Potential Tailwinds for the U.S. Apartment Market in 2026

We previous covered headwinds that could shape downside risk in the U.S. apartment market in 2026, with no shortage of themes to discuss. In fact, some ancillary factors were excluded in the interest of sparing word count.

But despite all the negative attention on what could go wrong, there remains a set of influences in the macroeconomy that could in fact inform an upside scenario in 2026. Though an upside scenario in the coming 12 months likely underwhelms versus an upside scenario from the 2010s cycle, it’s still important to address a handful of positive influences – some of which are already in place – that could shape a more optimistic set of outcomes in 2026.

Tailwind #1: Wage Growth (and Real Wage Growth at That)

Wages continue to grow at a faster-than-usual pace, something that has been a sort of unheralded positive in the broader economy the past few years. Understandably, the counter argument to stronger-than-usual wage growth was concurrent inflation. Indeed, inflation outpaced strong wage growth in 2021 and 2022, meaning that real wage growth (despite being nominally strong) was declining.

That’s shifted in recent years, however. Not only has inflation continued to mercifully cool (albeit at a slower than desired pace) off its blistering peak, but strong wage growth has remained in place. Today then, real wages are expanding at a pace that can help support additional household formation. This has been further boosted in the past two to three years as well, especially in the multifamily sector as the U.S. has seen rents generally flatline during that period.

Tailwind #2: Affordability Is at Its Healthiest Level in Six Years

Wage growth ties into another unheralded strength that’s seemingly boosted household formation. That is, the share of income going toward rent (based on newly signed leases) is at its lowest level since 2018/2019.

As inflation at-large cools and the share of wallet allocated towards rent eases simultaneously, that appears to be an undercurrent supporting national apartment demand. Households don’t appear to be doubling up on aggregate (which would be more indicative of worsening affordability challenges).

That isn’t to say, however, that affordability challenges don’t exist. They do, and when they’re in place they’re very real. But when isolating the market-rate rental housing pool from the collective, the data shows affordability has improved – and should see another year of improvement as wage growth is expected to outpace rent growth in 2026 yet again, marking the fourth straight year in which that trend plays out.

Tailwind #3: Single Family Fundamentals Remain Heavily Disjointed with Multifamily

It’s an oversimplification to say that the interplay between multifamily housing demand and single-family demand is a zero sum game. In reality, the relationship is far more complicated. Still, by that same token, one can easily support the narrative that fewer move-outs from multifamily homes into single family housing is unquestionably supporting a deeper rental housing demand pool.

Data shows apartment renters are renewing leases at essentially an all-time high (only surpassed by a brief pandemic ear window) and the REITs largely report a considerable reduction of move-outs to home purchase today than past cycles (generally reporting that move-outs to single family are happening at 50% of their “normal” pace).  And Class A apartments – where this relationship would be most evident – have seen performance trends indicative a deeper demand pool. Stated differently, renters are renting for longer.

Mortgage rates have eased slightly off their peak, and home prices in some oversupplied markets have cooled too. Still, the delta between cost of renting and cost of ownership remains higher than ever, and it will take more than incremental adjustments to home prices, mortgage rates, or even income levels to correct the relationship back to more normalized levels.

Tailwind #4: Don’t Discount the Impact of Demographics

Tying into the above set of points, demographic trends are another set of tailwinds for rental housing. This is true both in terms of sheer volume of young adults as well as in terms of societal influences and consumer behavior.

Regarding the former point re: volume of young adults, the U.S. has added about 1.18 million people within the 18- to 34-year-old cohort since 2018. That’s an average of about 236,000 people per year. While the peak population boom of the Millennials is in the past, don’t forget that Gen Z and the older ages of Gen Alpha are quite large cohorts too.

Regarding the latter point re: societal influences and consumer behavior, many of the traditional life stage triggers that would push households into the single-family market (e.g. marriage and family planning) are happening later in life (if at all). Thus, not only do economic forces shape the intersection between single family and multifamily demand, but behavioral trends do too.

As a bonus demographics tailwind, the percent of 18- to 34-year-old households living alone (about 9%) has steadily increased in recent years, which further dispels any narrative of widespread “doubling up” of households.

Tailwind #5: Headwinds Aren’t Always Permanent and Can Unlock More Demand if Corrected

There’s no doubt that a dull labor market is currently an in-place headwind. But there is potential that the labor market corrects course and, if so, would theoretically unlock further untapped demand. There’s also a non-insignificant share of young adults who continue to live at home with their parents, or with relatives and extended family which – pending that also unlocks – could further trickle into the rental housing pool. Though admittedly, this should only be considered a longshot tailwind as labor market headwinds are unfortunately most acutely affecting younger adults.