As the year draws to a close, rental markets are slowing down nationwide, coupled with the slowing economy. The top U.S. rental markets in terms of competitiveness remained those with good growth—including more job opportunities—and a larger number of affordable neighborhoods. A new RentCafe report looked at what the hottest rental markets were in 2023.
RentCafe analyzed the 139 largest U.S. rental markets where data was available, looking at five key metrics to determine a score: the number of days an apartment remains vacant, the percentage of rentals that were occupied, number of prospective renters competing for an apartment, the percentage of renters that renewed their leases and the share of available apartments that came online this quarter. Based on these metrics, a Rental Competitivity Index (RCI) value was awarded to each market.
The national RCI stood at 59.5 through December, marking a slight drop from the first quarter of this year, as well as slightly below the 2022 score of 59.9.
Midwest markets remain in the top five
Of the top 10 most competitive rental markets, four were in the Midwest, boasting an RCI score of more than 100. The lower cost of living, new job opportunities in the realm of reshoring and other new investments made the Midwest one of the most competitive regions in 2023.
Milwaukee remained the top Midwestern market, ranking third overall with an RCI score of 113. Overall occupancy stood at 95.8 percent, while a total of 2.9 percent of rentals were in newly built communities. On average, apartments stood vacant for 33 days, with 14 prospective renters competing per unit.
Grand Rapids, Mich., boasted an RCI score of 109, with the market maintaining its position as an affordable alternative to Chicago, Detroit and Indianapolis. However, suburban Chicago also remained a top choice for renters.
Omaha, Neb., remained in the top ten as well. The metro also ranked sixth overall for new development. On average, there were 13 prospective renters per apartment, while 63.9 percent renewed their leases. The market also boasted the lowest number of days that an apartment remained vacant for—28, 10 days below the U.S. average.
Of the top 30 markets, 10 were in the Midwest. Factors that boosted the competitivity of this region were a more affordable cost of living, more open space and a higher rate of renters renewing. Other competitive Midwestern markets included Cincinnati, Kansas City, Kan., Wichita, Kan., Madison, Wis., and Lafayette, Ind.
Miami was the hottest rental market of 2023
Miami-Dade County stood out with the highest RCI score—122—of all 139 markets tracked by RentCafe, marking the second year in a row in the top spot. Developers struggled to keep up with demand, with the metro boasting a 3.7 share of new apartments added since January, taking the third spot for that metric nationwide.
Job opportunities and a friendlier tax environment were among the top factors for Miami’s success. A whopping 22 people competed for a single apartment on average, while units stayed vacant for 31 days. Furthermore, a total of 71.2 percent of renters chose to stay in place and renew leases, making competition even fiercer.
Florida overall scored high on the competitiveness ranking, with a few other hotspots entering the top 30. These included Broward County and Tampa.
Northeastern markets were a mixed bag
North Jersey, N.J., was the second-hottest rental market of 2023, with an overall RCI of 116. Since the onset of the pandemic, the area evolved as an attractive alternative to New York City, and held the first spot during 2023’s first quarter.
Northern New Jersey counties—including Bergen, Essex, Hudson, Morris and Sussex—saw high competition among renters and recorded an overall occupancy of 96.3 percent. On average, 14 renters competed for a single apartment, which remained vacant for about 34 days. The market was also among those with a high share of new units.
Overall, Northeastern markets such as Philadelphia, Boston and New York were attractive, but they remained undersupplied—more than three-quarters of renters chose to stay in place instead of seeking new arrangements, while the share of new apartments remained relatively low.
Suburban Philadelphia stood high in the ranking, earning the second spot in the Northeast and the eighth spot overall. However, this market also faced the same issues as others in the region, showing signs of being undersupplied—only 0.9 percent of rentals were newly constructed, significantly below the national average, which also led to suburban Philadelphia recording the second-largest lease renewal rate out of all 139 markets, at 75.4 percent.
Orange County: Top California rental market
No California rental markets made it to the top 10 this year. Orange County ranked highest on the West Coast, landing in the 15th spot. The market’s economic diversity continued to attract renters, pushing the occupancy rate to 95.9 percent. Still, Orange County significantly lagged when it came to new development.
The other four California markets that made the top 30 were San Diego (86 RCI), Silicon Valley (75), Eastern Los Angeles County (71) and Central Valley (68). Silicon Valley maintained its allure as a top spot to live in. Out of all California areas, apartments rented fastest in Silicon Valley, sitting 33 days vacant on average. The area also boasted a decent pipeline, with a 1.7 percent share of new apartments.
What about the hottest smaller markets?
RentCafe also analyzed smaller rental markets along the same metrics. A few top entrants were college towns such as Fayetteville, Ark., which is home to the University of Arkansas. The city earned the top spot, tied with two others, with an RCI of 126.
Fayetteville had an occupancy of 97.2 percent and a lease renewal rate of 75.4 percent. It was one of the few small markets that enjoyed a significant uptick in new construction, with a share of 2.6 percent of new apartments. Fayetteville also recorded the shortest amount of time for an apartment to get rented, with an average of 18 days on the market.
Two other small markets were tied with Fayetteville for an RCI of 126—Providence, R.I., and Harrisburg, Penn., both of which had little to no new apartments built. This made for an increased rate of lease renewals, at 67.9 and 75.7 percent, respectively.
Hottest U.S. rental markets: National takeaways
The overall ranking highlighted the continued push for new development across the country, among other insights. Across the 139 markets analyzed by RentCafe, 1.9 percent of apartments available for rent were newly built—this was an uptick of 40 basis points from the figure recorded in 2022.
Overall occupancy across the analyzed markets stood at 94.0 percent, which was below the 95.3 percent of last year. Meanwhile, renters moved more than last year, as lease renewals stood at 60.2 percent, compared to 62.7 percent in 2022.
On average, renters competed less for new apartments this year, with only nine people competing for a single vacant apartment, down from the 14 renters competing in 2022.
All of these indicate that developers anticipated higher demand for new apartments, but current economic headwinds most likely got in the way, at least in the short term, as household formation also decelerated.
