Developers continue to focus on the construction of high-end multi-family housing despite a chronic lack of supply on the low-end, a trend that experts say is driving up rents for smaller homes to historic highs.
Rents are growing much faster among low-end apartments, particularly in California, according to a new study by listings site Zillow. In some California markets, annual rent growth at the low end is exceeding 20 percent a year, including Los Angeles, where rent has grown by more than 27 percent for low-end apartments over the past year.
“There’s a growing divide in the rental market right now,” said Zillow Chief Economist Dr. Svenja Gudell. “Very high demand at the low end of the market is being met with more supply at the high end, an imbalance that will only contribute to growing affordability concerns for all renters.”
She continued: “We’re simply not building enough at the bottom and middle of the rental market to keep up with demand. Apartment construction at the low end needs to start ramping up and soon.”
In L.A., the median rent for an apartment in the bottom third of the market was $2,029 a month, a 27.5 percent increase year-over-year. Meanwhile, rents for the overall market went up by just 6.7 percent in the region.
Developers’ penchant towards building units geared toward the most well-heeled renters is exacerbating the unevenness of rent growth.
Nearly 54 percent of new rental housing construction in L.A. has been geared towards high-end apartments since 2014, according to Zillow.