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Rising Rents, Dwindling Affordable Housing Supply Intensifies the Rental Housing Crisis

February 20, 2020
White and blue concrete 4-storey building
Photo by Ján Jakub Naništa on Unsplash

According to a new report from Harvard’s Joint Center for Housing Studies titled America’s Rental Housing 2020 found that despite record high rental construction rates, rapid declines in low-cost units, wage stagnation, and rising rents continue exacerbate the housing crisis low-income renters are facing. The study finds that in 2018, the cost-burdened share of renters, those paying more than 30 percent of income on rent and utilities, was greater than 40 percent in 46 states, with seven states exceeding 50 percent.

Charts showing Increasing shares of middle-income renters have cost burdens, particularly in large metros

The study notes a sharp reversal in rental housing trends where demands shifted from predominately low- and middle-income renters to high-income renters, significantly impacting new construction. The report finds that the median asking rent for units completed in between June 2018 and June 2019 was $1620, which is “37 percent higher, in real terms, than the median for units completed in 2000.”

Chart showing strong growth in high-cost rentals has coincided with dramatic declines in low-cost units

This coincides with a dramatic decline in low-cost units, renting for under $600, and a decline even among modest units renting for between $600 and $999. Specifically, the share of low-cost units dropped from 33 percent in 2012 to 25 percent in 2017.

The outcome of this trend is that 10.9 million renters—one-in-four renter households—spend more than half their incomes on housing in 2018.1 This is especially burdensome for low-income families, who subsequently face higher housing instability with fewer resources left to pay for necessities, such as food and healthcare.

Unequal Impact

Chart showing high housing costs prevent vulnerable renter households from spending on basic health needs

The report also outlines how the nation’s rental housing crisis disproportionately impacts minority communities noting, “Black renters had the highest burden rate in 2018 at 55 percent, followed closely by Hispanic renters as 53 percent, and then by Asian/other renters at 45 percent.” That is contrasted to 43 percent for white renter households. The study finds this trend is consistent even controlling for income.

The federal government is struggling to meet the demand. In 2018, the Department of Housing and Urban Development’s (HUD) funding for rental assistance grew from $37.4 billion in 2013 to $40.3 billion. In reality, it is just an average annual increase of 1.5 percent.2  Due to the discrepancy, three out of four of the 17.6 million eligible households do not receive rental assistance.

Key Findings include:

Income Inequality in America Continues to Rise

  • In the past 30 years, the average income of the top fifth renters grew by 40 percent, while the bottom fifth fell by 6 percent. The income disparities between the highest and lowest renters grew from 12 times to 18 times.

The Stock of Low Cost Units is Shrinking. The Supply of High Cost Units Continues to Grow.

Chart showing rents continue to climb much faster than general inflation
  • Regulatory barriers, labor shortages, and local resistance to high-density development restrict the construction of rental housing that even middle-income households can afford.

An Increasing Number of American Families are Cost-Burdened.

  • In 2017, 208 million US households were spending over 30 percent of their incomes on housing. 10.9 million US Households were severely burdened, spending over 50 percent of their income on housing.
  • The study notes that homelessness is on the rise after falling for the previous six years and notes high-cost burden can lead to evictions and homelessness. The report cites the 2017 American Housing Survey finding that 1.9 percent of all renter households—including 1.4 million adults and 810,500 children—reported being threatened with eviction within the previous three months.
  • The number of cost-burdened renters households remains high especially for minority households. In 2018, Black renters had the highest cost-burden rate closely followed by Hispanic and Asian renters.

Scarcities in Affordable Rental Housing.

  • The scarcity in the supply of affordable housing is forcing 17.6 million very-low-income renters, earning less than 50 percent of area median income, to compete for an extremely limited supply of housing affordable for their budget.
  • The supply of federally subsidized unit has not increased in a meaningful way  since 2010.
  • In 2019, unit vacancy rates hit 6.8 percent, the lowest since the 1980s.
  • Affordability restrictions on 935,000 federally subsidized rental units are set to expire by 2030 and nearly 50,000 federally subsidized units nationwide were converted to market rate between 2014 and 2018.
Chart showing the supply of federally subsidized units has remained essentially flat since 2010

Though the rental crisis has moved cities and states to implement new policies and has caught the attention of the biggest tech companies, universities, and hospitals, their efforts are not enough to address the scale of the problem at hand. The report’s findings emphasizes the urgent need for large-scale federal investment in quality affordable rental housing and reducing barriers to affordable housing development. The Inclusivity Institute also believes this is a critical time to explore new, innovative multi-sector strategies expand access to and preserve affordable housing.We aim to do work towards those solutions with a focus on decreasing concentrations of poverty and reducing racial inequality in our housing markets.