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Middle-Class Renters Struggle to Find Affordable Apartment Homes

Digested from “Rents Rise Faster for Midtier Apartments Than Luxury Ones”
The Wall St. Journal (8/16/15) Kusisto, Laura

Demand for new apartment homes may be high, but the new supply to answer it is overwhelmingly in the luxury category, which won’t alleviate middle-class renters' increasing demand for affordable living arrangements.

Because middle-class renters increasingly need affordable apartment homes, rent growth has been highest among Class B properties, at 5.8 percent, compared to Class C properties, at 4.9 percent, and Class A properties, at 4.2 percent. This means an increasing number of middle-class renters are paying more than 30 percent of their income toward housing costs, making them what are known as “rent-burdened” residents. 

But constructing a luxury apartment community costs about as much as constructing a mid-tier community, so developers are erring toward the former as an opportunity to recoup development costs. That will continue to put pressure on the pool of Class B and Class C properties, which will continue to increase rents as long as demand is high. 

High demand will also continue to make Class B properties strong investment opportunities.

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