Rental Housing Market

CoStar, a private data company focused on “professionally managed” apartment buildings, provides the most recent estimate of a 4.8% “stabilized” vacancy rate in late 2025. “Stabilized” vacancy is calculated once new buildings have 90% of their homes leased, which eliminates changes to the vacancy rate caused by newly completed buildings that are still in initial lease-up. This is increasingly important in Madison as more new rental homes are in large buildings that can take months to lease up.

CoStar data show a low vacancy rate of 1.9% for Madison in 2022, but currently nearing the healthy range of 5-7%.

CoStar further breaks down data by market “tier,” or the quality of rental housing, though this breakdown includes “unstabilized” or newly completed buildings still leasing up.

It is notable that the lowest cost/quality rental housing (the 1- and 2-star tier) also has the lowest vacancy rate (4.6%). This reflects pent-up demand for lower-cost rental housing, even if it is lower quality. Meanwhile, the 3-star tier and 4- and 5-star tier show healthier vacancy rates of 6.5% and 6.9%, respectively. Many 4- and 5-star tier homes are in new buildings in early stages of lease-up, and vacancy rates decline as lease-ups proceed.

Rental Housing Supply/Demand Comparison

Using Comprehensive Housing Affordability Strategy (CHAS) data, we can compare the number of households in different income categories with the number of homes affordable to that same income category ("affordable" here means that housing costs don't exceed 30% of household income). The latest data from 2021 shows an undersupply of rental homes in both the lowest and highest income categories. Renter households make choices all the time to rent housing outside of (either below or above) what would match their income level. But those with the least incomes have the fewest choices and often face severe housing cost burden—which means paying more than 50% of their income towards rent every month.

Within the lowest category of income and housing cost, Madison has 11,230 more households than available homes. Thus, without any form of subsidy, these households cannot find housing affordable to them. Meanwhile, within the highest category of income/housing cost, there are 14,225 more households than homes, meaning that there is a lack of supply of rental homes within the middle and upper levels of what is affordable.

This imbalance at higher income and housing cost is not uncommon, as there is a practical “upper ceiling” in the rental housing market. For instance, a household making $160,000 per year can technically afford to spend $4,000/month for housing, but few choose to do so, which is reflected by the very small number of rental homes built at rents that high.

CHAS data can also show which housing is being rented by households of various income levels, whether by choice or limited availability of supply affordable to them. The data make clear that households rent across all price points, regardless of income level.

For instance, out of the 14,075 renter households with incomes above the median income, about 3 in 4 "rent down," which means that they spend less (often much less) than 30% of their income on housing by choosing to live in less costly housing than their incomes would allow. About 1 in 5 of these households rent housing that would be affordable to those making below 50% AMI. This is likely due to a mix of reasons, such as wanting to save money, housing quality or size simply not being major considerations (especially for smaller families or households without children), lack of attainable homeownership opportunities, or lack of enough higher-cost rental options.

This creates an even tighter rental housing market that limits housing opportunities for lower-income renter households. While city policies can do little to influence decision-making for these households, local policies and programs can attempt to offset the impacts of these decisions on low- and moderate-income renter households in these ways:

• Support construction of income-restricted, high-quality rental housing for lower-income households throughout the city, especially in areas with access to transit and amenities.
• Support more market-rate rental housing choices of all types to ensure a healthy supply.
• Support more housing types that are appealing and affordable to renter households as first-time homeownership opportunities.

Rental Cost Increases & Affordability

Another useful data comparison blends Costar data on actual rents by market tier with rental affordability limits set by WHEDA for low- and moderate-income households (in this case, for 2-person households). It shows that household incomes are diverging more than rental rates, which means higher-income households have more housing choices and very low-income households have fewer choices than they did a decade ago.

WHEDA’s maximum rental rate for 80% AMI households in income-restricted housing in 2025 is $2,078 per month, which exceeds the average market rents for all tiers of the rental housing market. This suggests that households making 80% AMI can afford most rental housing options in Madison, including the newest, highest-quality 4- and 5-star rental housing.

The 2025 affordable monthly rent for 50% AMI households, $1,299, relative to average rents is about the same as it was a decade ago, though is now slightly above the average rent for 1- and 2-Star rental homes.

Meanwhile, the monthly rent affordable to 30% AMI households in 2025 is $780, about $470 less than the average rent for even the most affordable (1- and 2-Star) tier in today’s market. The vast majority of households in this income bracket will need subsidized housing or will experience housing cost burden or severe housing cost burden.

Rental Housing Affordability by Race

Tracking median income levels by race and ethnicity over time helps determine relative levels of affordability compared to citywide rent levels. Ideally, the median household within each racial and ethnic group would be able to afford housing at median rent levels without being cost-burdened. However, this is not the case.

From 2015–2023, Madison's median monthly rent rose from $939 to $1,364. During this same period, median household incomes and the rents that households could “afford” (at 30% of income) also increased for each racial and ethnic group.

• The percentage increase in median income for Hispanic/Latino, Black, and Asian households outpaced the percentage increase in median rent.
• While the rate of income increase for the median White household was slower than that for median rent, the monthly rent affordable to that household is still $717 above median rent.
• In 2023, the rate affordable for a median-income Black household was $284 below the median rent, indicating fewer housing choices and more likely cost burden.
• In 2023, the rate affordable for a median-income Hispanic/Latino household was $206 above median rent, indicating an increase in potential housing choices over the past decade.

Renter Households with the Most Significant Unmet Needs

Data from multiple sources indicates there are about 17,105 households that earn less than 30% AMI in Madison who rent or are experiencing homelessness. Of these:

• Approximately 7,600 (44%) are likely students, many of whom receive support from family or financial aid.
• Approximately 1,500 (9%) are households with Section 8 vouchers that allow them to spend more on housing than they could otherwise afford.
• 2,830 (17%) are households renting homes affordable at the 30% AMI income level. This includes 876 in public housing who are required to contribute no more than 30% of their income to housing costs.
• An estimated 5,275 (31%) are very low-income renter households facing cost burden (unable to afford their rent), including an estimated 690 that experience homelessness at any given time.

Next Chapter

Homeownership Market