Harvard University’s Joint Center for Housing Studies (JCHS) released their annual report on The State of the Nation’s Housing on June 19. The report is a valuable resource of trends and statistics for anyone in the housing industry. NMHC partners with JCHS in the development of the report by providing data and resources on the multifamily industry and supports JCHS’s efforts to examine the state of housing in the U.S.
The 2018 report marks the 30th anniversary of the inaugural study and assesses whether and how key metrics have changed over the last decade.
According to the report, a lot has changed since 1988 – but there are still housing challenges to overcome. For example, this year’s report notes that in the 1980s there were fewer young adults buying homes, therefore demand for rental housing remained high. Additionally, the loss of low-cost rentals resulted in millions of families spending an outsized share of their income on housing. For this year, the study notes that homeownership rates among young adults are even lower and the number of cost-burdened renters has increased.
The report examines the many reasons why these problems persist, including higher costs for building materials and labor, rising land prices, regulatory barriers, and the growing income to housing cost disparity.
Although the affordable housing challenge is a result of a sum of these factors, the study notes that weak income growth among low- and moderate- income households is a primary factor. “If income had kept pace more broadly with the economy’s growth over the past 30 years, they would have easily matched the rise in housing costs,” the report reads.
The study also details how today’s demographics affect the housing market. Immigration rates are a driving factor of housing demographics. As it is, the foreign-born share of households has grown from 15 percent in the 1980s to nearly 50 percent today, and the research indicates that even more growth will occur in the coming years. Lower rates of millennials heading households also contributed to lower projected household growth. Simply put, millennials are not forming households at the same rate as previous generations did. Lastly, the aging baby boomer population is also a notable consideration. Adults aged 65 to 74 are the fastest growing age group and are anticipated to grow at an “unprecedented pace.” According to the report, this will “increase the presence of older households in both the homeowner and rental markets.”
In JCHS’s previous reports, it was noted that the multifamily market was on the rise. In fact, this year’s report cites that rental demand had been on the rise for nearly a decade. While multifamily demand may have increased more slowly over the past two years, demand for apartments continues to grow.
In the study, the JCHS also analyzes multifamily construction. After the housing crash, multifamily construction increased – peaking at 397,000 units built in 2015. In 2016, the construction rate slowed slightly by one percent and continued, and then decreased by 10 percent in 2017.
Diving into the affordable housing challenge further, the study compares the amount of cost-burdened households over time: 38.1 million in 2016, compared to about 31.6 million in 2001. Although the number of cost-burdened households has decreased from its peak in 2011, the progress has somewhat plateaued in recent years. In fact, the number of severely burdened renters increased by 3.6 million between 2001 and 2016.
Although the nation does face housing challenges, the report outlines possible solutions. “Expanding the supply of lower-cost housing would help relieve the cost burdens of some households of modest means, but subsidies are the only way to close the affordability gap for the nation’s lowest-income families and individuals,” the report reads. Additionally, it states that even though multifamily construction has been slowing, vacancy rates are still low enough to support more housing – which should aid affordability concerns.
“Tackling this broad mix of conditions will require collaboration of the public, private, and nonprofit sectors in a comprehensive strategy that fosters innovation, design, construction, financing, and regulation of housing,” the report reads.
NMHC believes that it is more important than ever for the private and public sectors to find ways to work together to spur housing growth. More information on NMHC’s efforts regarding affordable housing can be found on the affordable housing advocacy landing page.
To examine the full JCHS The State of the Nation’s Housing report, please visit their site.