US Cities Lack Affordable Housing Even If High-Rises Are Being Built

The idea that high-rise residential buildings appear in a city is something desired by most urban boosters and mayors because of various different reasons. In the recent past we saw a clear increase in the number of new buildings of this kind among real estate investors, mainly those coming from other countries. High-end products are now actually accounting for around 80% of all the new real estate constructions. The problem is that such products, especially those present in the more popular US cities, depend on a small population segment, the one that can afford it. Investing in Triple Net property is something that is more preferred for many because the high-rise buildings are not as great for cities as initially anticipated.

The high-rise residential boom is now basically over and what happened in the US is also happening in Great Britain. That is mainly because of the fact it was proven that the structures are not helping with housing affordability, which is a big crisis for the middle-class US citizens at the moment. Millennials were those targeted by these buildings but they are now aging and are tending to move towards cities that are less expensive or suburbs. Major foreign investors started to withdraw because of negative investment results.

Politicians and housing advocates often promoted the high-rise buildings as a great solution for housing affordability problems. Unfortunately, the real cause of the problem is found in the principally prohibitions appearing in starter home urban development. Urban neighborhoods with high rises replacing the older buildings basically bring in solutions that are less affordable than the homes that were replaced.

The huge problem for the real estate investors is that high-density housing is always much more expensive to develop. It is now known that the buildings that have over 5 stories will require a rent that is around 2.5 times more than the garden apartments. When looking at the San Francisco Bay area we see even higher costs for constructions as a high-rise building can end up costing 7.5 times more than detached houses.

If we look at real estate statistics it is clear to notice that most of the highly expensive residential areas in the US are those that have many high-rise buildings. This includes Seattle, San Francisco, Miami and New York City. High-rise buildings were promoted as perfect for the middle-class but the buildings are now not really occupied by them or by the working-class. The units are rarely actual homes of the people owning them. Around 60% of the NYC luxury units are not a main residency and can be unoccupied whenever.

Another thing that should be mentioned is that the high-density building strategy actually tends to increase real estate surrounding it. Luxury apartments are built in areas that feature more affordable, older buildings and it is those buildings that end up with a higher value in the eyes of the buyers, not the high-rise apartment buildings.

On the whole, suburbs are now starting to be the most affordable parts of a city for most citizens and the high-rise buildings are not as attractive as initially expected as they are actually more expensive than the alternatives. Affordable housing is thus continuing to be a huge problem in the US.