December 14, 2017

New JCHS Report Examines America’s Rental Housing

Share Posted By:

Unprecedented growth in the rental housing market is slowing amidst persistent affordability challenges for low- and moderate-income renter households, according to 2017 America’s Rental Housing, the Harvard University Joint Center for Housing Studies’ (JCHS) newly released report. The report finds that fewer new renter households are being formed, rental vacancy rates have risen, and rent increases have slowed. At the same time, renter demographics are changing and rental affordability challenges remain prevalent. While renters are disproportionately younger and lower-income than all households, the report shows that growing shares of renters are older and higher-income. For example, the number of renter households earning more than $100,000 annually increased from 3.3 million in 2006 to 6.1 million in 2016. The report also finds that nearly 21 million renter households continue to pay more than 30 percent of their income on housing costs. This blog post will highlight the report’s key findings on the rental market affordability challenges.

Rental Housing Cost Burdens
According to JCHS, the number of cost-burdened renter households, defined as those spending more than 30 percent of income on housing, dropped from 21.3 million in 2014 to 20.8 million in 2016. The number of severely cost-burdened renters, those spending more than 50 percent of income on housing, declined from 11.4 million to 11.0 million over the same period. Despite the drop in the number of cost-burdened renter households, the report shows that at the average annual pace of decline between 2014 and 2016, it would take another 24 years to return to the 2001 level of 14.8 million households. The report highlights that the share of renter households with cost burdens remains high at 47 percent, and the rental housing affordability gap remains wide. While median monthly rental costs rose by 15 percent in real terms between 2000 and 2016 to $980, median renter household income fell sharply from $38,000 in 2000 to $32,000 in 2011, before gradually recovering to $37,300 in 2016. JCHS suggests that this rebound can be partially explained by the rise in the share of higher-income renters in the housing market. For example, the number of renters earning at least $75,000 rose by 40 percent to 9.1 million between 2011 and 2016, the fastest growth in renter households in any income group. The report notes that a high share of low-income households has housing cost burdens. In 2016, 50 percent of renter households earning between $30,000 and $45,000 were cost-burdened. The report suggests that the prevalence of cost burdens among lower-income renters can be largely explained by the shortage of affordable housing in the private housing market, and addressing the gap between income and housing costs will require solutions that would increase low-income households’ access to rental assistance, expand the affordable housing stock and preserve existing affordable housing.

Shortage in Rental Assistance 
Between 2001 and 2015, the number of very low-income households, those making less than 50 percent of area median income, rose by 29 percent to 19.2 million; however, the number of very low-income households receiving rental assistance rose only 14 percent over the same period. As a result, the share of very low-income households who receive rental assistance dropped by 3 percent to 25 percent between 2001 and 2015. The report notes that the growing gap between need and rental assistance is evident in the closed or long waiting lists for rental assistance in most cities. The report also highlights that while the number of housing choice vouchers issued increased from 2.0 million in 2006 to 2.3 million in 2016, the number of public housing units dropped from 1.1 million to 1.0 million, and the number of privately owned units with project-based subsidies fell from 1.4 million to 1.3 million over the same period. 

Affordable Rental Housing at Risk of Loss
According to JCHS, much of the subsidized rental housing stock is at risk of loss due to under-maintenance or expiring affordability periods. The report highlights that the nation’s public housing face a backlog of deferred repairs that was estimated at $26 billion in 2010, and the number of occupied public housing units fell by 60,000 between 2006 and 2016. Furthermore, the Rental Assistance Demonstration (RAD) program, which was launched in 2012 to convert public housing into long-term project based Section 8 contracts that provide more flexible financing for improvements, quickly reached its initial cap of 60,000 units and the cap has been increased to 225,000. The report also notes that nearly 500,000 Housing Credit units will come to the end of their required affordability periods by 2020, as the oldest units built under the program reach the 30-year affordability mark. It will require extensive preservation efforts to keep Housing Credit units with expiring affordability restrictions in the subsidized housing stock. 
In addition, the report notes that residential segregation by income has increased steadily in recent years, especially among households with the highest and lowest incomes. In 2015, the average renter household earning under $20,000 lived in a neighborhood where 28 percent of residents had comparably low incomes and only 15 percent had incomes above $100,000. JCHS recommends a set of actions to address this challenge, including incentivizing Housing Credit applicants to propose projects in a broader range of neighborhoods, reforming the housing choice voucher program to increase the options available to low-income households, adopting protections against source-of-income discrimination and providing mobility counseling. 

Rebuilding and Repairing Disaster-Damaged Homes
This year’s natural disasters, including devastating hurricanes in Texas, Florida and Puerto Rico and massive wildfires in California, will pose substantial rebuilding challenges for years to come. The report notes that disaster-damaged rental housing is often repaired or restored at a much slower pace than owner-occupied homes, as renters must depend on their landlords who control the rebuilding of their properties. For example, only 60 percent of rental units that were substantially damaged by Hurricanes Katrina and Rita in 2005 had been rebuilt by 2010, compared with 74 percent of homeowner properties with similar levels of damage. Furthermore, federal disaster aid generally provides more funds to homeowners than rental property owners who lack adequate insurance coverage. According to JCHS, rebuilding of units available to voucher holders is vital in any disaster recovery effort, given that these rental units comprise 62 and 64 percent, respectively, of the HUD-assisted housing stock in Houston and Tampa.

Policy Solutions
The JCHS report notes that addressing the nation’s rental affordability challenges, especially expanding the supply of affordable housing for low- and moderate-income households, requires a federal, state and local policy landscape that supports the efficient provision of affordable rental homes. The report emphasizes the importance of preserving the Housing Credit in federal tax reform and strengthening it to expand the supply of affordable rental homes, highlighting the Cantwell-Hatch Affordable Housing Credit Improvement Act (S. 548), a bipartisan legislation that would expand and improve the program’s ability to serve low-income households across the nation (Learn more about the impact of the Housing Credit in every state and congressional district on the ACTION Campaign website). The report also highlights the importance of facilitating a regulatory environment that does not cripple innovative solutions for expanding rental housing affordability. Recent Enterprise research demonstrates several solutions that can help increase the stock of affordable rental homes, including utilizing publicly owned parcels for creating affordable homes; preserving and increasing the supply of the small and medium multifamily housing stock, which provides 54 percent of the nation’s rental housing stock and is a key source of affordable housing; and addressing the regulatory restrictions that both decrease the supply of housing and increase the cost of housing development.