As Inflation Rises, Houston Has Built The Nation's Biggest Pool Of Luxury Apartments
Houston has built the nation's largest inventory of luxury multifamily units over the last 10 years as tenants flock to high-end rental housing, so far undeterred by high inflation and cost-of-living hikes.
Houston built 72,000 luxury units in the last decade, according to data from StorageCafé, in a national market that is largely only building new luxury complexes. That was enough to beat its next closest competitors, New York City (61,000 units) and Austin (59,000 units).
Last year, 376,495 luxury units were built across the U.S., compared to 41,255 non-luxury. Over the last decade, 94% of Houston's new apartments were classified as luxury, though the Bayou City is bested by major Arizona metros like Gilbert and Chandler, and by Plano, Texas, where at least 99% of new apartments are classified as luxury.
"According to our analysis, Houston shifted decisively toward premier living over the last decade," Doug Ressler, business intelligence manager at parent company Yardi Matrix, said in an email. "Boasting a strong economy and important population growth, Houston’s prosperity also translates into an increased appetite for rental apartments that provide superior living conditions for their residents."
Ressler added the tight housing market means those with the wherewithal to buy houses are renting instead, and developers are rushing to add to the multifamily supply. Those residents are expecting more amenitized spaces, too, he said, with features like coworking spaces and resort-style pools.
Units are rolling out larger than ever, at an average of 961 SF, 137 SF larger than non-luxury units.
Houston currently has 15,151 units under construction across 58 communities, but many more are expected: 34,506 units over 116 communities, according to July data from ApartmentData.com.
Houston's hottest markets include Tomball, Friendswood, Lake Houston and other suburban submarkets, according to ApartmentData.com data based on percentage of growth year-over-year and the percentage of the market absorbed. But ApartmentData.com President Bruce McClenny said the greater Katy area alone has 2,500 units under construction, twice as many as Inner Loop locations like the Montrose, Museum District and Midtown.
Though those luxury units come with corresponding price tags for Houstonians, Houston remains the most affordable metro in Texas for renters. Rents in Houston are $1.40 per SF, just below San Antonio, which is priced at $1.41 per SF. In keeping with its skyrocketing home sale prices, Austin rents are the most expensive in the state, at $1.91 per SF.
Though Houston is still the most affordable option in the Texas Triangle, some wonder whether the luxury trend can continue amid inflation and the rising cost of living.
McClenny said his personal electric bill has doubled, and he is concerned about how people will have to change their lifestyles in the current economic climate.
"I’m concerned with affordability," McClenny told Bisnow. "I'm at a loss, coming back to how are people reacting to [rent prices rising]? Where are people going? How are they changing their lives to try and make ends meet in this higher rents, higher food prices [world]?"