Older Units Appreciating More, Disrupting Affordable Housing Stock

One sign of a healthy housing market is the filtering of older structures less desirable for buying becoming more attractive for market rate rental housing. Currently, there's a shortage of such units.

Up to the year 2000, older rental units were more affordable. Yet, from 2000 to 2016, the real median rent for units built in the decade beforehand grew by 6.5 percent, while units built in 1960 appreciated by 21.4 percent. ApartmentList's analysis posits that less new construction is hampering the filtering process as demand for older units increases and remodeling activity grows.

During the recovery from the housing bubble collapse, construction of new multifamily housing rebounded strongly, with 2017 spending coming in at 3.8 times the amount spent in the 2010 trough. While this relative boom might give the impression that the rental market is currently overflowing with a glut of brand new units, the recent spike starts to look much smaller when viewed over a longer horizon. Since 1980, the share of rental units that are 10 years old or younger has been steadily declining, while the share that are over 30 years old has steadily increased. Furthermore, even the recent multifamily construction surge seems to be cooling off, making it unlikely that there will be a significant reversal of this trend in the near-term.

Read more