Recent studies show that real estate developers have largely been catering to wealthy renters. As a result, the average asking rent dramatically increased, outpricing low and middle-income renters.
In 2014, the average asking rent for a newly built apartment in America was an astounding $1,372 a month. This price costs more than half of the typical rent nationwide and marks a huge increase from what brand-new apartments were asking for just a few years ago.
The steep sum shows a troubling dilemma in the country's rental market. While pressure has been building on low and moderate-income households struggling to find affordable housing, the market has been predominantly adding new supply tailored for the rich.
Earlier this month, the Harvard Joint Center for Housing Studies pubished a report on America's rental housing that shows only about 10 percent of recently added rental housing would be affordable to the nearly half of renter households in America who make a salary of less than $35,000 a year.
This trend is particularly visible in larger markets such as Washington, where cranes and construction crews have been busy for several years. Despite the economic recession, developers are busy putting up luxurious apartment buildings filled with high-end fixtures and concierges.
For rent, they advertise a one-bedroom unit for $1,850 a month. The asking rent for the same model can go up to $2,994. Since the recession, rarely did developers construct affordable housing which is affordable to households making $45,000 a year.
This move from developers are a response to the rising demand of wealthy renters. Over the past decade, 9 million new households in America were added to the rental market thanks to demographic shifts and a falling homeowner rate. The Harvard report pointed out that this is the largest increase in renters of any recorded 10-year stretch.
Likewise, it is economically challenging for real estate developers to construct new apartments that the average renter could afford. The costs of developing them are not exactly cheap. Height limits, parking requirements and zoning restriction all push up the cost of construction. So do design reviews and legal battles that last for extended periods.
