For real estate investors, 2026 marks a decisive pivot point. The post-pandemic era of rapid appreciation and unregulated short-term rental (STR) growth has ended. The market is now defined by a “Great Divergence” where success is driven by regulatory compliance and operational efficiency rather than speculative asset appreciation.
While the national residential market sees a “slow climb” in inventory and stabilizing mortgage rates near 6.3%, the rental sector is experiencing a fundamental bifurcation:
- Class A multifamily saturation: Record numbers of new high-end apartments have limited rent increases to just 0.6% in the South
- Workforce housing scarcity: Conversely, the “missing middle” remains critically undersupplied. With high interest rates locking potential first-time buyers into the rental pool, demand for affordable, flexible housing solutions like PadSplit’s coliving model is intensifying.
This report uses data from Realtor.com, the Bureau of Labor Statistics, and local municipal codes to analyze the 2026 landscape. The core thesis is clear: heavily regulated markets with falling asset prices offer the strongest buy-box opportunities for investors willing to pivot from STRs to workforce housing models like PadSplit.
Where to buy: Markets with the best deals
For investors looking to acquire new doors, the “Correction Markets” of the South and West offer the most leverage in years. High inventory levels and seller fatigue are creating opportunities for aggressive acquisitions at below-replacement cost.
An opportunity for frustrated sellers
The defining metric for investors in late 2025 is the surge in delistings. In October and November, approximately 6% of all listings were removed from the market without selling.
- The opportunity: This creates a “shadow inventory” of motivated sellers who failed to get their 2022 pricing. Investors who can offer speed and certainty (even at lower price points) can unlock these off-market deals.
- Target markets: Delistings are highest in Miami, Denver, and Houston. These are prime targets for acquiring single-family homes that sat stagnant on the MLS.
Price softening in key PadSplit markets
While the Northeast remains expensive due to low supply, the “Boomtowns” are discounting.
- Dallas, TX: Now a “buyer’s market.” Median list prices are down 5.3% year over year. In luxury- and investor-heavy zip codes like 75225, homes are selling for 18.5% below asking price.
- Phoenix, AZ: Active listings have surged, and the urban core (Downtown Phoenix) has seen prices drop 21.7% year over year. This is largely driven by the failure of STR condos, which can now be converted into PadSplit’s workforce housing.
- Jacksonville, FL: Downtown Jacksonville prices have plummeted 36.4%, signaling severe distress and a potential entry point for investors willing to convert the properties for workforce tenants.
Investor Takeaway: The “buy box” should focus on these correcting metros where the price per square foot is falling, allowing for better cap rates upon conversion to high-density PadSplit coliving properties.
Comparing returns: PadSplit vs. traditional rentals
With traditional multifamily rent growth stalling at 2.2% nationally (and nearly flat in the Sun Belt), PadSplit offers a yield arbitrage by increasing density per square foot.
Profiting from the price gap
Data from 2025 highlights the significant gap between traditional apartment rents and PadSplit’s shared housing room rates.
- Yield implications: In Dallas, converting a single-family home into a 5-bedroom PadSplit coliving property can generate over $3,200/month in gross revenue, significantly outperforming a single-tenant lease, which might earn $2,200 for the same property.
- Main drivers of demand: In markets like Richmond, VA, where unemployment is a low 3.6%, the demand is driven by the working class—service workers, healthcare aides, and tradespeople who cannot afford a $1,600 apartment but earn too much for subsidies.
Skip Class A apartments: They’re oversupplied
Investors should avoid competing directly with Class A apartments. The U.S. saw 109,000 new multifamily units delivered in Q3 2025 alone, pushing vacancies up to 6.2%. This supply is concentrated in the “luxury” segment, leaving the affordable tier protected from oversupply risks.
What rising costs mean for revenue
- Inflationary expenses: The “shelter” component of CPI remains high (+3.6%), but more importantly for operators, energy costs rose 2.8%, and electricity specifically is up 5.1%. In an inclusive “all utilities included” PadSplit coliving model, utility management technology is no longer optional; it is critical to preserving margins.
- Insurance & climate: Harvard JCHS warns of rising insurance premiums acting as a “hidden tax.” In markets like Jacksonville and Houston, this line item can kill cash flow if not accurately projected.
- The “lock-in” effect: With mortgage rates near 6.3%, fewer tenants are leaving to buy homes. This reduces turnover costs (vacancy / lease-up fees), which is a net positive for rental investors, increasing the “lifetime value” of a reliable tenant.
An analysis of the top 40 markets for PadSplit coliving investment
While the post-pandemic economic recovery has stabilized employment and spurred wage growth in certain sectors, the cost of housing has decoupled from the earning power of the essential workforce. The American housing market is splitting into two: homeowners locked into low mortgage rates, and a growing number of permanent renters facing record-high costs.
The workforce is now priced out of traditional rentals
The most potent metric for evaluating shared housing demand is the “Housing Wage”—the hourly rate a full-time worker must earn to afford a modest rental home without being cost-burdened (typically spending more than 30% of income on rent).
In 2024 and moving into 2025, the gap between the Housing Wage and actual wages for service/essential workers has reached historic widths.
- National context: A full-time worker needs to earn approximately $32.11 per hour to afford a standard two-bedroom apartment. However, the average renter’s wage in many key markets hovers between $18.00 and $22.00 per hour.
- The service sector disconnect: Essential roles (home health aides, retail staff, and hospitality workers) often earn between $15 and $20 per hour. In a market like Tampa or Austin, a traditional studio apartment renting for $1,600+ is mathematically impossible for these workers without a severe cost burden (often exceeding 50% of income).
By offering all-inclusive room rentals at 40-50% of the cost of a traditional apartment, PadSplit does not just compete with other rentals; it creates a new tier of affordability that serves a massive, underserved demographic of the working class.
Top 40 markets
The Southeast growth engine (GA, FL, AL, TN, NC, SC)
Strong job growth, more people moving in, and lots of service jobs create high demand for workforce housing.
1. Atlanta, Georgia
Market status: Mature / high volume
Regulatory environment: Improving (ADU liberalization in the city / DeKalb)
PadSplit occupancy rate: 84%
Atlanta is the birthplace of PadSplit and remains the bellwether for the industry. With over 10,000 doors, the market has matured into a stable ecosystem of vendors, property managers, and lenders familiar with the model.
The demand: The Atlanta Regional Commission’s 2025 survey lists housing affordability as the region’s top concern for the first time in history, surpassing traffic. The region faces a supply gap of over 100,000 units. Wages for the region’s logistics and hospitality sectors have failed to keep pace with the explosive rent growth in the Perimeter, leaving thousands of essential workers cost-burdened.
Investment strategy: The “Golden Age” of buying cheap properties in Atlanta may be over, but the market now offers stability. Investors should focus on South Atlanta, East Point, and College Park—areas close to Hartsfield-Jackson Airport and MARTA rail. DeKalb County’s clear ADU ordinance (allowing 800 sq. ft. units) provides a pathway to double-density on large lots.
2. Tampa / St. Petersburg, Florida
Market status: High appreciation / severe need
Regulatory environment: Excellent (State Preemption via Live Local Act)
PadSplit occupancy rate: 89%
Tampa Bay has experienced some of the highest rent appreciation in the nation (50% since 2020), creating a crisis for its service workforce.
The regulatory game-changer: Florida’s Live Local Act (SB 102, amended by SB 328) may prove to bethe most significant pro-housing legislation in the country. While it’s unclear how it will be implemented, it preempts local zoning to allow multifamily and mixed-use residential in commercial zones administratively (without public hearings) if affordability targets are met. Even though this act did not go far enough to apply to residential zoned districts, it’s still a step in the right direction.
While primarily for large developments, this signals a massive cultural and legal shift toward density. St. Petersburg has embraced this, pushing for density to support its vibrant downtown hospitality scene.
Investment strategy: Insurance costs in Florida are a major consideration. Investors must underwrite for high premiums. However, the potential rent per room is massive. A room that rents for $600 in Atlanta increases to $800-$900 in Tampa due to the scarcity of alternatives.
3. Jacksonville, Florida
Market status: Logistics hub / land availability
Regulatory environment: Favorable
PadSplit occupancy rate: 86%
Jacksonville is the “quiet giant” of Florida. As a logistics superpower with a massive port and military presence, it has a steady stream of transient and contract workers.
Data insight: Jacksonville is one of the few Florida markets where entry-level home prices remain relatively attainable ($250k-$300k range), allowing for better cash flow than Miami or Tampa. The large land area means lots are often oversized, perfect for adding detached ADUs or converting garages.
4. Orlando, Florida
Market status: Tourism dependent / high occupancy
Regulatory environment: Favorable (Live Local Act)
PadSplit occupancy rate: 92%
Orlando is the archetype of the “service economy” market. The disconnect between theme park wages and housing costs is extreme.
The gap: NLIHC data indicate Orlando has one of the most severe shortages of affordable units in the nation. This ensures that well-managed PadSplit units stay full. The “seasonality” of tourism is mitigated by the 12-month nature of Orlando’s attractions.
5. Charlotte, North Carolina
Market status: Financial center / rising costs
Regulatory environment: Moderate
PadSplit occupancy rate: 87%
Charlotte’s rapid growth has fueled a “Housing Wage” of $35.08 for a two-bedroom unit, forcing even mid-level professionals into the renter pool. The State of Housing in Charlotte 2025 report emphasizes that while supply is increasing, affordable inventory is critically scarce.
Strategy: Focus on the “crescent” of neighborhoods north and west of Uptown where transit is improving, and housing stock is still convertible.
Southeast market roundup (Tier 2 & 3)
The Texas Triangle & the West (TX, AZ, NV)
This region is defined by explosive population growth and, crucially, some of the most aggressive land-use reforms in the nation.
12. Houston, Texas
Market status: High volume / regulatory ease
Regulatory environment: Best in class (No zoning)
PadSplit occupancy rate: 81%
Houston is unique in the industrialized world for its lack of use-based zoning. This flexibility allows investors to adapt properties—converting dens, dining rooms, and garages into bedrooms—with significantly less friction than in zoned cities.
The economic engine: The Texas Medical Center and the Energy Corridor provide a diverse tenant base ranging from traveling nurses to oilfield support staff. Houston’s affordable entry price (15% below the national average) combined with high rents creates a yield of ~7.01% for traditional rentals, and significantly higher for PadSplit coliving properties.
13. Dallas / Fort Worth, Texas
Market status: Economic powerhouse / regulatory thaw
Regulatory environment: Improving (State Preemption & Forward Dallas)
PadSplit occupancy rate: 84%
The DFW metroplex is the top market for real estate investment due to corporate relocations and job growth.
The gap: Dallas has an abysmal affordability ratio—only 17 affordable units per 100 ELI households.
Regulation: The “Forward Dallas” comprehensive plan and new state laws (SB 15/SB 840) are stripping NIMBYs of the power to block density. Investors should look for commercial-adjacent neighborhoods where these new laws provide “by-right” density protections.
14. Austin, Texas (The reform leader)
Market status: Appreciation / density play
Regulatory environment: Revolutionary (HOME Amendments)
PadSplit occupancy rate: 68%
Austin has taken the boldest steps in the nation to fix its housing crisis. The “HOME” amendments allow up to three units on single-family lots by right.
Strategy: Investors should acquire lots with room for “Missing Middle” infill—building a main PadSplit home, and two ADU PadSplits on the same parcel. The high cost of living (rents dropped slightly but remain high) ensures demand from the service workers supporting the tech sector.
15. Phoenix, Arizona
Market status: High velocity / tech hub
Regulatory environment: Favorable (Golden Girls Law)
PadSplit occupancy rate: 91%
Phoenix boasts the fastest booking times in the PadSplit network. The “Silicon Desert” is booming with semiconductor manufacturing (TSMC, Intel), bringing thousands of workers.
The gap: A shortage of 56,000+ units puts upward pressure on rents.
Innovation: Arizona’s “Golden Girls” law allows unrelated seniors to live together, setting a legal precedent for coliving. The large lot sizes in Mesa and Chandler are perfect for detached ADUs.
16. Las Vegas, Nevada
Market status: Transient workforce / crisis demand
Regulatory environment: Mixed
PadSplit occupancy rate: 85%
Las Vegas has the worst shortage of affordable housing for ELI renters in the nation (14 per 100 households). The service/hospitality workforce is massive and operates on a 24/7 schedule, making flexible, furnished housing highly desirable.
Southwest / Texas market roundup (Tier 2 & 3)
The Midwest yield belt (IN, OH, MO, MI)
For investors prioritizing immediate cash flow over speculative appreciation, the Midwest is the target. These markets are characterized by the “Refuge Market” phenomenon: affordable cities attracting residents priced out of coastal areas.
22. Indianapolis, Indiana
Market status: High yield / growing need
Regulatory environment: Neutral / improving
PadSplit occupancy rate: 98%
Indianapolis is a prime example of the “affordability trap.” While home prices are lower than the national average, the “labor burden” to buy a home has increased 112% in a decade. Wages ($17.92/hr avg renter wage) have not kept up with the housing wage ($22.07/hr), creating a perfect wedge for PadSplit.
Strategy: Convert large, older Victorian / Craftsman homes in transitional neighborhoods into 6+ bedroom assets. The spread between acquisition ($200k) and rent roll ($3k+) is exceptional.
23. Kansas City, Missouri
Market status: Growth / manufacturing
Regulatory environment: Favorable
PadSplit occupancy rate: 82%
With the 2026 World Cup approaching and major manufacturing wins (Ford plant), Kansas City is seeing a surge in temporary and contract labor demand.
24. Cleveland & Akron, Ohio
Market status: Maximum yield
Regulatory environment: Neutral
PadSplit occupancy rate: 96%
The risk / reward: Appreciation is slow, but cash-on-cash returns can exceed 20% with the PadSplit model. High poverty rates ensure high demand for rooms priced at $100-$130/week.
Midwest market roundup (Tier 2 & 3)
The Mid-Atlantic & emerging markets
31. Richmond, Virginia
Market status: “Refuge” market / high occupancy
Regulatory environment: Stable
Richmond is absorbing population overflow from Washington D.C. Rents for Class A units have hit $1,750, pricing out the service workers that support the state capital’s economy.
32. Baltimore, Maryland
Market status: High yield
Regulatory environment: Strict (Requires navigational expertise)
PadSplit occupancy rate: 86%
Driven by Johns Hopkins and the university systems (“Eds and Meds”), Baltimore has a built-in tenant base of students and medical staff. Large rowhomes can be converted into high-density coliving. Entry prices of $200k for a 6-bedroom potential create massive cash flow.
Emerging & niche markets (33-40)
The new playbook to adopt in 2026
The real estate investment landscape has fundamentally changed. The era of passive appreciation and unregulated short-term rentals is over. Success in 2026 requires a different approach: regulatory awareness, operational discipline, and a willingness to serve the market’s most underserved segment.
The opportunity is clear
Across America’s fastest-growing markets, millions of essential workers (nurses, teachers, warehouse staff, hospitality employees) earn too much for subsidized housing but too little for traditional apartments. This isn’t a temporary gap. It’s a structural feature of our service-driven economy, and it’s widening.
The math works
In correction markets like Dallas, Phoenix, and Jacksonville, investors can acquire properties below replacement cost and convert them into workforce housing with superior yields. While Class A apartments struggle with 6.2% vacancy and flat rent growth, properly managed coliving properties maintain high occupancy by solving a real problem: the $500-$800 monthly gap between what workers earn and what housing costs.
The tailwinds are strong
State-level reforms in Texas, Florida, and Arizona are dismantling the regulatory barriers that once made density impossible. The “lock-in effect” from high mortgage rates means tenants are staying longer. And the delistings creating shadow inventory give savvy investors negotiating leverage they haven’t had in years.
The path forward
Focus on markets with favorable regulations, distressed pricing, and strong employment fundamentals. Underwrite conservatively for insurance and utilities. Partner with experienced operators who understand compliance. And recognize that you’re not just building a portfolio—you’re providing housing solutions for the backbone of the American economy.
The investors who recognize this shift and adapt will outperform. Those waiting for a return to 2021 conditions will be left behind.
The workforce housing demand is here to stay. The top investors are already using it as their exit strategy.
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Data current as of Q1 2026; subject to change.
