The deluge of new apartments flooding the Metro Atlanta market has turned the tables on landlords, who are granting renters more incentives and lower rents.

But with developers hitting the brakes on new projects as financing grows cold, the upper hand may flip back to landlords by late next year.

Apartment renters are finding sweeter deals in the Metro Atlanta market.

Developers are underway with 18,500 new apartment units in Metro Atlanta, pushing the region to fifth place in the U.S. in terms of construction volume, according to an August Yardi report.

A bulk of the new supply is springing up in the suburbs. The 13,000 new units coming up in those areas are increasing the existing multifamily stock by 5%, according to Yardi Business Intelligence Manager Doug Ressler. Anything over 3.5% is considered robust. 

The rush of supply has forced developers to offer more perks to prospective renters, typically in the form of free rent that can span months, and in some areas of the metro area has forced rates downward. The dynamic is allowing renters to lease higher-quality apartments for the same rent.

“It may be a good time for renters to snag an amenity-rich apartment that previously may have been out of reach,” said Crystal Chen, who wrote Zumper’s August report on the multifamily market.

Every major submarket in Metro Atlanta experienced rental rate declines year-over-year in August, with rents dropping anywhere from 4.8% in Forest Park to a whopping 22% in Decatur, according to Zumper. There was an 8.9% drop in Alpharetta, a 6.3% fall in Atlanta, an 11% drop in Roswell and a nearly 10% drop in Sandy Springs, where GID Development Group is building almost 600 new units for its High Street Atlanta Apartments. 

“It’s Economics 101. It’s decelerating rents and concessions are increasing,” Ressler said. “That’s going to make it a very renter-friendly market.”

The share of landlords offering concessions has ballooned nationally from a low of 19.4% in July 2022 to 33.6% in April of this year, according to Zillow.

More than half the rental listings in Atlanta, Raleigh, Charlotte, Salt Lake City, Nashville and Austin include some form of renter incentive, Zillow reported. The Atlanta metro area saw a 14.5% spike in incentives on listings year-over-year in August. 

“Builders have stepped up and built an incredible number of homes in response to soaring rents during the pandemic, and renters are now seeing the benefits,” Zillow Chief Economist Skylar Olsen said in the report. “Now is a great time for renters to find a deal, with more new apartments hitting the market than at any time in the past several decades.”

Independence Realty Trust Inc. is offering incentives ranging from three weeks to two months of free rent in Atlanta, Raleigh, Nashville and Huntsville, Alabama, Senior Vice President Janice Richards said on an Aug. 1 earnings call.

And Mid-America Apartment Communities Inc. Executive Vice President Tim Argo said during an Aug. 1 earnings call that “Midtown Atlanta probably [is] our worst concessionary environment right now, sometimes pushing three months where there are lease-ups.” Mid-America reported rents falling between 8% and 9% for new leases in the region.

But Ressler said the fair weather for apartment renters likely won’t last. New apartment starts are quickly falling across the U.S.: By 2026, developers will be underway with 350,000 versus more than 500,000 today.

With the dropoff in new development, Ressler said Yardi is predicting rents will rise and concessions will fall off by as early as late 2025.

The ingredients for increasing housing demand are not abating, Ressler said. During the pandemic, non-native population growth in the U.S. drove people in spades to rental homes and apartments, especially since many don’t have the ability or credit record to buy homes. That trend is still in place, Ressler said, and is co-mingling with the Gen Z population — many of whom are now in their early and mid 20’s — who are moving out of their childhood homes and searching for places to live.

“So what you have is a double whammy. The demand for multifamily and rentals in general is increasing exponentially. Supply is not able to keep up with it,” he said. “Atlanta is a dynamic city. It’s a gateway city. Because of that, you’re going to see population growth and no real new supply to support it. What that means is prices are going to rise.”

Bisnow/Shai Dolev

Chapman Taylor’s Michael Swiszczowski, Moda Family Homes’ Chris Procter, IMMO Capital’s Samantha Kempe, UKAA’s Lesley Roberts and Chapman Taylor’s Catalina Ionita

The UK single-family rental sector is fast convincing real estate investors of its benefits. If it can prove it helps housing affordability and creates much-needed new homes, it just might convince society at large as well. 

“While we’re not necessarily doing God’s work in investing in single-family housing, by investing in that sector we’re creating additionality and net new housing,” Packaged Living Managing Director of Single Family Housing Jonathon Ivory told an audience of 200 at Bisnow’s Single-Family Rental event late last month. “Covid-19 has changed how and where people want to live, and single-family rental provides new homes in green and open places that improves wellness and quality of life.”

Packaged Living is backed by Canadian investment giant Fiera Capital, Ares is backing developer Moda for a £1B single-family rental drive, and Swedish investor EQT is backing Sigma Capital, among many large investors looking to buy into the sector in the UK.

In the UK, single-family rental has emerged in the wake of its rise in the U.S., where it has faced criticism for putting homes into the ownership of large institutional investors, rather than individuals. 

Conductor founder Charlotte Constance quoted a statistic from a survey undertaken by the data firm, highlighting that 86% of those polled wanted to own their own home rather than rent.

“How can you sleep at night?” she asked the panellists.

Ivory said that in building new homes, institutional investors and the developers they backed were helping to meet the housing targets set by government, and that structural factors had led to the consistent shortfall of housing built in the UK.

Bisnow/Shai Dolev

Packaged Living’s Jonathon Ivory, Sigma Capital’s Rob Sumner, Godwin Developments’ James Mulcare, Apache Capital’s Richard Jackson, L&G’s David Reid, Bond Bryan’s Tomasz Romaniewicz and Conductor’s Charlotte Constance

He made an often overlooked point that this structural shortfall had pushed house prices up. Combined with low interest rates and a decline in pension contributions, that meant that for many people, owning a home was a savings and pensions scheme as well as a place to live.

“It is not this sector’s job to fix those structural inadequacies,” he said. 

Other speakers argued when it comes to affordability, purpose-built single-family came out ahead of other forms of open-market rental housing.

“It’s a value proposition that’s attainable to the mass market,” Moda Family Homes Director Chris Procter said. 

“It will be at a significantly lower price point than city-centre apartment schemes,” he said, adding that although it may be slightly more expensive than a single-family home owned by a buy-to-let investor, the quality of the home and the service offered by a large scale, professional landlord would be significantly higher. 

Sigma Capital Investment Director Rob Sumner offered data to back this up. Sigma manages listed company PRS REIT, which owns 4,000 suburban single-family rental homes. He said the average household income of its tenants was £42K a year, and that those households spent about 25%-30% of their net income on rent, compared to 35%-40% in the urban BTR market. That makes its homes far from a premium product, he said. 

UKAA President and Allsop partner Lesley Roberts said it was easier to incorporate social housing into single-family rental schemes than traditional big-block urban multifamily schemes. The income differential between the open-market units and the socially rented units is smaller, and there is also a more practical reason. 

“The land is cheaper, and you can build to the pace of absorption in your market, which makes assimilating the two and creating a community easier,” she said. “Towers are expensive, you can’t occupy them until they are built, and the specification can be a bit higher.”  

IMMO Capital is a platform buying existing homes on behalf of institutional investors. In a podcast interview with Bisnow, Chief Investment Officer Samantha Kempe said the company was not necessarily taking homes out of the hands of individuals because it was often paying less than individuals were bidding.

“Quite often, we have [sellers] come back to us because the other bidders fell through,” she said. “They weren’t able to get their mortgages in place, or they changed their mind last minute, and they ended up finding another property. And the seller will come back to us and say, ‘You know, are you still willing to buy that price? I’m in a chain, I need to move.’ So, the convenience factor and the certainty that we can provide sellers — that often means that we are able to buy properties at a bit of a discount.”