The Harvard Joint Center for Housing Studies (JCHS) released a new report, America’s Rental Housing 2020, that examines the state of our nation’s rental housing. The report explores rental household demographics, the current rental housing stock, the state of rental markets, rental affordability and rental housing challenges. NMHC is proud to be a long-time sponsor of the JCHS housing reports.
According to the report, the number of high-income renters is on the rise. This shift in renter household demographics is a departure from the past. Since the start of the decade, households with incomes up to $75,000 accounted for three-quarters of the growth in renters. This is a change from the 2000s, when low-income renters accounted for 93 percent of renter growth.
In response to the rise in high-income renters, developers have been more focused on building on the high end. Overall, rental construction is at its highest levels in three decades. In response to the demand from high-end renters, the median asking rent for new construction between 2018 and 2019 rose about 37 percent, in real terms, from 2000. However, the uptick in high-end new construction isn’t only a response to the demand.. The rising costs to develop mean it’s more difficult to build at the low-end. Between 2012 and 2019, commercial land costs doubled, and construction costs increased by 39 percent. Because of the high cost to build at the low-end, low-cost rentals have dwindled. In fact, the number of low-cost rentals under $600 fell by 3.1 million between 2012 and 2017.
The lack of affordable rental units has led our nation to a housing affordability crisis. According to the report, the share of renter households paying at least 30 percent of income for housing in 2018 was 47.5 percent. And it’s not just a crisis at the lowest income levels. The report also found that cost burdens are rising fastest among middle-income households.
With a lack of housing affordability on the rise, the report also examined what policymakers could do to lessen the crisis. “The federal response has not kept up with need,” the report reads. “The shortfall in federal spending leaves about three out of the four of the 17.6 million eligible households without rental assistance.” To solve this growing problem, the report suggests an increase in subsidies and federal funds, paired with building more market-rate rentals for low- and middle-income renters. But to do so, policymakers must enact public mandates and incentives to ensure that property owners can build more affordably and the public and private sectors must then come together to build the rental housing our nation needs.
To explore real-life solutions to the housing affordability crisis, check out the NMHC Housing Affordability Toolkit. If you wish to learn more about NMHC’s work regarding affordability, visit our affordability webpage. Click here to download the full JCHS 2020 America’s Rental Housing report.