Commentary: Supply Boom is Driving Down Rental Costs

By David M. Greenwald
Executive Editor

It turns out there is evidence that housing supply can in fact reduce rent.  Perhaps one of the most surprising features of the housing debate has been the reluctance of some to acknowledge the impact of supply on cost.

An article on Monday in the Wall Street Journal (warning: paywall), illustrated this point.

“Apartment rents fell in every major metropolitan area over the past six months through January, a trend that is poised to continue as the biggest delivery of new apartments in nearly four decades is slated for this year,” the article noted.

While there is some indication that part of the decline signals that many tenants “may be maxed out on how much income they can devote to rent” – there is a bigger factors.

The article notes: “The softening rental market follows an unprecedented run for the apartment and home-rental industry put into motion by the pandemic. Pent-up demand for housing exploded in the months after the introduction of Covid-19 vaccines in late 2020 and a surge in people searching for apartments lifted rents 25% over two years.”

While they acknowledge that there is a “seasonal stalling in rents” in typical years, the bigger factor: “, the market faces a significant headwind in the biggest delivery of new supply since 1986.”

“Nearly half a million new apartments are coming on line this year,” it continues.

It explains, “But where housing inventory remains unusually low—to the benefit of home sellers—the crush of new apartment supply will give renters more choices, making it more difficult for landlords to raise rents at rates seen early in 2022, when rent growth was at a near-20% annual clip.”

“The new supply may already be having an impact. The share of apartment tenants who renewed leases declined in January to 52%, the lowest level for that month since 2018, according to property-management software company RealPage. The data suggests some tenants are finding better deals at other buildings,” the article continues.

“Renters facing lease renewals suddenly have a lot more options,” RealPage economist Jay Parsons said in a report. “Landlords are likely to start dropping their renewal rents to prevent tenants from leaving,” he added.

The article further explained that while shelter costs continued to move up – nearly 8 percent over last year at this time, “the impact of rent declines tends to lag behind what is expressed in the CPI. Many renters are in the middle of leases signed before recent price drops. That is one reason why the rising cost of rent reflected in the CPI shows annual price growth that is still higher than market measures, which track new leases.

“Measured annually, rent growth remains positive, according to most data sources. But the pace of growth is decelerating, and if it continues to slow beyond winter, it would help pull down headline inflation figures, of which housing costs are a major component.”

The decline has been across the board “in every major US metro area” and “none of the 52-largest metro areas tracked by Apartment List experienced positive rent growth over the period.”

All of this is good news and it also demonstrates the need for additional supply to start slowing down rental growth.  It took a massive influx – 500,000 new units across all markets to finally succeed to bringing down rents.

Assemblymember Matt Haney, who represents San Francisco, tweeted on Monday, “Of course we also need tenant protections, huge investment in social housing, affordable housing–the market alone will not provide affordable housing for everyone.”

But he said, “building more housing at all levels does impact rent & affordability, it’s common sense, let’s do more.”

He added, “This is overall rent–it doesn’t mean that every unit or every tenant is seeing their rent go down, especially current tenants. But increasing supply helps increase affordability, and we need a lot more. Our country & especially CA has under built housing.”

He said, “Even with this increase in building, our state has drastically under built housing. If we built more, we’d see a larger impact on rents.”

Haney later said, “Rents have decreased over the last year in Sacramento based on these reports. It doesn’t mean it’s enough, we need rent to go down by more, and we also need to build a lot more housing.”

As we know this is an ongoing battle, we have seen local communities pushing back against new housing regulations and the HCD.  We have also seen CEQA lawsuits stall student and other housing projects.

But overall this demonstrates the basic principle – building more apartments will eventually reduce rental costs.

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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  1. Matt Williams

    This article prompts more questions than it answers.  For example:

    1) How many apartments was the distinguishing supply before the additions?

    2) What percentage increase in supply does the “Nearly half a million new apartments are coming on line this year” represent?

    3) Did apartment rents fall in Davis in the same period?

    4) What changes in total apartment demand simultaneously took place in the article’s cited metropolitan areas?

    5) What changes in total apartment demand took place in Davis during the same time frame?

    1. Ron Oertel

      What changes in total apartment demand simultaneously took place in the article’s cited metropolitan areas?

      Articles like this one never examine changes in demand (e.g., the 6% drop in population in San Francisco, which also caused a drop in rental prices).  Much of which was attributed to the pandemic, telecommuting, etc.

      Demand is further reduced when economic activity declines, and companies lay off employees – as is occurring now.

      San Francisco’s housing prices have significantly declined, and I’m not aware of any significant construction causing this.

      Assembly member Haney’s comments (cited above) shows that he doesn’t understand even the most basic supply-demand model (or perhaps “willfully” ignores factors which don’t fit his agenda).

      If I’m not mistaken, Mr. Haney is in the opposite camp from supervisor Preston. (Would have to re-read 48 Hills articles to verify this.)

      I recall previously posting an article which implied that Preston’s efforts to land an affordable housing complex were “undermined” by the mayor, who wanted primarily market-rate housing at that location instead.

      1. Matt Williams

        Thank you Richard, but the ratio I was looking for was between the incremental half million and the then-existing supply.  So, if the existing supply was 50 million units, then the half million represents a 1% increase in supply. If the supply was 100 million units then the 1% drops to half a percent.

        According to the latest City figures we have between 12,000 and 13,000 apartment units. 1% of that would be 130 units.

        NOTE: in 2010 we had 11,664 apartment units.  I’m still chasing down the most recent number.

  2. Ron Oertel

    Thought I’d see what else I can find about Assembly member Haney (quoted in the Vanguard article, above):

    At least three developers who have projects pending or recently approved by the city have donated to Sup. Matt Haney’s campaign for state Assembly, an apparent violation of one of the city’s most important campaign-finance laws.

    Several county chapters of the California Democratic Party have passed or are considering resolutions condemning the anti-labor plutocratic group Govern for California and calling on Democratic candidates to refuse to accept the group’s money.

    The SF County Central Committee approved that resolution Sept. 28, with Sen. Scott Wiener and Assemblymember Phil Ting the only ones voting no.

    It’s a particularly interesting vote because Govern for California was one of the largest contributors to the Assembly campaign of Matt Haney.

    The big money shows up for Haney in state Assembly race

    Building trades, a tech mogul, and opponents of single-payer are putting up hundreds of thousands in an IE that is likely to attack Campos

    Sup Matt Haney defeated David Campos in a state Assembly election where less than 25 percent of the registered voters cast ballots, most of them were over 50, and some $2 million in mostly real-estate money was used to attack Campos.

    Haney, Ting, and Wiener all back $1.4 billion PG&E nuke bailout bill

    (There’s more articles, but you get the idea. Haney seems to be “cut from the same cloth” as Wiener.)

    Folks, you might think you’re voting for Democrats, but you’re actually voting for YIMBYs and the vested interests which support them.

  3. Jim Frame

    I don’t know what’s happening to the Davis rental market, but I would expect that the student-oriented housing projects that have come online recently (and those that are about to) would have a noticeable depressant effect on rents because a big chunk of the rental demand comes from students, and that’s a limited number.

    That situation doesn’t pertain to for-sale housing here — at least not to the same extent — because the demand for for-sale housing is nearly unlimited given the attractiveness of Davis to Sacramento-region families and Bay Area retirees.

    1. Matt Williams

      Jim, according to the 2022 UC Davis Apartment Vacancy/Rental Rate Survey …  “Rental Rates — The overall trend indicated by the 2022 survey is that rental rates increased significantly in 2022 over 2021 and 2020.”


  4. Jim Frame

    The figures Don cites suggests that the increase in student (and other) renters is outstripping even the relatively large additions to the rental stock in the last couple of years.  Does that jive with enrollment increases, or was there just that much pent-up demand?

    1. Don Shor

      Huge pent-up demand after the pandemic.

      UC Davis Admits Record Number of New Undergraduates for Fall 2021
      by News and Media Relations
      The University of California, Davis, offered freshman and transfer admission status for fall 2021 to a record 52,254 applicants — including an all-time high of 31,772 California residents.

      UC Admissions Reach Record Highs For California Freshmen, Underrepresented Students And Community College Transfers
      The total number of new students admitted for undergraduate study represents a 14 percent increase compared with last year, according to statistics released July 19 by the university system.
      UC Davis received a record 105,850 applications, admitted almost half of those students — and estimates 10,800 will accept and enroll in the fall.

      The campus admitted 31,772 California freshman and transfer applicants. Overall, 12,733 international and 7,749 U.S. out-of-state applicants were admitted.


      Last year, the campus received 94,725 first-year applications and 15,464 transfer applications for a total of 110,189. UC Davis offered admission to 35,563 first-year and 9,098 transfer applicants. The fall 2022 entering class that enrolled numbered 9,194, including 6,498 new first-years and 2,696 transfer students.

      The University of California, Davis, continues to attract high numbers of applicants for undergraduate study. For fall 2023, a total of 109,350 students have applied — just 0.8% shy of the record high set last year.
      The UC Office of the President released systemwide and campus statistics today (Feb. 24). Read the UC-wide news release.
      Among the UC Davis applicants, 94,609 applied for first-year admission and 14,741 applied for transfer admission.
      California residents and transfer students
      Robert Penman, executive director of Undergraduate Admissions, said the campus aims to enroll an entering class of about 9,400 new undergraduates, up about 200 from fall 2022. Plans call for almost all of that increase to come from among California residents.
      UC Davis measures its Davis-based enrollment as an average over the three regular academic quarters for its 2018 Long Range Development Plan, or LRDP, which has a projected capacity of 39,000 students for the Davis campus. Early estimates indicate enrollment will average about 37,000 for the 2022-23 academic year.

      1. Matt Williams

        Jim and Don’s comments beg the question, “How well is UCD complying with the terms of the recent MOU with the City and the County? Specifically,  “The terms of the MOU include a commitment to build more housing for students and a guarantee to house 100 percent of any new student enrollment growth on campus”

        UCD’s website for the MOU is

        1. Don Shor

          a guarantee to house 100 percent of any new student enrollment growth

          Important to note that the “guarantee to house” is not a requirement to live on campus. New students may live wherever they choose and I’d guess (it might be interesting to try to get the figures on this) that a high percentage of incoming transfer students don’t choose to live on campus.
          If high-density housing is built downtown on infill sites, I would bet a large number of students would occupy those units, regardless of the cost.

          Incoming freshmen who choose to live on campus are guaranteed housing in the residence halls for the fall quarter, provided all requirements and deadlines are met. While not required, over 90% of incoming freshman choose to live in the residence halls. Freshmen entering the university during winter or spring quarter may contact Student Housing to request to be placed on a wait list; the housing guarantee does not apply for winter or spring quarter.

        2. Matt Williams

          Don raises an interesting point.  If indeed he is correct that “guarantee to house” does not mean “”guarantee to house on campus” then what exactly is the “understanding” that is central to the MOU?  The answer to that question requires more detailed review of the actual MOU document which can be accessed at

          With that said and asked, there are a significant number of UCD students who live in the same residence they lived in prior to enrolling at UCD.  UCD’s policies can not be so dictatorial/inflexible that they forbid a student from continuing to live at home and commute to the campus.

        3. Matt Williams

          Here is the actual MOU language from the executed document.  I have bolded the language relevant to Don’s 7:42am comment.

          C.   Housing. ‘Through this MOU, the University commits to provide on-campus housing for 100% of the actual student population in excess of the baseline enrollment number of 38,825 students, as defined in the 2018 LRDP EIR (the “LRDP enrollment’). The University’s LRDP’s baseline number of beds is 9818.  The University will increase the total number of student housing beds on the UC Davis campus, at minimum, according to the following schedule:

          __ 1.  By Fall 2019, the University shall have no less than 10,500 student housing beds on the Davis campus;

          __ 2. By Fall 2021, the University shall have no less than 12,500 student housing beds on the Davis campus;

          __ 3.  By Fall 2023, the University shall have no less than 15,000 student housing beds on the Davis campus;

          __ 4.  In the event the actual number of newly enrolled students, as defined above, surpasses the number in the 2018 LRDP EIR projection starting in the Fall of 2023, University will meet and confer with City and County to establish a plan to ensure the commitment to house the additional new students.

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