Rent relief? Don't hold your breath. Here's why

Residential rents are rising more than normal — but those gains are getting smaller. Rents in October were 4.5 percent higher nationally than they were a year ago, according to a new report from Zillow. Compare that with 5.3 percent annual gains in September and 6.6 percent gains in July, when rents hit their high.

"Rental appreciation has started to slow down, in part, due to more rental supply. Many of the bigger multifamily rental projects that were begun a couple years ago in cities nationwide are finally starting to open for occupancy, easing pressure on rents somewhat," said Zillow Chief Economist Svenja Gudell.

Easing rents do not, however, mean that things are getting any easier for the average renter. It will take a lot more supply in more affordable neighborhoods to ease the pain. Apartment developers have largely been focusing on prime, downtown locations, where demand and price returns are highest.

Read More Think your rent's too darn high? Just wait

After a boom in multifamily construction over the past five years, the numbers are coming down. Multifamily housing starts fell over 8 percent in October compared with October of 2014, according to the U.S. Census. There have also been some high profile sales in the market.

Last month, Equity Residential (EQR)'s Sam Zell agreed to sell 23,000 apartments to Starwood Capital Group, according to a company release. That is roughly a quarter of Equity Residential's total apartment stock. While some analysts warned that Zell was signaling a top to the multifamily market, others said it was just a good deal.

"It's a very good time to be a seller because of the valuations," said Alexander Goldfarb, a REIT analyst with Sandler O'Neill. "Even though development is above the long term average, there are 7 million more millennial renters today than a decade ago. From the buyer perspective, they're buying higher yielding assets."

That was likely the logic behind Blackstone Group (BX)'s recent deal to buy Stuyvesant Town and Peter Cooper Village in Manhattan for $5.3 billion.

Avalon Bay (AVB), another large multifamily developer and REIT, also sold some older apartment stock this year. It focuses on more suburban markets, banking on the belief that all those urban millennials will age out of the cities.

"The leading edge of the millennials [is] aging into their 30s where housing preferences start tilting more towards the suburbs," Avalon Bay CEO Timothy Naughton said on the company's latest earnings call.

Development may be slowing slightly, but Naughton said the growth cycle is far from over. That should continue to help renters even in some of the hottest local markets. The San Francisco metro market has the fastest rental appreciation among the nation's 35 largest markets, according to Zillow, with rents there up 15 percent from last year. Rents, however, were growing as fast as 19 percent annually last summer.

Renters in large multifamily buildings are better off than those in single-family rentals. Apartment rents rose 3.9 percent annually, according to Zillow, while single-family residence rents grew 4.5 percent. Single-family rental supply may be getting tighter as investors slow their purchases of rental homes. Investors were buying at a fast clip during the foreclosure crisis, but with fewer distressed homes coming to the market and overall home prices still rising fast, potential investor returns are shrinking.

Despite the slight cooling in rent rates, affordability is still historically weak, and a growing number of renters is struggling.

"Make no mistake: Despite this recent slowdown in rental appreciation, the rental affordability crisis we've been enduring for the past few years shows no signs of easing, especially as income growth remains weak. It will take a lot more supply, and a lot more renters-turned-homeowners, to fully reverse this," said Gudell.

At least 1 in 4 renters, or 11.2 million renter households, were severely burdened by rents that took up over half their incomes, according to Harvard's Joint Center for Housing's last count in 2013. Looking at recent demographic trends, researchers there project that number could increase by 11 percent to 13.1 million by 2025.