How Does Constricted Apartment Supply Affect Rents?
- Jesse Carter
- Sep 30, 2025
- 4 min read
When demand for apartments rises faster than construction deliveries, the result is clear: rent costs increase.
In this article, we’ll explore how limited supply leads to higher rents, what rent control advocates and economists argue regarding the best methods to maintain affordable housing, and the role Streams Development plays in enhancing the supply of multi-family housing.
Free Market Basics of the Rental Market
At its core, apartment rental prices hinge on supply and demand. If too many people are pursuing too few rental units, landlords have the leverage to charge more. Typically, this means a property owner will rent the property to the person willing to pay the most for it.
Those with lower incomes get priced out, which is how a constricted apartment supply translates into higher rents. This dynamic favors higher-income, more credit-worthy renters, while those earning less struggle to find affordable housing.
Importantly, rising rents signal to the market that more apartments are needed.
In a normal cycle, high rents make it attractive for developers to build new apartments or for owners to convert and renovate properties into housing.
Eventually, that added supply can relieve the shortage and help stabilize prices.
On the other end of the spectrum, when rent prices fall or stagnate because there are plenty of vacant units, it sends a message that apartments are overbuilt.
Rent Control and Rent Stabilization: Short-Term Relief vs. Long-Term Supply
When rents soar, so does the outcry for a quick fix. That’s when policy discussions about rent control and rent stabilization emerge—measures designed to curb rising rents and offer tenants immediate, if temporary, relief.
Rent control advocates argue that capping rent increases can protect tenants from sudden rent hikes and displacement.
In cities like New York City, rent stabilization laws limit how much landlords can raise rents each year for specific older apartments, offering tenants greater stability.
However, economists and housing experts caution that capping rents by law can lead to unintended consequences. This is not surprising, considering that in Keynesian fashion, it can be considered government controlling free markets.
However, rent control removes the financial incentive for builders and landlords to create or maintain rental housing. Over time, this means fewer rental units on the market and older units in worse condition. Decades of research largely back up these concerns.
In one survey, 93% of economists agreed that strict rent control laws diminished housing stock and quality. Historical case studies shared by the National Multifamily Housing Council support this.
For example, after a rent control law took effect in Cambridge, Massachusetts, the city saw an 8% drop in rental units during the 1980s, while nearby towns without rent control gained rentals. As a student, I was living in Cambridge in rent-controlled housing during this time. Although the rent and location were great, the house had fallen into disrepair.
Limiting landlords’ revenue can lead to the deterioration of existing rental housing. Maintenance might be deferred and upgrades canceled if owners can’t recoup those costs through rental increases.
A study of Los Angeles’s rent control found that while tenants saved on rent, 63% of those savings were offset by the loss of housing quality and availability as some units deteriorated or were taken off the market.
In short, rent caps often trade off immediate tenant savings for a slower trickle of new housing and declining conditions in the existing rental housing stock.
Rent control advocates often prioritize short-term affordability and tenant stability benefits, while critics focus on the long-term supply consequences and allowing market forces determine the upward and downward price swings.
The U.S. Rental Market Today: When Supply Loosens, Rents Stabilize
Alternative options were seen in 2023–2024: rent concessions (like a free month of rent or other move-in discounts) became far more common in cities where new units opened.
As Zillow reports, 40 of the 45 largest U.S. metro areas saw an increase in renter concessions in 2024, with roughly one in three rental listings offering some incentive to entice tenants—up from one in four listings the year before.
Greater supply equals more choices for renters, so owners had to compete on price and perquisites.
Even with potential perks up for grabs, many renters are still stretched: the typical U.S. rent now makes up roughly 30% of a median renter’s income, teetering on the edge of what’s considered affordable.
This underscores a key point: building sufficient housing takes time, and we’re still playing catch-up after years of undersupply.
So long as there’s a significant shortage of units, landlords will have the upper hand, and rents will remain relatively high in many regions.
Finding Balance: Addressing Rents by Tackling Supply
So, how can we sustainably tackle high rents? The ultimate solution is to increase the supply of rental housing.
When more apartments are built— especially in high-demand areas—it creates competition, which can help moderate rent prices and give renters more options.
However, an assortment of approaches might be what it takes. Ultimately, a successful, comprehensive housing strategy can include:
Protecting tenants from egregious rent spikes
Preserving existing rental housing in good condition
Aggressively expanding supply
The key is not to ignore the supply side: decades of experience show that if we simply try to cap rents without building more housing, we end up with fewer places to live and often higher rents for those unlucky enough not to snag a rent-controlled unit.
It’s like squeezing a balloon—push down in one spot, and pressure pops up elsewhere.
In Closing: Addressing Constricted Apartment Supply in the Carolinas
Constricted apartment supply affects rents by driving them upward, making it tougher for many Americans to find affordable homes. Easing the rent burden in the U.S. will ultimately require building more housing to meet the strong demand.
At Streams Development, we recognize the impact that limited supply has on local communities.
Our team is actively working to expand the availability of high-quality rental housing throughout the UpState of South Carolina. From apartment communities to mixed-use developments, our projects are designed to support long-term housing growth while meeting the needs of modern renters.
If you're looking to partner on a residential or commercial development project or want to discuss investment opportunities in high-demand markets, contact Streams Development today.
Based in Greenville, SC, we’re proud to be one of the most experienced real estate development firms in the region, with a track record spanning over thirty states.
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