Luxury Apartments Lower Rents in Key US Cities

Luxury apartments drive rent reductions in major cities as new supply enters markets like Austin and Phoenix. Luxury apartments key factor.

December 30, 2025

Valerija I.

Luxury apartments are contributing to falling rents in cities with heavy new supply.
US average rent declined 0.18% in November, the biggest monthly drop in over 15 years.
Older apartments in some cities are now cheaper than regulated ‘affordable’ units.
Developers expect new supply—and falling rents—to slow in the coming year.

Key Takeaways

Luxury Supply Shifts Rents

An influx of luxury apartments has pushed rents downward in several major US markets, per Bloomberg. Cities like Austin, Denver, and Phoenix saw rent drops as new luxury buildings pulled tenants from older, less competitive units.

According to CoStar, the average US rent fell 0.18% in November, the largest monthly decline since 2009. The dynamic is especially evident in Sun Belt cities and popular vacation markets, with landlords forced to cut prices to maintain occupancy.

Older Units Hit Record Lows

The rapid delivery of luxury apartments means rents for aging market-rate properties have dropped as much as 11%. In some areas, older units now rent for less than regulated affordable housing, mainly due to new luxury inventory. The impact has been especially pronounced in Sun Belt cities, where a wave of high-end construction has flooded the market in recent quarters.

Cities experiencing the highest volume of new apartment deliveries had the most notable declines, while markets with fewer new completions saw minimal change.

Cities with the fastest new unit growth over the past five years — particularly in the Sun Belt — have seen the sharpest rent declines, underscoring the impact of luxury supply on broader market pricing. (Source: CoStar)

Implications for Housing Affordability

Industry analysts highlight this cycle as the most significant since the 1980s. The supply of luxury apartments has helped moderate rents and relieve some affordability pressure in key cities. Yet, experts caution that luxury construction alone is not a long-term fix for affordability concerns.

Luxury apartments have underscored the impact of general supply on rent levels, with developers like Camden Property Trust citing new supply as a reason for price cuts. Developers are already reducing future projects in softened markets, anticipating tighter supply and potential rent increases ahead.

Outlook for New Luxury Supply

Luxury apartments have temporarily eased rent growth, but new deliveries will slow sharply next year. As fewer projects move forward, landlords anticipate tighter markets and potentially higher rents, signaling the window for lower prices may be short-lived.