Rising vacancy rates in the local rental market are always troubling for landlords. It's one of the key economic indicators of the rental market's condition, and when the number goes above the average vacancy rate, it might mean your rental income is in trouble. Real estate investors know that there are ways around this, but you first need to understand what it is and how it affects you.
Key Highlights:
- Rising vacancy rates signal market challenges: With the U.S. average at 7.6% in 2025 and cities like Nashville reaching 11.1%, landlords may face reduced rental income and increased competition.
- Pricing and marketing are critical factors: Overpricing your rental and a poor listing presentation can significantly reduce tenant interest and prolong vacancies.
- Tenant quality directly impacts occupancy: Weak tenant screening leads to higher turnover, while retaining reliable tenants helps maintain steady cash flow and lower vacancy rates.
- External factors also play a role: Location disadvantages, seasonal demand shifts, and broader economic conditions can all contribute to higher vacancy levels.
- Tracking vacancy rates is essential for profitability: Calculating your vacancy rate and projected income loss helps you understand the financial impact and make informed decisions to improve occupancy.
What Is The Average Vacancy Rate?
The average rental vacancy rate across the top metro cities in the US reached 7.6% in 2025, which is already an increase from the previous year. When used as a baseline, Nashville's vacancy rates are already at a concerning 11.1% in 2025, from 8.5% in 2024.
The Music City is already beyond the normal rental vacancy rates, especially given how popular the city is. This has brought on lowered rental prices, given that the alternative for property owners is lost rental income. It doesn't necessarily mean you can't do anything about it and just weather it until it passes. You can identify what might be causing it to create an effective plan to reduce vacancy rates.
What Are The Main Causes of High Vacancy Rates?
Before adopting practices and techniques that can help your rental property's occupancy rates, you first need to understand the underlying issues that may have caused it.
High Rental Price
If your asking rent is higher than the fair market rent, you'll have a much harder time attracting tenants. They would find other available rental units that have lower rental rates, yet offer the same things you do. Competitive pricing is the key to low vacancy rates. Research similar properties in the local market to determine the right rental price, but make sure that your rental business won't suffer from negative cash flow.
Ineffective Marketing
Prolonged vacancies are often a sign of poor marketing efforts. If you don't present your rental property right in the listings, prospective tenants won't even bother viewing it. Find out which amenities are appealing to your target market to know what to highlight in your listings. Use high-quality photos to stand out in the market despite low rental demand.
Weak Tenant Screening
One of the best ways to significantly reduce vacancy rates is by retaining quality tenants, but first, you have to find quality tenants. You can achieve that by having a meticulous tenant screening process. Tenant retention is easier when your renters follow your lease rules and respect your investment property. You'll get a stable cash flow and not worry about rising vacancy rates.
Being in an Undesirable Location
A vacant property or unoccupied rental units might be the result of your property being in a poor location. It's hard to attract quality tenants when your rental real estate has less to offer than other properties in the real estate market. You can make up for this with property improvements or rent discounts. The longer your property sits vacant, the harder it will be to find potential tenants.
Seasonal Demand Fluctuations
Low market vacancy rates might be temporary, which you can tell by analyzing vacancy patterns in your area. Rental demand tends to dip at certain times of the year, such as holidays or vacation months. The best way to prevent this is by retaining tenants in your rental property. Remember that tenant satisfaction prevents tenant turnover. You can achieve this by offering flexible lease terms or lowering rent outside of peak seasons.
Economic Factors
Vacancy rates can be influenced by factors even real estate investors can't control, such as job losses, an increase in housing, or other economic downturns. When the market vacancy rate is high, it generally means that many, if not all, properties have vacant units as well. Competition will increase among comparable properties, since other properties will up their game to get through bad economic conditions and low market demand.
Poor Property Management Practices
It's harder to see if you're making bad decisions with your property if everyone is affected by high vacancy rates, but it is a contributing factor. The issue can worsen if you neglect your property management duties. Maintenance, for instance, is crucial for keeping or increasing your property value, as well as inspiring tenant loyalty. Your rent collection methods aren't just for ensuring steady income, but also for providing renters with convenience.
How To Calculate Vacancy Rates For Your Own Rental Property
High vacancy rates are obvious, even for multifamily properties, but it is important to calculate how it affects your business. Your property's vacancy rate represents how much you're losing. For single-family homes, it's much easier to determine it since you only have one tenant. For multifamily vacancy rates, all you have to do is use this formula:
(Vacant Units / Total Number of Units) x 100
You can use this to calculate your projected lost income as well by using the following formula:
Vacancy Rate x Gross Potential Rent = Projected Vacancy Loss
A low vacancy rate means more consistent net operating income, while high vacancy rates could mean negative cash flow. That could vary significantly depending on how many units you have, how many are unoccupied, and how long your vacancies have lasted.
Rental Vacancy Rate FAQs
What is considered a normal vacancy rate?
- A healthy vacancy rate typically falls between 5% to 8%, depending on the market. Rates above this range may indicate issues with pricing, demand, or property management.
Why are vacancy rates rising in some markets?
- Vacancy rates can increase due to factors like higher rental prices, oversupply of housing, economic downturns, seasonal demand shifts, or ineffective property marketing.
How do I calculate my property’s vacancy rate?
- Use this formula:
(Vacant Units ÷ Total Units) × 100
This gives you the percentage of your property that is unoccupied.
What can landlords do to reduce vacancy rates?
- Landlords can lower vacancies by pricing competitively, improving marketing, maintaining the property, screening tenants carefully, and focusing on tenant retention strategies.
How Professional Management Can Be Your Solution
Navigating a tough rental market is never easy. You have to worry about many things beyond rental vacancy rates, which makes being a property owner very stressful. The good news is you won't have to worry about all this, since there are experts like Green Tree Property Management to help you out.
With a property manager, you can gain insight into the market and have a partner who knows how to secure your monthly income despite high rental vacancies in the area. Our services are both for finding potential tenants and retaining existing residents to maximize your investment.
Contact us, and leave your worries behind.
More Resources:
Key Features to Highlight in Your Nashville Rental Listing
Tenant Turnover Process Tips to Get Your Rental Unit Ready to Rent
