Some Sun Belt apartment owners and operators are confronting a unique moment of temporary oversupply. After a pandemic-era building boom, cities like Austin, Atlanta, and Phoenix are digesting a wave of new multifamily deliveries that has outpaced short-term demand. The result? Rising vacancies, softening rent growth, and pressure on asset performance in markets that, not long ago, led the country in rent acceleration. And to make matters worse, many of these markets happen to be highly "credit stressed", with renters being more affected by inflation and credit card debt.
Over the last several months, I’ve been joining our account management teams across multiple Sun Belt metros. In Texas and Arizona in particular, we sat with operators as they retool their leasing strategies mid-cycle, balancing real-time vacancy challenges with long-term optimism. Many of them are in fundamentally strong markets—just temporarily oversupplied. What follows is a data-backed look at what’s happening, what we're seeing, and how to adapt.
An unprecedented supply wave in sun belt cities
Multifamily completions in 2024 exceeded 590,000 units nationwide—the most in five decades. The Sun Belt absorbed the bulk of that, with Dallas–Fort Worth alone delivering around 35,400 units. Austin and Houston weren’t far behind, with 25,000 to 30,000 units each. Other high-growth markets like Atlanta (24,134), Phoenix (26,216), Charlotte (17,175), and Raleigh–Durham (15,616) all landed in the top ten for new deliveries.
While completions are peaking, starts are falling: new deliveries are expected to drop by about 15% in 2025 and fall even further in 2026, as lending tightens and developers pull back. That said, it will take time to absorb the wave now cresting.
Importantly, demand hasn’t collapsed. In fact, national apartment absorption rebounded in 2024, with over 530,000 units leased—more than double the volume of 2023. Job growth, wage gains, and unaffordable homeownership are still pushing households toward rental housing. In markets like Houston, Austin, and Dallas, demand is healthy. The issue is timing: too much supply, all at once. When I speak with our partners who operate in these markets, I hear about the pressure ownership groups put on them to fill units. What they often tell us is that to address the owners' occupancy expectations, they are obliged to lower their screening standards, and they feel like the higher risk tenant base they let in will result in higher defaults and increased bad debt in the near term. That concern is very valid, and consistent across partners in many of these regions.
The impact: High vacancies and cooling rents
In oversupplied metros, vacancy rates have jumped. Austin topped 14% in 2024—more than double its 2021 rate. Orlando, San Antonio, and Atlanta hover near 12%. With more units competing for renters, asking rents are softening. Austin’s rents dropped about 7.4% year-over-year. Other markets like Raleigh, Charlotte, and Phoenix have seen more modest declines, but flat-to-negative rent growth is becoming common where inventory surged.
Concessions are also up. By mid-2024, more than 20% of apartments nationally were offering incentives, including one to two months free rent. Stabilized Class A assets in lease-up-heavy submarkets are particularly affected.
Not every market is equally exposed. Urban cores and new product are facing the stiffest headwinds. Meanwhile, suburban Class B and C product, especially with sticky renters and limited new competition, is faring better. In North Carolina, some operators have 95%+ suburban occupancy while struggling to fill urban units. In Florida, metros like Tampa and Miami are showing early signs of rebalancing.
Economic tailwinds and tenant quality considerations
Sun Belt fundamentals remain strong. These states continue to lead in population and job growth. Two-thirds of Sun Belt metros still have average rents below the national median, giving them a structural affordability advantage. And with homeownership still out of reach for many, demand will likely remain strong as long as household formation continues.
Still, many owners & operators face a difficult trade-off: maintain screening discipline (accepting higher vacancy) or loosen criteria to fill units faster (thus boosting occupancy with a major risk of bad debt piling up). In some cases, we’ve seen owners reduce income or credit thresholds to compete for applicants. But this can backfire. Rent collection friction and lease break risk increase materially with lower thresholds—especially when paired with high exposure to floating-rate debt and rising operating expenses.
This is where rent guarantees can play a critical role. By using a third-party guarantor for high and medium risk renters, an operator can approve a broader pool of residents—particularly those with thin credit files or below-average scores—without compromising on financial protection. It offers the ability to maintain high occupancy and sufficient underwriting standards at once. Especially in oversupplied markets, this kind of risk-transfer strategy can help operators fill units faster and protect Net Operating Income (NOI). Retention matters too. With flat rents and rising turnover costs, keeping the right resident is often more profitable than chasing new ones. Operators who pair smart incentives with strong resident engagement are seeing fewer skips and better collections, even in soft leasing conditions.
At TheGuarantors, we encourage our partners who operate in oversupplied markets to find the right balance of (momentarily) slightly looser standards to drive occupancy while shielding from a spike in bad debt 12-18 month down the line. For instance, a major account of ours who operates in several Sun Belt markets decided to rebalance their usage of our product until the market normalizes: they decided to i) remove their cash deposit entirely, ii) lower their rent guarantee coverage requirement for medium risk renters ("conditionally approved") and iii) expanded referrals of higher risk renters ("denied"). As a result, they're able to get more renters in units without giving up on the quality of their rent roll.
Navigating the next 12–18 months
While the current oversupply feels acute, the outlook is improving. New deliveries are set to slow sharply. Absorption is expected to remain steady. Markets like Phoenix, Las Vegas, and Tampa are forecast to normalize faster, while Austin and Charlotte may take longer to absorb inventory. The worst of the vacancy pressure appears to be peaking now.
This is the window to optimize operations. Operators should monitor competitive concessions closely, tighten expense controls, and refine their screening strategy. Some are revisiting coverage strategies or supplementing with lease protection tools. Others are investing more in lead conversion and renewal programs to minimize vacancy drag.
In a temporarily oversupplied environment, execution is the differentiator. The operators who maintain screening discipline, leverage risk management tools, and deliver strong value to residents will be the first to re-stabilize—and best positioned for the Sun Belt’s next wave of growth.
