Have We Entered a "Landlord-Friendly" Era?

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In This Article

According to the Wall Street Journal, landlords have a reason to rejoice: A “landlord-friendly era” of real estate is about to unfold.

The high cost of mortgage rates and homeownership doesn’t look like it will abate any time soon. With the new construction pipeline drained by the end of the year, landlords can expect to see rental prices increase nationwide as 2025 progresses.

“The relationship is going to very quickly flip from a renter-friendly environment to a landlord-friendly environment,” Lee Everett, head of research and strategy at multifamily giant Cortland, told the Wall Street Journal.

Compounding the issue is stubborn inflation, which is likely to cause the Federal Reserve to hit pause on any rate cuts. “It will be very hard for the headline inflation number to reach the Fed’s 2% goal without a slowdown in housing costs,” Lisa Sturtevant, chief economist at Bright MLS, told the Journal.

Rents have steadily been climbing in the Midwest, Northeast, and parts of the West Coast—where construction has been considerably less than in the Sunbelt. According to real estate analytics data and analytics giant CoStar, landlords can expect multifamily rents to show “meaningful growth” in the second half of 2025 as demand overtakes supply.

Construction Costs Could See Rents Increase

One of the big unknowns about the Trump presidency is how much construction costs are likely to increase should tariffs persist and migrant deportations continue. According to the National Association of Home Builders, the U.S. imports about 70% of its building materials from Canada and Mexico. Additionally, undocumented labor contributes about 13% of the construction workforce.

As construction declines in the South, demand for rentals has been increasing, with the multifamily vacancy rate now below its long-term average for the first time in about two years, according to the Journal. The overall pattern points to a multifamily wave of increasing rents, which explains why real estate investment trusts (REITs) have been buying up Sunbelt multifamilies.

“We assume that the second half of 2025 [into] 2026 will be back to rent growth,” Gaia CEO Danny Fishman, who has recently overseen the purchase of three Sunbelt properties for his REIT, told the Journal. “We are playing the wave.”

Democratic government officials are less enthusiastic about increasing rent prices, which is exacerbating a housing market mired in an affordability crisis.

“This is chaos on steroids,” Virginia Democratic Senator Mark Warner said. “The problem is that from the rental market side, I fear those folks are going to bear the biggest burden.”

Markets With the Greatest Rent Increases

A review of HUD data from constructioncoverage.com highlighted parts of the country where rent is rising fastest. While median rents for 2025 are expected to be 4.8% higher nationally than in 2024, the Mountain West, specifically Montana, and Idaho, lead the nation, where rents are projected to be over 20% higher year over year, more than four times the national average.

Virginia (11.6%), Tennessee (10.7%), and Hawaii (9.2%) also show far higher-than-average rent increases. However, on a metropolitan level, one city stands out above all others—Bozeman, Montana—where rents are forecast to be 37.4% higher in 2025 than the year before. Boise City, Idaho, is not far behind, with a 32.1% increase.

Drilling down on the reasons for the rent spikes in these areas, the local Daily Montanan revealed that the Bozeman market is essentially frozen, with 80% of mortgage holders in the state having rates that are 2% to 3% below the current mortgage rates and thus unwilling to move and increase inventory.

A lack of new housing and an influx of residents from neighboring states has led to a wildly unaffordable real estate market. From 2010 to 2020, there was 9.6% population growth against 6.6% housing growth. Montana lagged behind as surrounding states saw a burst of homebuilding after the pandemic. With a 14,000 housing unit gap, it would take three years of constant building at Montana’s current rate just to meet the existing demand—not factoring in the increasing demand of new residents.

Rents Overall Will Show Steady Increases

Using RealPage data, CRE Daily provided further insights into the expected state of the rental market in 2025. Here are the key takeaways:

Markets such as Chicago, Cincinnati, Indianapolis, Kansas City, and Pittsburgh, as well as Virginia Beach, will continue to experience rent increases due to minimal new construction pressure and steady demand.

Coastal cities like Boston, San Francisco, and Seattle will return to historical norms of rental increases of 3% and 4%, in line with the U.S. average.

Baltimore, Philadelphia, Cleveland, and Milwaukee will see modest rent growth as demand keeps pace with supply.

Sunbelt cities, including Dallas, Houston, Las Vegas, Orlando, and Miami, will experience 1.5% and 2.5% this year as prices stabilize after years of rapid expansion.

Limited demand in Atlanta, Los Angeles, San Diego, and Minneapolis may see rent growth below 2%.

Apartment oversupply in Austin, Phoenix, San Antonio, Raleigh, and Charlotte will carry over for the rest of the year, resulting in neutral or negative rent growth.

Final Thoughts

Interest rates, insurance, property prices, and taxes are all up, so the last thing people should do is buy real estate, right? Wrong. Quiet markets like these are the ideal time to strike deals and buy real estate—if you can afford it.

If you’ve got access to cash, now is a great time to buy and hold to refinance later. Rents and house prices are only going to increase. However, if you’re a small mom-and-pop landlord with limited funds, leveraging at a time like this and praying for an interest rate reduction and rental increase will age you overnight.

Now is not a time to think about cash flow. It’s time to build a portfolio that simply pays for itself.

Cash flow is a long way down the line. Heaven forbid your tenants move out or stop paying. With high holding costs and no cash on the sidelines to bail you out, you could be in big trouble.

The good news for investors is that with higher interest rates, landlords are not getting inundated with offers. Some might be feeling the pain of an interest rate that adjusted upwards during the Fed increases and never came down. This means now could be a good time to strike a deal.

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