Average Rent Increase Per Year: Everything You Need to Know

As a property owner, rent increases are necessary to maintain profitability as expenses like repairs, taxes, and utilities rise. Gradual adjustments in line with fair market value (FMR) and the average annual rent increase help keep your rental properties competitive and reduce the risk of vacancies.

While national rent growth has slowed to an average of 0.8% year-over-year in 2024, cities like Columbia, South Carolina, have seen increases as high as 8%. Understanding these regional fluctuations and knowing when to adjust your rent is key to staying ahead.

In this article, we’ll explore rent trends, factors influencing rent, and what to expect from the rental market in the coming months.

How much does rent increase each year?

Rent prices in the U.S. fluctuate annually due to factors like inflation, housing supply, and regional demand, making it necessary to understand how much landlords should adjust rent each year. On average, rents increase by about 3% per year, but recent years have deviated from this.

• 2021: Rents surged with an 18% year-over-year increase as the market rebounded from pandemic-related freezes.
• 2022: The average rent increase slowed to 12.2%, still above historic levels.
• 2024: Rent growth has moderated, with a modest 0.8% increase year-over-year as of August.

National averages don’t tell the full story. Regions like New York City saw rent increases of 3.6% in 2024, while cities in the Sun Belt, such as Austin and Atlanta, experienced rent declines due to an oversupply of new apartments.

Meanwhile, areas in the Midwest and Northeast, like Erie, PA, and Duluth, MN, saw rental prices rise due to higher demand and limited supply.

Understanding these variations and staying informed about local trends will help you make smart decisions when adjusting your rental prices.

What determines rent increases?

Various factors influence rent increases, such as vacancies, population shifts, supply chains, and housing laws. While the importance of these factors varies by state, several key economic and social elements affect rent across the entire country. Understanding these factors can help a landlord raise rent appropriately while maintaining tenant satisfaction.

Here’s a closer look at the primary determiners:

Inflation

Although rental price growth and inflation don’t always rise at the same rate, they usually correlate. For example, in 2021, inflation rose by 6.3%, and rent prices increased by over 10%. Inflation drives up property-related expenses, motivating landlords to offset these costs by raising rents.

Home sale prices

When home prices rise, fewer individuals can afford to buy, increasing demand for rental properties. This higher demand results in more competition among renters, pushing rental prices up.

Supply and demand

When the demand for rental units exceeds supply, rent prices rise even more. Since 2010, new construction hasn’t kept pace with demand, exacerbating the shortage. In 2020, apartment construction hit a five-year low, intensifying this imbalance.

By 2024, the U.S. will need to build 4.3 million additional apartments by 2035 to meet current and future demand, including a shortfall of 600,000 units caused by underbuilding after the 2008 financial crisis. Without significant new construction, rent prices are likely to remain high, especially in states like Texas, Florida, and California, which are expected to account for 40% of future rental demand.

Determining fair market rent

Determining fair market rent is important for landlords and property managers to set a competitive and reasonable rent that attracts tenants while ensuring profitability. Fair market rent represents the average rent for similar properties in the same area, and setting the right price helps maintain tenant satisfaction and avoid prolonged vacancies.

To accurately determine fair market rent, consider the following methods:

1. Research local listings: Check websites like Zillow, Rentometer, and local real estate platforms to see what similar properties are charging in your area.
2. Consult real estate agents: Local experts can provide insights into market trends and help refine rent pricing.
3. Consider property features: Location, size, amenities, and the condition of the property all affect rent. Properties with modern amenities or prime locations may justify higher rent compared to others.

By setting a rent price aligned with fair market rent, landlords can attract tenants and maximize rental income.

Rent increases by state

While the national average rent increase provides a general overview, state-specific data offers more precise insights.

To better understand rent changes across the U.S. in 2024, here is a breakdown of average rent prices by state, including both median and maximum rents:

1. Alabama: Rents increased by 1.86%, a dollar value of $180.
2. Alaska: Rents increased by 3.3%, with an average rent of $1,240.
3. Arizona: Rents decreased by 3.4%, bringing the average to $1,097.
4. Arkansas: Rents remained stable at $760.
5. California: Rents increased by 1.2%, averaging $2,440.
6. Colorado: Rents decreased by 3.8%, now at $1,780.
7. Connecticut: Rents increased by 4.4%, reaching an average of $2,150.
8. Delaware: Rents increased by 2.7%, with the average rent at $1,150.
9. District of Columbia: Rents increased slightly by 1.6%, now $2,380.
10. Florida: Rents decreased slightly by 2.3%, now averaging $1,218.
11. Georgia: Rents decreased by 4.1%, now at $1,042.
12. Hawaii: Rents increased by 1.4%, averaging $2,850.
13. Idaho: Rents increased by 2.1%, now at $887.
14. Illinois: Rents increased by 5.7%, with an average of $1,038.
15. Indiana: Rents increased by 2.8%, averaging $1,095.
16. Iowa: Rents increased by 2.6%, with an average of $806.
17. Kansas: Rents increased by 1.3%, now at $863.
18. Kentucky: Rents increased by 2.4%, reaching $783.
19. Louisiana: Rents increased by 3.7%, now at $876.
20. Maine: Rents decreased by 8.1%, with an average of $873.
21. Maryland: Rents increased by 6.1%, now averaging $1,415.
22. Massachusetts: Rents increased by 2.1%, with an average of $2,900.
23. Michigan: Rents increased by 8.5%, now at $892.
24. Minnesota: Rents increased by 0.7%, averaging $1,010.
25. Mississippi: Rents increased slightly by 1.8%, now at $789.
26. Missouri: Rents increased by 3.9%, with an average rent of $843.
27. Montana: Rents increased by 4.5%, now at $836.
28. Nebraska: Rents increased by 2.3%, now averaging $857.
29. Nevada: Rents decreased slightly by 2.8%, now at $1,159.
30. New Hampshire: Rents increased by 2.1%, now at $1,145.
31. New Jersey: Rents increased by 4.8%, now at $1,550.
32. New Mexico: Rents increased by 2.7%, now at $857.
33. New York: Rents increased by 2.8%, with an average of $3,400.
34. North Carolina: Rents decreased by 3.1%, now at $932.
35. North Dakota: Rents increased by 2.6%, with an average of $828.
36. Ohio: Rents increased by 1.5%, now at $825.
37. Oklahoma: Rents increased by 2.0%, with an average of $818.
38. Oregon: Rents increased by 1.1%, now at $1,173.
39. Pennsylvania: Rents increased by 2.6%, with an average of $958.
40. Rhode Island: Rents increased by 2.3%, now at $1,031.
41. South Carolina: Rents increased by 1.5%, now averaging $918.
42. South Dakota: Rents increased by 1.4%, now at $761.
43. Tennessee: Rents increased by 1.2%, now at $897.
44. Texas: Rents increased by 1.2%, averaging $1,082.
45. Utah: Rents increased slightly by 1.0%, now at $1,090.
46. Vermont: Rents increased by 3.7%, now at $999.
47. Virginia: Rents increased by 4.8%, with an average rent of $1,257.
48. Washington: Rents increased by 1.3%, now at $1,337.
49. West Virginia: Rents increased by 1.7%, now at $732.
50. Wisconsin: Rents increased by 7.8%, now averaging $872.

Future rent trends and projections

Recent reports indicate that while rent prices continue to rise, the pace has slowed compared to the rapid increases of 2021 and 2022. By July 2024, rents rose by 0.41%, reflecting a more moderate growth rate. As the market stabilizes, landlords should be prepared to justify any adjustments to the new rent price based on these trends.

From June to July 2024, asking rents increased by 0.5%, slightly down from previous months. This data suggests the market is stabilizing, and the dramatic spikes of the past few years are unlikely to return in the near future.

Regional insights

Regional variations play a key role in rent trends. While Sun Belt cities are experiencing rent declines, the Midwest and Northeast are seeing upward pressure due to higher demand.

Tracking rent increases and decreases across regions is important for making informed real estate decisions, depending on your goals.

Cities with the highest rent increases in 2024

Cities with the Lowest Rent Increases in 2024

These trends reflect the latest shifts in U.S. rent prices, with oversupply leading to rent declines in some regions, while others experience steady growth driven by high demand and limited supply.

Rental industry trends to consider 

Both economic and social factors influence rental price growth. Beyond supply and demand, there are several key trends shaping the future of rent prices. Additionally, property taxes are an operating expense that landlords must account for when determining rent prices.

Impact of junk fees on rental prices

Additional rental fees, such as pet fees, pest control fees, and other arbitrary charges, are contributing to the growing burden on renters. According to a report from the National Consumer Law Center, these “junk fees” make affordable housing less accessible, with 40% of U.S. renters already spending 30% or more of their income on housing.

The Biden Administration has committed to reducing or eliminating these fees and promoting transparency in the rental process. As a property owner, it’s important to weigh the short-term gains of these fees against the potential downsides. Charging excessive fees could deter prospective tenants, making it harder to fill vacancies.

Rising homeownership costs keep renters in the market

More than 35% of American households rent, and with homeownership becoming more expensive, many first-time buyers are unable to afford a mortgage. According to Redfin, first-time homebuyers in 2023 need an annual salary of $64,500 to afford a typical starter home, a 13% increase from the previous year.

Given that the average American salary is $63,795, many are priced out of the housing market and forced to remain renters. This trend suggests that tenants may rent for longer periods, providing property owners with greater tenant retention but also raising considerations for lease renewals and rent increases. The shortage of vacant rental properties further exacerbates the issue, driving up rental prices due to high demand and limited availability.

Effect of rising interest rates on rental demand

Rising mortgage rates have sharply increased the total number of renters, as many potential homebuyers find themselves priced out of the market. As of 2024, mortgage rates have surpassed 7%, making homeownership unattainable for many families. This has kept rental demand high, especially in regions with limited housing supply.

This combination of high mortgage rates and restricted housing supply is expected to sustain demand for rental units, driving prices higher in certain regions across the U.S. Property owners should consider these trends when making decisions about rental pricing and lease agreements.

How to raise rent on your tenants

Incremental rent increases help maintain profitability over time. However, tenants may struggle to understand why their rent is going up without a clear explanation. Providing valid reasons, such as increased operating expenses, rising cost of living, or higher mortgage rates, can help tenants accept the changes.

It’s important to give tenants fair notice — preferably at least three months before their lease expires — to allow them time to adjust. This approach fosters goodwill and increases the chances of receiving rent on time. Gradual rent increases, rather than steep hikes, can also preserve tenant satisfaction and reduce the risk of turnover.

For example, instead of raising rent by 10% at once, consider a 3-5% annual increase based on market conditions and expenses. Providing transparency and offering flexibility helps smooth the process for both parties.

Communicating rent increases to tenants

Effectively communicating rent increases is important to maintaining a positive landlord-tenant relationship. Here are some steps to follow:

1. Provide written notice: Clearly state the reasons for the increase and the new rent amount in a written notice. This transparency helps tenants understand the rationale behind the change.
2. Offer fair notice: Although a month’s notice may be legally sufficient, consider providing at least three months’ notice to give tenants time to adjust their budgets and plan accordingly.
3. Answer questions: Be prepared to address tenant concerns by explaining the reasons for the increase and sharing information like market data or documentation of increased operating costs.
4. Provide supporting evidence: Show local rent trends or improvements made to the property that justify the increase.

Clear communication, transparency, and a willingness to address tenant concerns can help ease the transition and reduce the risk of tenant turnover.

Negotiating rent increases

When negotiating rent increases with tenants, it’s important to approach the conversation with fairness and flexibility. Listening to tenants’ concerns and considering compromises, such as a smaller increase in exchange for a longer lease or spreading the increase over time, can foster trust and avoid vacancies.

Timing considerations for rent increases

Timing is key when raising rent. Landlords should consider the following factors:

• Local rental market: Implement rent increases during high-demand periods, such as peak rental seasons, when vacancies are less likely.
• Lease renewal: Ensure that tenants receive ample notice of any rent increase before their lease expires, ideally at least three months in advance.
• Operating expenses: Align rent increases with rising property costs like maintenance, taxes, or utilities to justify the timing of the increase.
• Tenant retention: Consider how rent hikes will affect tenant satisfaction. A sharp increase may result in turnover, so balancing reasonable increases with market conditions can help maintain occupancy.

In high-demand markets, tenants are more likely to accept rent increases, while in slower markets, smaller or staggered increases may be necessary to avoid vacancies.

Raising rent ethically and responsibly

Understanding how rent increases work is important for both property owners and renters. Since the pandemic, rental markets have experienced significant economic and social changes, which have caused sharp spikes in rent prices across the country. 

Luckily for renters, rental price growth has begun to stabilize and is expected to continue on a stable trajectory. However, rental demand remains strong, particularly for studio and one-bedroom apartments. Although the peak rent prices of 2021 and 2022 are likely a thing of the past, property owners can still expect healthy competition among renters. 

That being said, it’s important to keep in mind that rental market conditions vary widely from state to state and even within cities and neighborhoods. Determining when to raise rent, and by how much, will depend on factors relevant to your local rental market. By taking a balanced and informed approach to rent adjustments, property owners can ensure the sustainability of their investments while providing fair and competitive rates for their tenants.