For years, the housing markets in many states across the United States have suffered due to a lack of available housing. This has helped to drive the price of housing up, creating an affordability crisis for low- and middle-income Americans. In response to this, developers have been building more apartments, but in an odd decision, they seem to have chosen to focus on luxury apartments, appealing to the higher end of renters.
Building Luxury Apartments During a Housing Shortage
The housing market in many of America’s biggest cities have seen housing prices increase over the past few years, thanks to a lack of available housing. Rather than focusing on the lower end of the income spectrum who could most use a greater availability of housing, developers seem to have focused more on building luxury apartments. These buildings have amenities often seen as unnecessary, but which drive up the price of the building, such as swimming pools and easy access to transportation.
The Decision to Focus on Luxury Apartments
The primary reason developers have been focusing so much on luxury apartments is simple: while there may be greater demand for affordable housing, luxury apartments sell for much more. With there being limited land available due to heavy zoning restrictions, any potential real estate available for development will come at a premium. And right now, with there being a lack of housing at all ends of the income spectrum, developers see more potential for profit in appealing to wealthier tenants.
The Consequences of Developing Luxury Apartments
The decision to focus primarily on luxury apartments, rather than affordable housing, has a knock-on effect throughout the rest of the housing market. The price of all housing, not just those at the higher end of the market, has gone steadily up, making housing more and more unaffordable. In the end, many low- and middle-income Americans are being priced out of the ability to live in some of America’s biggest and most prosperous cities.
How it Could Affect the Housing Market
Some fear that this could have serious long-term ramifications for the housing market. While luxury apartments may sell for more than affordable housing, they have a relatively limited customer base, and developers may be oversupplying that demand. If that happens, some developers may be left with overpriced housing with no one left to buy it, leading to potential economic problems.
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