The U.S. apartment market should see more new units in 2020 than in any year since the 1980s, but these pads aren’t for the great unwashed.
The country should see 371,000 new rental units this year, a 50 percent increase over last year, according to the Wall Street Journal, citing data from RealPage. Some major cities like Houston and Los Angeles will see more than double the amount of new homes this year than they did last year, in part due to projects planned around the rental market’s 2015 peak finally nearing completion.
Luxury developments will comprise up to 80 percent of the new supply this year, with developers saying they represent the best opportunity to make money given rising construction and land acquisition costs. Some analysts say this could still have a positive impact on middle class renters, as wealthier renters could “move up” to nicer apartments and leave more room for poorer renters in cheaper homes.
The gap between rents at luxury properties compared to one rung below has hit an average of $500, up from about $300 10 years ago. It is even higher in Los Angeles at $880 per month.
“A lot of these properties are competing for a small group of renters,” RealPage chief economist Greg Willett told the Journal. “A typical renter can’t afford this brand new product.” [WSJ] — Eddie Small