Plenty of Luxury Units to Go Around—While Affordable Housing Gets Less Affordable
Home ownership is not the prized goal that it once was. Increasingly, higher-income individuals and families are opting to delay home ownership or forgo it altogether. Rental vacancies are historically low in urban centers around the country, as affluent households are migrating in droves out of the suburbs and back to the center. Developers, unsurprisingly, are choosing to build and renovate for this lucrative end of the market.
"They can also benefit from making a building mostly market-rate units and leaving a small percentage of units as affordable-housing units, which earns them tax advantages but still allows them to make a hefty profit," reports Gillian B. White.
However, the token affordable-housing units in luxury buildings are insufficient to significantly affect the market.
Rent inflation has typically mirrored overall inflation; but costs are now inflating disproportionately for lower-income households. A recent study by The Federal Reserve Bank of New York finds that "rent inflation is consistently higher for lower-cost housing units than it is for higher-cost units."
Add to this the country's growing wealth and income inequality, and the outlook for low-income urban renters could be dismal if the trend continues unabated.
"In order to change that pattern, intervention is likely needed in the form of government policies that encourage and reward builders to build affordable units in the first place and then discourage them from converting them to pricier units in the future," suggests White. "Until then, millions of low-income Americans will continue to face fewer options and higher prices."