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Multifamily in Houston remains a tenant-friendly market. Occupancy continues to drift lower, pulling rents along with it. Landlords are offering incentives and discounts to entice would-be renters. Construction continues unabated, suggesting the market will remain soft for some time. Austin, Dallas/Fort Worth, and San Antonio also continue to struggle.

Developers have delivered 25,944 apartments to the market over the past 12 months, according to MRI Apartment Data. Houston has absorbed only 16,039. Another 18,417 are under construction.

An industry rule of thumb suggests that the market can absorb one apartment unit for every six jobs created. The region will need to create approximately 108,000 jobs to absorb all the units currently under construction. Job growth is likely to decelerate in the coming months as the nation’s economy cools. Houston created only 74,500 jobs in the 12 months ending July ’24, enough to absorb roughly 12,400 units. Without a surge in job growth, Houston’s apartment market will remain overbuilt well into ’25.

With too few renters and too many empty units, landlords have embraced incentives to attract potential tenants. One in three apartment units in Houston has an incentive attached to the contract. The share is much higher for Class A properties and lower for Class B, C, and D.

Landlords continue to offer incentives to attract new tenants. This may include free rent, the waiver of a security deposit, or floorplan upgrades. As of July ’24, incentives impacted over half of all Class A units, one-third of Class B and C units, and one in seven Class D units. The concessions have effectively reduced monthly rents by 5.0 to 7.0 percent across the board.

Houston is not alone. Other Texas metros are struggling as well. In Austin, incentives are available on 54 percent of all apartments, in Dallas/Fort Worth on 39 percent, and in San Antonio on 46 percent.

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