Photo: Robert Clark
Average rents have grown the fastest for America’s oldest buildings, which traditionally are the most affordable.
Slowing levels of new construction and increased demand for affordable housing have put upward pressure on rents in older units, according to a recent study by the listing site ApartmentList.
Yet despite a recent boom in rental construction, the share of rental units built in the last decade in the US fell to an all-time low.
“The importance of older builds is largely related to the lower rents they command, which allows for successful and inclusive communities. This role is important for both large and small metros,” ApartmentList housing economist and author of the report Chris Salviati tells Livabl.
Currently, some 66 per cent of all rental units are more than 30 years old — the highest share recorded since the census began tracking the data in 1960. Conversely, just 9 per cent of the current stock was built within the last decade, the lowest share since 1960.
Old buildings make up an increasing share of rentals in all of the nation’s 25 largest metros, but aging is fastest in the Sun Belt.
In a healthy market, old buildings are important source of housing affordability.
As a building ages, its initial construction costs are paid off and its value slowly depreciates due to normal wear and tear. Typically, the building then commands lower rents.
Neighborhoods with a mix of buildings of different ages offer a myriad of housing choices that are ultimately accessible to more diverse residents across a range of income levels.
The quickened pace of rent growth for older building cohorts has resulted in a more narrow price gaps across buildings of different ages.
In 2000, the median rent of properties built prior to 1960 was 23 percent lower than that of properties built a decade earlier. But as of 2016, the gap is down to a mere 7 percent.
Today, a lack of new units hitting the market is keeping older units in higher demand as inventory tightens — a trend more prominently pronounced in white-hot markets like San Jose, California and Manhattan.
“Older buildings failing to filter down would tend to exacerbate existing affordability issues in the near term. In the long-term, a continuation of this trend would result in a severe lack of housing options for low- and middle-income households in many of the nation’s large cities,” says Salviati.
And although construction levels have rebounded slightly since the housing bubble collapse, there’s still a long way to go.
“Recent construction has begun to exert a downward pressure on rent growth, but we would need to see sustained levels of new construction in order to really begin alleviating affordability issues,” says Salviati.
The national rental market is cooling but uncertainty remains about long-term affordability.
“This market cooling is following a prolonged period of rents growing much more quickly than overall general inflation, and many are still struggling with housing affordability. It’s unclear if this lower level of rent growth will continue over the next year,” he adds.
Click here to read the entire report.