The Affordability Paradox: Why Rents Stay High Even as Supply Surges

Published on February 3, 2026
Last Updated on February 3, 2026

America is delivering more apartments than any time in the last 40 years—yet rents remain stubbornly high. This contradiction frustrates policymakers, confuses renters, and alarms investors.

 

 

But the truth is simple: we are building the wrong units in the wrong places at the wrong price points.

Record Supply — But Misallocated

More than half a million new units hit the market in 2024–2025, but most are luxury Class A developments.

Neal's Take:

“We’re not oversupplied. We’re incorrectly supplied.”

Neal Bawa

Middle-Income Renters Are the Most Underserved

Developers can’t build Class B at sustainable margins due to inflated land and construction costs.

Neal's Take:

“The affordability crisis isn’t a demand problem—it’s a construction cost problem.”

Neal Bawa

Household Formation Outpaces Deliveries

Millennials and Gen Z are entering peak family formation years. This keeps demand high despite new supply.

Neal's Take:

“Demographics always win. And right now, demographics are screaming for more rentals.”

Neal Bawa

Migration Is Reshaping Rent Floors

Markets like Austin, Charlotte, Phoenix, Nashville, and Columbus continue absorbing new inventory quickly.

Neal's Take:

“Apartment demand isn’t national—it’s hyperlocal. Oversupply in one city means nothing to the next.”

Neal Bawa

Rents Will Rebound Faster Than Expected

Temporary softening will fade by late 2025, especially in high-growth metros.

Neal's Take:

“When the supply wave passes, rents surge. The moment the pipeline shrinks, pricing power returns.”

Neal Bawa

Investors Should Use This Window Strategically

Periods of temporary price softness are ideal acquisition windows—especially with strong demographic support.