Why Builders Are Not Building Affordable Apartments

In our country’s 150 largest cities, builders completed 395k new apartments in 2017, a whopping 46% increase from 2016 and the highest level seen in 40 years. And luxury, upscale apartments accounted for between 75-80% of the new supply. So, what’s keeping builders from building more affordable apartments?

Land, material and labor costs are rising so much that they can only build luxury upscale apartments as the cost to build both luxury and affordable apartments is nearly the same. As one developer said, “The two-by-four doesn’t care whether it’s in a luxury building or in an affordable building. It costs the same.”

I have also read that locally banks are tightening up their lending guidelines and increasing the down payment required on apartments, which only makes it even more difficult to deliver new affordable housing.