Filtering up

An honest-to-goodness example of an apartment complex about to “filter up.” People understand that a tight housing market leads landlords to raise rents. What they often don’t seem to understand is that a tight housing market also causes some landlords to invest more money in their properties in order move them into a more expensive submarket. That’s how a shortage of units in the $1,200/month submarket (for example) can hurt someone shopping in the $800/month submarket.

In this case, high demand for rental housing in south Austin has convinced Pensam Capital to upgrade what I’m betting are fairly cheap apartments just a couple of blocks from South Lamar. If this were happening a couple of years from now, everyone would be blaming South Lamar’s new apartment complexes for gentrifying the area. But other than the Post property a mile away, the others have just started or are just about to start construction. It’s hard to attribute Pensam’s investment to anything other than high rents and a shortage of upscale rental housing in the area.

Filtering down happens too, of course. It’s just that no one sends a press release to the Austin Business Journal when they decide to cut back on maintenance and allow their property to slip in to a cheaper submarket. Extreme instances of housing filtering down still make the news, though.