is headed in that direction for all property classes.  Rents are lower than they were this time last year. Incentives dominate the market. And developers continue to overbuild.

The Houston market absorbed roughly 17,600 Class A apartment units in the 12 months ending May ’24, according to Partnership analysis of MRI Apartment Data. Normally, that would be a strong performance. However, Class A inventory expanded by nearly 22,000 units over the same period. The Partnership estimates there are almost 35,000 unoccupied Class A units in the market, up from 31,600 units this time last year and 24,000 two years ago. At current rates of absorption, the 35,000 units equals almost a two-year supply. A one-year supply is considered normal.

Class A rents and occupancy have trended down for well over a year. Average monthly rent for a Class A unit in a “stable” property, i.e. one that has been open for over a year, was $1,760 in May, down $11 from last year. The average for a Class A unit for a property in lease-up, i.e., open less than 13 months, was $1,633 in May, down $33 from last year. 

Concessions now dominate the market. These may include free rent, waiver of a security deposit, or floorplan upgrades. As of May ’24, over half of all Class A units have an incentive, over one-third for B, and over one-third for Class C. The concessions have effectively reduced monthly rents by 5.0 to 7.0 percent across the board.

Roughly 19,000 apartment units, virtually all Class A, were under construction as of June 1. Another 33,000 were proposed or in the planning stages. An industry rule of thumb holds that Houston absorbs one apartment unit for every six jobs created. At the current pace of construction, Houston will need to create roughly 114,000 jobs to absorb what’s currently under construction. The Partnership’s forecast calls for the region to create half that many jobs (57,000) this year.

Prepared by Greater Houston Partnership Research Department

Patrick Jankowski, CERP
Chief Economist
Senior Vice President, Research
pjankowski@houston.org

Leta Wauson
Research Director
713-844-3661
lwauson@houston.org