Houston’s Supply Cliff Is Here

For most of the last three years, Houston’s apartment story was written by cranes. Developers who broke ground when money was cheap delivered building after building into 2024 and 2025, and landlords across the metro fought for renters with free months, waived fees and discounted rents. That chapter is closing.

The pipeline is emptying

At the end of the second quarter, about 11,756 units were under construction across the metro, according to Cushman & Wakefield. That is 20.8% fewer than three months earlier and 36.4% fewer than a year ago. Deliveries are already slowing: 3,772 units opened in the second quarter, down from 4,460 in the first.

The drop in groundbreakings shows up further out. Northmarq expects roughly 5,600 units to deliver in 2027, which would be the lowest annual total in about 15 years. New permits remain light, so there is little in the queue to refill the pipeline before 2028.

Demand kept going

While supply fell, renters kept signing leases. Cushman & Wakefield counted 6,177 units of net absorption in the second quarter, nearly triple the 2,200 in the first. Through June, the metro absorbed 8,377 units, slightly more than the 8,232 that were delivered. Northmarq’s count for the quarter was higher, at more than 6,500 units, up about 60% from the same period last year.

That demand is pulling vacancy down. Northmarq puts metro vacancy at 7.1%, a 40 basis point drop in the quarter and the largest quarterly improvement since 2021. Cushman & Wakefield, which tracks stabilized properties with a different methodology, reports 11.1%, down 30 basis points from the first quarter. Both point the same direction.

Rents are the last piece

Rents have not caught up yet. Cushman & Wakefield’s average effective rent was $1,312 a unit in the second quarter, down 0.2% from the prior quarter and 2.3% from a year earlier. Northmarq describes rents as mostly flat for the quarter, with Class A buildings outperforming and Class B and C rents stuck even as their occupancy improves.

That order is typical of a recovery. Occupancy tightens first, concessions fade next, and rent growth follows once landlords no longer need to compete on price. Northmarq expects vacancy to keep trending lower as new supply eases, toward the metro’s long-run average of about 6%.