Trends say that more and more people are looking to rent, rather than own. Developers are excited to capitalize on this increase in demand. However, in order to make their developments financially feasible, luxury apartments in central areas are taking the highest priority due to a number of factors. According to CoStar, more than 80% of the country’s metropolitan apartments are luxury. So where does this leave the lower and middle class families that have been an important part of the apartment demand segment for so long? The high demand of mid-tier apartments and the scarcity of such has resulted in higher rental rates than ever seen before.
Rental rates for Class B apartments has risen by 5.8% compared to the 4.2% rent increase in Class A apartment rents. The supply of Class B and C apartments has slowly decreased and the development of luxury has sky-rocketed. The rents for mid-tier apartments, though rising, are still less than that of luxury apartments. Applicants for these more affordable housing options continue to roll in. More and more families are continuing to spend at least 30% of their income on housing alone. If the supply of high-rise luxury apartments continues to increase, only then could they become more affordable to middle-class renters.