Providence leads Zillow's hottest rental markets as Northeast supply stays tight

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Providence tops rental markets

Highlights

Zillow identifies Providence as the hottest U.S. rental market due to strong demand and limited new housing supply in the Northeast and coastal California.
Providence records 5% annual rent growth, a 5.1% projected vacancy rate, and the top-10 lowest share of rental concessions at 12.9%.
San Francisco posts 5.4% rent growth and 33.2% concessions, illustrating tightening rental conditions beyond the biggest coastal cities, with New York at 4.5% growth and 17.8% concessions.

Zillow ranking highlights tight rental conditions

According to Business Insider, Zillow said the U.S. built more new housing units in 2024 than in any year in the past half-century, but that surge largely bypassed the Northeast and coastal California, helping explain why rental competition is strongest there.

The company ranked the hottest rental markets heading into the summer by focusing on metro areas where rents are rising quickly, vacancy rates are falling and incentives such as waived fees or a free month of rent are uncommon. Kara Ng, senior economist at Zillow, said the common factor in the hottest markets is that demand to live there exceeds the number of homes available to rent.

Providence, Rhode Island, takes the top spot in Zillow's list, followed by New York and San Francisco. The top 10 also includes Hartford, Los Angeles, Chicago, Boston, Milwaukee, Virginia Beach and San Jose.

Affordability pressures deepen in smaller Northeast market

Providence's ranking reflects both strong demand and the limits of a smaller housing market. The city, with a population of about 195,000, has recently been described as unaffordable for homebuyers because of scarce housing inventory, a dynamic that can push more households into the rental market and lift asking rents.

Among the top 10 markets, Providence posts annual rent growth of 5%, a projected vacancy rate of 5.1% and the lowest share of concessions at 12.9%. New York records annual rent growth of 4.5% with concessions at 17.8%, while San Francisco shows 5.4% rent growth and concessions at 33.2%, underscoring how the tightest rental conditions are extending beyond the largest coastal cities.

Our earlier article on New York Fed research showed that many Mid-Atlantic firms are still passing through higher import-tariff costs, with a sizable share planning additional price increases over the next six months or longer. It also noted that delayed contract renewals and gradual price adjustments could keep tariff-related inflation pressures lingering, complicating the broader affordability backdrop.

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