The Verona apartment complex in suburban Denver doesn’t have the flashy amenities some tenants covet. No infinity pool. No rooftop lounge. No concierge service. Still, demand at the 1980s-era complex is so strong that the landlord has raised the rent 72% on some apartments in just two years, after renovations.

Modest apartment buildings like the Verona that cater to middle-class and working-class families are becoming scarcer as fewer are built nationwide and older ones are demolished. That has resulted in a severe shortage of midtier apartments, causing rents for these units to rise at a faster pace than for luxury ones.

Even though construction of multifamily rental properties is running at the highest level in decades, the overwhelming majority of new units—more than 80% in the nation’s largest metropolitan areas—are luxury, according to CoStar Group Inc.

Construction costs are generally too high to justify building new complexes for low- and middle-income tenants, experts say, contributing to the scarcity. For instance, AvalonBay Communities Inc., one of the country’s largest apartment developers, spends $340,000 on average for each unit it builds, according to Dave Bragg, an analyst for Green Street Advisors. The average monthly rent, to make up for construction costs, is projected at $2,900—putting those units near the top end of even pricey apartment markets.

The difference in costs between installing granite countertops and stainless-steel appliances is so slight compared to buying land and installing elevators that economists say developing a luxury apartment and a midtier one comes out roughly the same. Historically, developers could save some money by building low-rise buildings in suburban locations, but even those are becoming increasingly difficult to build as even suburban officials push developers to develop midrise buildings in central locations and reduce sprawl.