Luxury apartments dominate US cities amid housing recession
Lots of luxury homes are coming to major cities across the United States.
Analysts at Yardi Matrix estimated that more than 400,000 units were completed in 2022, and they expect another strong showing in 2023. Experts believe much of this new stock has been built with upper-tier customers in mind.
“You often see new housing labeled as ‘luxury,’ in part because it’s new,” said Ethan Handelman, deputy assistant secretary at the U.S. Department of Housing and Urban Development. “When you get to affordable housing, we need to provide some additional capital and/or rental assistance to make housing affordable for those who need it most.”[ads1];
Market rate rent for new apartments can easily be several thousand dollars monthly. For many high wage earners in cities, this is achievable. But for moderate-income Americans, the skyrocketing prices seem disconnected from reality.
“The marketplace is structured to not accommodate certain people. We have to admit that,” said Dominic Moulden, a resource organizer at Organizing Neighborhood Equity DC.
Builders say that the high cost of housing in the US is related to the large amount of regulation in the housing sector. For example, they say many American cities lack land due to restrictive zoning codes.
“Currently, 40% of the cost of multifamily development is in regulation,” said Sharon Wilson Géno, president of the National Multifamily Housing Council. — We have to do something about that if we are going to build more homes.
In 2022, the Biden administration announced a housing action plan that aims to strengthen housing supply within five years. But these efforts may not have a significant impact on prices for some time.
“Unfortunately, I don’t think we’re going to see rents come down much in the next one to two years,” said Al Otero, a portfolio manager at Armada ETF Advisors. “Developers can’t make money at the more affordable price points. That’s why we’re seeing development and new construction at the much higher, higher end of the spectrum.”
Watch video above to see why the US is flooded with new luxury apartments.
