Last year in America, the median asking rent for a newly built apartment was an astonishing $1,372 a month. That’s about 50 percent more than the typical rent nationwide. It marked a dramatic rise from what brand-new apartments were renting for just a few years ago.
And the steep sum shows a troubling disconnect in the country’s rental market: While pressure has been building on low- and moderate-income households struggling to find affordable housing, we have largely been adding new supply tailored for the wealthy.
A report on America’s rental housing from the Harvard Joint Center for Housing Studies published Wednesday details how only about 10 percent of our recently added rental apartments would be affordable to the nearly half of renter households in America who make less than $35,000 a year.
The trend is particularly visible in cities like Washington, where cranes and construction crews have been busy for several years now since the recession erecting the kind of gleaming new apartment buildings that have high-end fixtures and concierges.
For rent, they advertise, at $1,850 a month for a one-bedroom. Or $2,196. Or $2,994. Rooftop pool and grilling stations included.
Rarely are the cranes building affordable housing — either of the subsidized variety or the kind that’s simply within reach of households making, say, $45,000 a year.
Developers are, in fact, responding to new demand from well-off renters. Over the past decade, we’ve gained 9 million new renter households in America, thanks to demographic shifts and a falling homeowner rate. That’s the largest increase in renters, according to the Harvard report, of any 10-year stretch on record. And the growth is coming from every demographic, including, most notably, the wealthy.
The number of renter households in the top 10th of the income spectrum rose 61 percent over that decade, more than for any other group. So developers are not simply building luxe apartments no one wants to rent.
But they’re also responding to the worrisome dynamic that we’ve made it very, very difficult in many cities to construct market-rate housing that would be affordable to the middle class or modest renters.
It’s economically challenging for developers to create new apartments the median renter could afford, at about $875 a month, while covering the costs of constructing them.
Height limits, parking requirements and zoning restrictions all push up the cost of construction. So do lengthy design reviews and legal battles with neighborhoods opposed to new development.
Developers must also build at the densities communities allow, and in the limited places where they allow higher density. And if a given parcel of land is only zoned for about five stories of apartments, those apartments might have to command $2,500 a month each to make the project profitable.
It has meanwhile grown much harder to build affordable housing with public subsidies. Public support has dwindled, and developers who now want to tackle such projects often have to weave together multiple complex tax credits and subsidy steams.
