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Even the most surly landlords would have to admit they’ve had it pretty good for quite a while when it comes to rent increases. As of January 2026, some areas have recorded a 40% increase in fair market rents for one- and two-bedroom units since fiscal year 2021.
But finally, after being stretched thin, tenants are getting a break. Rents are down nationwide, and it’s landlords who have to watch the bottom line.
The national median rent just recorded its lowest January level in four years, according to Apartment List data reported by CNBC, down 1.4% from a year ago to $1,353. That leaves rents about 6.2% below their peak in summer 2022 as new supply floods the market.
The asking rents for zero- to two-bedroom units have now posted 29 straight months of declines in many markets, according to Realtor.com’s January 2026 Rental Report. For small landlords, adapting quickly to changing market conditions is key to protecting long-term cash flow.
A “Rental-Friendly” Era
Vacancy rates are up in many markets and nationally by 7.3%, according to CNBC, and with them come concessions and rent drops as the market softens, creating a renter-friendly, more balanced environment. According to Realtor.com, these markets include traditionally high-priced metros, such as Denver, Sacramento, and Washington, D.C.
Some markets—such as Austin, Texas, which saw a 6.3% decline from the previous year—are experiencing an even more extreme contraction. Other declining markets include New Orleans, San Antonio, Texas, and Tucson, Arizona. The Los Angeles Times reported that rents in L.A. dropped to a four-year low.
Douglas Elliman broker Michelle Griffith told CNBC that “2026 is shaping up to be one of the more renter-friendly periods we’ve seen in a decade.”
The softening is due to supply having exploded, particularly in the commercial and multifamily sectors, as over 600,000 new multifamily units were completed nationally in 2024, according to figures from the U.S. Department of Housing and Urban Development. In addition, 2 million rentals are expected to open by 2028, according to RentCafe.
The subsequent glacial rent growth has seen multifamily housing rents rise just 0.1% in February from December to $1,716, while annual rent growth was 0.4%, from 0.6% the previous month and a precipitous drop from 1.5% a year earlier, according to the Apartments.com multifamily rent growth report.
“We’re seeing price wars within buildings, longer days on market, and the need for multiple price reductions just to generate foot traffic,” Jaclyn Bild, a real estate broker associate at Douglas Elliman, told CNBC.
It’s Not All Negative for Landlords
The recent price drops need to be taken in context. Landlords are still sitting pretty, as “rising rents over recent years have made it more difficult for potential first-time buyers to save for a down payment, further constraining affordability,” Selma Hepp, chief economist at Cotality, said in a Property Markets Insights report. In some markets, such as Miami, rents have increased by more than 50% over the last five years.
“If your income is rising at the same time your rent is, maybe that extra expense is no big deal,” Matt Schulz, chief consumer finance analyst at LendingTree, said in a recent report, as cited by CBS News. “However, so many Americans’ financial wiggle room is tiny, even in the best of times, so having to carve out hundreds of extra dollars to pay rent each month can be a big deal.”
The drop in rents doesn’t mean that tenants are about to bail on signing new leases, especially with inflation far from out of the woods amid economic uncertainty and a poor jobs report.
Realtor.com senior economist Jake Krimmel said in a press release, “The foundation for a housing rebound may be taking shape, but rebuilding confidence and moving the needle on affordability will require a sustained stretch of lower inflation and a more certain labor market.”
By contrast, certain markets in the Northeast and West Coast, where new construction has not been so robust, have been more resilient, according to Realtor.com data, despite year-over-year rent drops in Los Angeles and New York.
The Takeaway for Landlords
The rental market is not monolithic. According to Realtor.com, as reported by sister site MarketWatch, higher?income renters are getting bigger rent cuts, while lower?income renters have seen rents rise more since 2019 and fall less recently, so cheaper rentals have been hit much harder.
“The softness at the top of the market is primarily what is driving down the median,” Realtor.com stated. “Those renters in higher-cost units have seen the bulk of the rent relief since 2023, while those in low-cost units have seen very little of it.”
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Not surprisingly, in markets where there has been a lot of construction of large apartment buildings and thus more units to fill, landlords have been far more willing to offer concessions such as a month’s free rent and free parking, Homes.com reported.
According to real estate analytics company ATTOM Data Solutions, some single-family rental markets have not been immune to the softening rental market. Combined with increased operating costs, this has left small landlords with little room for negotiating new leases. This means smaller investors need to be especially disciplined about underwriting rent assumptions and renewal terms because they do not have the same financial leeway as large institutional operators of multifamily apartment buildings.
Final Thoughts: Strategies for Smaller Landlords in a Softening Rental Market
Landlords can no longer rely on presumptive rental increases—at least in the short term. Surviving in a market where expenses have consistently been on an upward tear and rents are stalling will bring different challenges to different investors, depending on the size of their debt burden. Those who bought when interest rates were low are in a good position. Recent buyers or those who have recently refinanced will need to be particularly savvy going forward.
It’s an old-school formula: safeguard income and reduce expenses. Keep good tenants in place through incentivized lease renewals, and cut down on extraneous expenses by negotiating with contractors, utility companies, and suppliers, shopping for insurance, appealing property taxes, and maintaining major systems to offset repairs.
Eventually, once the market absorbs new apartments, rents will start to increase again, as they always do. In the meantime, managing what you have requires meticulous attention to detail and a steady hand on the tiller.
