Luxury Multi-Family Housing Boom Creates Scarcity in Other Markets

"Modest apartment buildings like the Verona [in Aurora, Colorado] that cater to middle-class and working-class families are becoming scarcer as fewer are built nationwide and older ones are demolished," according to the central premise of an article by Laura Kusisto. "That has resulted in a severe shortage of midtier apartments, causing rents for these units to rise at a faster pace than for luxury ones."

The idea that supply scarcity of "mid-tier" multi-family housing is driving up housing costs might come as a surprise given that multi-family construction is moving along briskly in many parts of the United States. Here's the rub: "Even though construction of multifamily rental properties is running at the highest level in decades, the overwhelming majority of new units—more than 80% in the nation’s largest metropolitan areas—are luxury, according to CoStar Group Inc."

Developers pin the trend toward luxury properties on the high costs of construction and land. According to Kusisto's explanation of that point, "[t]he difference in costs between installing granite countertops and stainless-steel appliances is so slight compared to buying land and installing elevators that economists say developing a luxury apartment and a midtier one comes out roughly the same."

The rest of the article goes on to examine more of the data that illustrates the trend around the country while continuing to cite Denver and it suburbs as examples.