High demand for lower-end units causes rents to rise
As apartments get more luxurious, more people want to rent instead of own. Unfortunately, it’s mostly rich people — and it’s pricing everyone else out of a place to live.
Real estate marketplace Zillow says rent for cheaper apartments is rising faster than the rent for apartments overall, but there aren’t enough lower-end apartments available. That means rents are continuing to skyrocket.
Even though more people are looking for less expensive apartments, real estate developers aren’t building affordable housing. Instead, they’re focusing on high-end, luxury apartments for richer renters.
Zillow analyzed 15 metro markets and found the same trend everywhere. For example, in Chicago, low-end rent costs have gone up more than 6 percent since 2014, but construction on cheaper apartments only increased by 8 percent. Meanwhile, high-end rents actually went down by 1 percent but construction on luxury apartments went up by almost 80 percent during the same time.
“As rent overall continues to grow, rents are growing faster across the board among low-end apartments as demand for more affordable rentals stays hot,” Zillow says. “But rather than build more units at the bottom end of the market to meet this demand, apartment developers have instead focused their efforts on adding more supply at the high end.”
Tampa had the biggest jump in high-end apartment building. More than 93 percent of new construction went to more expensive apartments since 2014. But no low-end apartments were built during the same time.
“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,” says Zillow Chief Economist Dr. Svenja Gudell. “We’re simply not building enough at the bottom and middle of the rental market to keep up with demand.”
Want to buy a home?
If you’re looking to skip out on renting and become a homeowner, you’re not alone. It turns out most of us want to buy a home, from young millennials to older baby boomers. But not everyone can afford it.
Whether you’re interested in renting or buying, they both share a common ground: high costs for low-income earners. While cheaper homes are being built —more than cheaper apartment buildings are — they aren’t being bought by those who need them the most. Instead, middle- and higher-class Americans are scooping up cheaper homes.
Because of this, it’s no wonder that most young people are putting off buying a home. With the burden of student loan debts and other financial responsibilities, many millennials are putting off buying a home because they don’t want to add a mortgage payment into the money mix. Some low-income Americans that already own a home put more than half of their paychecks toward mortgage payments.
What happens when everyone wants to rent?
Many homeowners are selling their homes to start renting. A fire-hot market means high rent and few options for those looking for affordable housing. So what about those who need a place to live and can’t afford to in the crowded space?
For starters, broaden your horizons. Don’t stick to one area or neighborhood or else you’ll limit your options. Move into suburban areas, even if it means being further away from metro and downtown hotspots.
You can also comparison shop and negotiate. If you’re in love with a place but not the price, see if it’s comparable to other units in the area. Show the owner or landlord what it’s like around town to see if they’ll budge on costs. Also find out what deals are going on, like move-in specials, longer leases, or if any utilities are included. It never hurts to ask!