When housing prices become too expensive, many people look to rent an apartment to start their own lives away from their parents.
Apartments offer many benefits that homeownership doesn’t.
One of the biggest is the lack of need to fund major repairs out of your own pocket.
When shopping around for an apartment, you may realize that the prices for each complex vary.
Most of them tend to be expensive.
Since apartment housing is often an alternative to owning a house because of affordability, you may wonder why apartments have become expensive.
Here are 10 reasons apartments are so expensive.
Why Are Apartments So Expensive? (Top 10 Reasons)
One of the biggest reasons that apartments are expensive is their location.
Apartments situated near metro areas or tourist areas tend to be more expensive than those located in the suburbs or a rural setting.
That’s because the metro and tourist areas tend to have the highest demand.
A lot of people who work in the city and need to operate in an office like to live close to their office.
It allows them to live without using a car, for example, since they can use public transportation or a bike.
Because this lifestyle can save a person a lot of money, as well as contribute to protecting the environment, many people want to adopt the lifestyle.
The problem is that apartment complexes only have so many apartments available.
When there’s a high demand for an apartment because of its location, then the price of rent increases.
This also goes for apartments located near a tourist area like a beach or an active local nightlife.
In this instance, people are trying to rent a vacation apartment to enjoy the tourist attractions.
Some people may rent the apartment for themselves for vacations.
Others may rent it and then use it as an Airbnb to attract other tourists to the area and make money.
Apartments know it is possible to make money if they’re close to a tourist attraction.
Because of that, rental fees are expensive.
2. Land Costs
Another reason that apartments are expensive ties into their location.
If an apartment is in a high-demand area, like the city, then the price of owning the land is going to be expensive.
Like most businesses, apartment complexes have to pay for the land that they’re using.
This may be in the form of property taxes or rent if they are leasing the land from a landowner.
Some plots of land are worth more than others.
Land in the city, for example, tends to be extremely expensive because there’s not that much of it available.
Cities build on every possible square foot of land.
If the land happens to occupy an area that sees a lot of business or traffic, such as a downtown area, then it commands a higher price to rent.
That’s because there’s a lot of demand for that particular parcel of land.
It has an opportune area that can attract a lot of people to it.
Landowners know this and will either sell the land or lease it at a high price.
Either way, apartment complexes will need to spend a good amount of money to obtain that land.
If they’re renting the land, then their rental fees will be high since they need to pay their own rent and still have enough to operate the business.
Apartments are expensive depending on where they’re built.
Land parcels can vary from inexpensive to extremely expensive depending on their location.
A lot of people think paying rent for an apartment is expensive because they’re unaware that it includes their utilities, too.
Some, although not all, apartments bundle rent with basic utilities like electric and water bills.
Instead of having their tenants pay those bills themselves, the apartment complex handles the utilities.
In return, apartment renters pay a higher rental fee.
The fee includes their basic rent as well as utility costs.
In places where utility prices are expensive, the bundle might actually save them money.
In other places, it may end up costing them more.
In situations where you’re unable to shop around for your own energy or water company, you may be stuck with the company that the apartment chooses for you.
Even if another company offers a cheaper price, you’re unable to switch to that company.
As a result, you’re paying more for your rent because the apartment uses a more expensive utility provider.
There are other utilities, too, that tend to drive up the cost of the rent.
Trash pick-up is another one that most people aren’t aware adds to their rental fee.
Since apartment complexes host a large number of people, they need a more expensive trash collection plan to deal with their dumpsters.
The cost of that service is included in the rent.
Some apartments also provide internet, but in most cases, you’ll need to pay for your own internet service.
This can make renting an apartment expensive, too, since you’re reliant on whatever the complex provides for internet service.
The cheapest option may use a type of service that the apartment can’t allow installation of because it breaks their rules.
For example, if the internet company needs to dig new fiber optic cables, then the apartment may be unwilling to allow you to have that internet service.
This ends up forcing you to obtain internet from sources they do approve of.
Those sources aren’t always cheap.
With the high price of rent, other utility costs can make living in an apartment even more expensive.
Arguably, one of the best reasons to rent an apartment over homeownership is that you don’t have to pay for maintenance.
In most instances, if something breaks in your apartment that the apartment provides, you can rely on a maintenance staff member to fix it.
You don’t have to worry about paying for their service either.
If your HVAC system breaks down, for example, then it could result in a pricey fix, especially if it needs replacing.
The apartment covers the cost and even replaces the unit without you needing to pay for a new system.
While you might think this would make living in an apartment less expensive, it actually doesn’t.
That’s because apartment complexes add maintenance fees to your rent.
When they calculate rental prices each year, apartment complexes will determine the likelihood of needing any maintenance services.
If they know that many of their HVAC systems or washers and dryers are nearing the end of their lives, then they may know that they’re going to need to use a lot of money to fix or replace them.
To cover those costs, they’ll increase rent.
You end up paying more each month to cover maintenance.
Essentially, you’re still paying for maintenance service and new appliances.
Instead of saving up money and setting it aside for emergencies like you would as a homeowner, you’re basically paying it out every month.
This ultimately ends up being more expensive, especially if you don’t use maintenance or require any new appliances in that given year.
Since you didn’t use the service, the rent you paid isn’t doing anything for you.
It’s just more money out of your pocket.
Apartments are expensive because of how they fund their maintenance services.
5. Staff Payroll
When you’re a homeowner, unless you live in a mansion, you likely don’t have maids, butlers, or other household staff keeping up your house.
You don’t have to worry about paying anyone’s salary.
That isn’t the case at an apartment.
An apartment complex is, at its very heart, a business.
As with any business, it has several staff members that it needs to pay.
There are receptionists who help renters out in the local clubhouse or office.
They’re usually the face of the apartment since they handle new applicants, too.
There are also gardeners and maintenance workers that they need to pay.
Maintenance, in particular, requires specialized skills from a trade school.
As such, these staff members tend to be more expensive to pay than others.
Some apartment complexes will hire the very best to ensure they’re able to handle any problem that their renters have.
Others keep their staff members affordable by hiring average joes with some basic construction and repair skills.
Then there are also those associated with the finances or operations of the apartment complex.
If the apartment belongs to a chain, then there might be several executives who oversee different apartments together.
Finally, there are investors who invested in the land development and creation of the apartment complex.
They expect their share of the profits, too.
All these staff members need livable salaries.
Their funds only come from one place: the rent that is paid by the tenants.
The more staff members that an apartment complex has, the more expensive rent is going to be.
The level of quality of those staff members also adds to the price of the rent.
If the apartment complex caters towards a certain household income, then they might want to splurge on their staff pay to ensure they attract the very best for those positions.
As a result, their renters pay a higher rent for high-quality staff members.
Apartments are expensive because the rent has to cover the salaries of several different individuals.
One of the biggest factors that contribute to the price of rent is how many amenities the apartment provides.
An apartment that has a pool, for example, is going to be more expensive than an apartment that doesn’t have a pool.
That’s because there are several costs associated with a pool.
There’s the actual installation of the pool, which for an apartment, could easily cost several thousand dollars depending on its size.
If the pool uses heating technology or other types of special features, then that also adds to its price.
The cost of energy to heat the pool, for example, makes owning the pool expensive.
Then there’s maintenance.
The pool needs regular cleaning and careful monitoring to ensure it’s safe to use.
Some apartments may even hire a lifeguard to stay on watch to ensure everyone’s safety while using it.
All these costs end up adding to the rent.
Even smaller amenities like basketball courts, workout rooms, or tennis courts add to the cost of the rent.
Even a dog park adds to the rent because it requires regular maintenance and products like dog poop bags.
The more amenities that an apartment has, the more expensive the rent is going to be.
Besides the cost to maintain these amenities, apartment complexes also know that certain amenities will attract people to their complexes.
Since the demand for their apartments is higher, the complex can raise the price of rent to ensure only a few select people can afford it.
Apartments are expensive because of amenities and the cost to run them as well as the increase in demand it provides for the complex.
7. Construction And Finishing Materials
Another reason that apartments are expensive has to do with the materials used during the apartment’s construction and its finishing.
Most apartments tend to go as cheap as possible when it comes to finishings and construction.
They may have a target household income that they’re aiming for and know that they need to keep costs low to allow them to afford the apartment.
That’s why they might have fake wood instead of real wood.
They might have outdated cupboards instead of modern ones.
They may use off-brand fridges and washers and dryers.
In most cases, cheaper apartments tend to use carpets to finish their rooms.
That’s because the carpet is cheap and easy to replace after each tenant leaves.
Not all apartment complexes go the cheaper route, however.
Others target a higher household income.
These complexes will use real wood for their floors.
They’ll have high-quality cabinets that are new and freshly painted.
They’ll even splurge on expensive appliances from brand-name sources.
Most of these apartments tend to lean towards the luxury lifestyle.
They know that their tenants are willing to pay more to have an apartment that matches their own lifestyle and taste.
Depending on the materials used in the apartment, rent can be higher or lower.
If the complex chooses high-quality materials that border on lavish, then you can expect the rent to be higher.
8. Private Parking
Tenants may not realize it, but their rent is also high because of parking.
Apartment complexes handle parking in different ways.
It mostly depends on the apartment’s location.
An apartment in the city doesn’t have a lot of parking available.
To give their tenants a place to park, they might rent out a portion of private parking in a parking complex.
Since they have to pay a certain amount of money to reserve that area, they pass the cost onto those using it.
Not everyone will see an increase in their rent or have to pay a parking fee on top of their rent, but some complexes choose to make it a blanket cost.
This means all their tenants will pay for the cost of parking regardless of whether they park a car or not.
Apartment complexes outside of the city have a bit more flexibility when it comes to their parking.
Some will offer two different types of parking.
There’s covered and uncovered parking.
Uncovered parking tends to be free, but if the apartment complex is in an area with limited parking, then they might charge for that, too.
Covered parking tends to come with a price because it’s in demand.
Tenants want to protect their cars from the rain, snow, and sun.
Since the apartment complex built covers for the cars and needs to maintain them from time to time, they’ll often sell parking passes.
Tenants need to pay for this parking pass either once a year or on top of their rent.
Depending on the demand for the limited spots, the price for the parking pass may be quite high.
Apartments are expensive because of how they handle parking.
All apartment complexes need to pay taxes.
They may need to pay property taxes or standard commercial taxes.
When tax rates increase, it means that the complex has to pay more towards taxes.
Their profit margin decreases.
This might mean that they’re unable to fund certain projects or pay certain staff members.
To ensure they continue to generate the type of profit they need to do business and flourish, they usually end up raising the rent.
If the apartment complex owns the land, then one of the biggest taxes that they’ll need to pay is a property tax.
As the complex becomes larger or adds more amenities to the area, their property tax increases.
That’s because the value of the complex is increasing.
To cover the tax, the apartment complex will raise the price of rent.
Whenever you hear that tax rates are rising, you can usually expect your rent to also increase.
10. No Fixed Rental Prices
A final reason apartments are expensive is that they’re always increasing their rent.
You may start off paying $400 for a one-bedroom apartment, but in a few years, that price may jump to $800.
Any of the factors listed above may contribute to the price increase.
However, the reason that apartments are expensive is that there’s nothing in place to lock a price in forever.
This is unlike getting a mortgage at a fixed rate.
Even if something happens in the economy that makes rates increase, you’re still paying the same mortgage that you agreed to initially.
When you rent an apartment, that ability isn’t available.
You’re subject to the landlord and whatever rental increase they decide to make.
Apartments are expensive because you can always count on the rent to increase over the years.
Renting an apartment comes with a few advantages over homeownership.
However, the cost of renting can quickly exceed the cost of owning a home in certain cases and areas.
There’s no question that renting an apartment in a city is the most expensive option.