The rental market in the U.S. has transformed dramatically over the past five years, shaped by pandemic-era disruption and recovery, economic volatility and evolving housing demand. Today, many regions across the country are facing housing shortages, record-high rent prices and a growing pressure for property owners to balance profitability with long-term affordability. 

In an effort to better understand current market dynamics, my team and I analyzed five years of real rent payment data collected from users of Rentec Direct’s property management software. Unlike many widely cited figures based on advertised rent prices for vacant units, our dataset reflects actual rent payments collected by landlords and property managers, better capturing the impact of factors like lease renewals, negotiated discounts and local rent control policies.

We reviewed payments from more than 351,000 tenants in more than 301,000 rental properties, representing all 50 states. This exploration uncovered some meaningful trends in regional rent growth, revealed how underlying economic and demographic factors are influencing the market and provided actionable insights to help other investors adapt and thrive in an increasingly complex rental landscape.

Top Markets for Rental Income Growth 

While national rents rose by an average of 31 percent, ten states experienced rent increases exceeding 50 percent over the last five years:

  • Arizona: 84% increase
  • Tennessee: 67% increase 
  • New Mexico: 65% increase
  • Georgia: 63% increase 
  • Maryland: 61% increase 
  • South Carolina: 56% increase
  • Alaska: 54% increase
  • Idaho: 54% increase
  • Montana: 54% increase
  • Wyoming: 53% increase 

These double-digit jumps reflect broader trends in population growth and migration patterns, economic stability and housing supply constraints, with some concentration in the Sun Belt and Mountain West. While this significant growth points to increasing affordability concerns for millions of renters, it also signals strong income growth potential for real estate investors. That said, investors considering rapid growth markets should be cautious of oversaturation and affordability ceilings, which can trigger higher turnover and vacancy rates—two of the biggest threats to profitability. 

On the other end of the spectrum, states like Louisiana and New York saw the most minimal rent changes, suggesting a potential shift toward stabilization or plateau, especially in highly regulated markets like New York City. Minnesota was the only state to see a significant drop in average rents, which are down 34% and can likely be attributed to major land use reform legislation introduced in 2020.

Interestingly, none of the states with the highest average rents paid by tenants in terms of dollar amounts made the list for highest rent growth over the past five years, which could suggest saturated markets:

  • Hawaii: $2,132
  • California: $2,101
  • Washington: $1,785
  • New Jersey: $1,758
  • Florida: $1,752

“Middle of the pack” states, including Arkansas, Delaware, Maine, Michigan, Oklahoma, Utah, Virginia and West Virginia, deserve a spot on the investment watchlist. These markets weren’t in the top 10 for growth, but still saw solid increases of close to 40 percent over the last five years. This relative affordability, coupled with ongoing demand—especially in suburban and secondary cities—may leave room for more upward movement. 

Investor ROI is Evolving 

31 percent national rent growth in just five years—and more than double that in some markets—reinforces real estate’s position as a resilient, income-generating asset. But double-digit rent growth isn’t necessarily translating directly to investor profits. Expenses have skyrocketed, and factors like inflation, rising operating costs and mounting regulatory pressure are compressing margins and reshaping ROI strategies. 

At the same time, expanding rent control measures, eviction restrictions and tenant protections driven by affordability concerns are challenging the traditional playbook of simply raising rents to offset increasing expenses. My home state of Oregon is a prime example of how well-intentioned legislation can have unintended consequences. Policies that overlook long-term supply and demand dynamics, for both tenants and landlords, have made it more expensive to build and operate rental housing, tightening supply and pushing rents even higher. Without adequate incentives for profitability, many landlords are choosing to exit the market altogether, further limiting inventory and driving up pricing.

To thrive in an affordability-focused era, sustained profitability demands that your pricing strategies get smarter and more data-informed. Investors need to price rental units based on local tenant data and adjust expectations to fall in line with demand patterns and demographic shifts. Retention should be your key driver, as it’s more profitable to keep a quality tenant than to push rents and risk turnover. Consider value-add upgrades and incentives that can boost appeal and justify modest rent increases without pushing tenants out. With a long-term lens and some due diligence, it’s still very possible to maximize returns in a tightening market.

The Role of Proptech in Managing Operational Costs and Tenant Satisfaction 

Embracing technology is no longer optional for landlords navigating tighter margins and higher tenant expectations. Tools that automate rent collection, maintenance requests, lease management and communication streamline operations, reduce manual workload and drive operational efficiency. These tools not only cut overhead costs, but also provide real-time data for smarter decision-making around pricing, repairs and resource allocation.

On the tenant side, features like online portals and mobile apps are almost a necessity to boost satisfaction and retention with convenience, transparency and faster service. In a market where retention is directly tied to profitability, proptech is a key competitive advantage. 

Key Takeaways for Real Estate Investors in 2025 

    1. Sustainable rent increases: Modest, consistent and data-informed rent adjustments can protect your margins while maintaining affordability for tenants.
    2. Retention beats turnover: Investing in tenant satisfaction and retention strategies will generate stronger long-term ROI than pushing rents to unsustainable levels.
    3. Stay ahead of policy changes: Proactively monitor local and state-level policies that impact landlord-tenant law to protect your investment. 
    4. Harness technology to cut costs: Automating operations where you can reduces overhead, improves tenant experience and empowers informed decision-making.
    5. High-growth doesn’t always equal high return: Target markets with room for appreciation, healthy demand, and fewer regulatory hurdles to balance risk and reward. New construction, strong school districts and diverse employment sectors tend to attract long-term renters.

Visit RentecDirect.com/learn/research to view the full State of Rent Report.