Aiming at Wealthy Renters, Developers Build More Luxury Apartments Than They Have in Decades – WSJ
(WALL STREET JOURNAL) Will Parker, January 17, 2020
Builders are on track to finish more new apartments in 2020 than in any year since the 1980s, a new study shows, with developers across the U.S. chasing after the more affluent tenants.
An additional 371,000 new rental units are expected to hit the U.S. market this year, which is a 50% increase over the number of new units completed in 2019, according to an analysis from real-estate analytics firm.
In some of the largest metropolitan areas, like Houston and Los Angeles, the number of new rentals in 2020 will more than double last year’s figures for new supply.
State and local governments are grappling with how to create more rentals to combat the rising cost of housing for middle- and lower-income families. But as much as 80% of new supply this year will come from luxury developments, or what the real-estate industry calls “Class A” properties, said RealPage chief economist Greg Willett.
“A lot of these properties are competing for a small group of renters,” Mr. Willett said. “A typical renter can’t afford this brand new product.”
Property developers say that the costs associated with land acquisition and construction have become so steep that catering to affluent renters presents the best opportunity to make a profit.