Cambridge, Mass.—Despite multifamily housing construction accelerating at its fastest pace in three decades, supply has failed to meet demand. The result is a record number of renter households facing severe affordability problems, which is among the findings of a new biennial rental housing report from the Harvard Joint Center for Housing Studies (JCHS).
“America’s Rental Housing: Expanding Options for Diverse and Growing Demand,” reports supply of rental housing has increased, but demand has grown even faster. The number of cost-burdened renters—those paying more than 30 percent of income for housing—soared from 14.8 million to 21.3 million between 2001 and 2014.
In total, the share of renters who are cost burdened stands at 49 percent. Some 26 percent are severely burdened, meaning more than half their income goes for housing. Those percentages have grown substantially since 2001, when the figures stood at 41 and 20 percent, respectively.
Factors leading to the housing affordability issues are numerous and diverse.
“At a national level, the rising affordability levels reflect steady increases in real housing costs during a period when wages and household incomes have been stagnant, or even lost ground for many families,” JCHS senior research associate Jonathan Spader told MHN.
“Those are the direct contributors. But the underlying sources of rent increases and stagnant wages are complex, especially when the issues are viewed within the context of individual cities. Population growth, barriers to the development of new rental units, and stagnant funding for rental assistance all play a role, along with the multitude of factors that affect household incomes.”
A number of headwinds are preventing the nation’s rental housing stock from being affordable for a larger swath of the population. Among the most daunting is the growth in the number of renter households, which is likely to continue as Millennials age and form new households, according to Spader.
“The filtering of units from higher rents to lower rents as they age has traditionally been a key source of affordable units,” he said. “With the size of growth in rental demand, the number of new units becoming affordable is likely to slow in the face of increasing upward pressure on rents. The political environment, with stagnant funding for rental assistance and production of affordable units through LIHTC, is another headwind, limiting the availability of assistance in a period when an increasing number of households need relief.”
What is likely to be the impact of a continuation in the growth of renter households facing affordability concerns? “The last two years have seen continued tightening of rental markets,” Spader said. “Continued growth in rental demand would only accelerate the trends that we’ve described in this report.”