Perspectives

We are short millions of apartments and giving away record amounts of free rent to fill them. Both exist at the same time. That’s not an error in my count, and it stops being a paradox the moment we notice that the shortage and the glut are not the same product. We don’t have enough housing an ordinary paycheck can afford, but the country has plenty of housing built for an income most renters do not have. For fifteen years, conventional Class A (the nicest, newest, best-amenitized product in the market, and the core of most institutional portfolios) has arguably been regarded as one of the most stable, least volatile segments of housing real estate. I want to poke at that comfort, and ask the uncomfortable question of whether the ground beneath it has moved.

Start with the product itself. The glut is real, but it is specific: newly constructed Class A conventional apartments. But is there a more complex explanation? Not one that says we built too much. Rather, a thesis that development costs have now risen so much that the average renter simply can’t afford to live in them.