A new Harvard University report shows a shrinking pool of affordable apartments, and more renters who are paying too much for their housing.
America’s Rental Housing 2020 was prepared by Harvard University’s Joint Center for Housing Studies (JCHS). It is an annual report that looks at important trends affecting rental housing and the people that rent. It finds that increased rents are affecting people at all income levels, but low-income renters face the greatest challenges.
In 2018, almost half (47.5%) of all renters were cost-burdened. This means that those renters were paying more than 30% of their monthly income toward rent and utilities. This is an increase of 266,000 renters paying too much for their housing since the year before.
One-in-four of all renters in 2018 paid half or more of their income for housing, which is called a severe housing cost burden. Low-income renters, though, were far more likely to be severely cost-burdened. In 2018, 72% of renters earning less than $15,000 a year were severely cost-burdened, as were 43% of those earning between $15,000 and $30,000.
Overall, 2019 saw an increase in the total number of renters, growing by 350,000. The growth was largely driven by increasing numbers of upper-income renters. Renters earning more than $75,000 a year made up three-quarters of the growth between 2010 and 2018. This reverses the trend from the 2000s, when low-income renters made up 93% of renter growth.
New construction of apartments grew 6% in 2018, and larger projects are becoming more common. Projects with 50 or more apartments were 61% of all proposals in 2018, compared with 11% in the 1990s or 27% in the 2000s. The growing development of large apartments signals that more cities are encouraging density to address housing shortages, but low-income renters do not necessarily benefit from the new housing being built.
In fact, the growth in new apartments largely targets the growing demand from upper-income renters. In 2018, 20% of new apartments had rents of $2,450 or more, while only 12% of new apartments had rents below $1,050. This means that there are fewer new apartments affordable to low-income renters, while there are a lot for upper-income renters to choose from.
The supply of low-cost rentals has continued to shrink. Having fewer affordable apartments available means that either prices go up as people compete for them, or people have to rent places that are too expensive. This is called a tight rental market. Between 2012 and 2018, the number of units renting for more than $1,000 increased by 5 million, but the number of low-cost units renting for less than $1,000 fell by 3.1 million. Low-cost units made up 33% of all rental housing in 2012, but only 25% in 2017.
Vacancy rates are another way to look at how tight rental markets are hurting low-income renters. The vacancy rate is the percentage of apartments that are available to rent in a market. You can look at vacancy rates overall, or for certain rent levels. A higher vacancy rate means there is a good supply of available apartments. A low vacancy rate means that people are competing for a small number of available units.
The national vacancy rate in mid-2019 was 6.8%. This is the lowest level since the mid-1980s. The market is also much tighter for low-cost units than for high-end ones. The vacancy rate for high-end rentals was 8.7% for the third quarter of 2019, but only 5% for medium- and lower-quality units.
Rents have also risen faster than the cost of other basic goods. Rents rose 27% between 2012 and 2019. This is four times greater than the increased cost of other goods on the Consumer Price Index. The median renter earning less than $15,000 had only $410 left each month for food, transportation, healthcare and other needs.
The report points out that rising housing costs and stagnant incomes have created more housing instability for low-income renters. More low-income renters are finding themselves at risk of eviction and homelessness. The report cites the 2017 American Community Survey (ACS) to point out that low-income renters are facing eviction at much higher rates than other income groups. Overall, 1.9% of renters reported being threatened with eviction within the previous three months. For renters earning less than $15,000, though, 2.7% had been threatened with eviction.
The report notes that federal housing assistance has been stagnant over many years and is not enough to meet the need. Of the 17.6 million eligible households in the U.S., only one in four receives assistance. As housing costs continue to increase, affordable housing providers need to give more subsidy to each recipient. This means that each year, fewer people can be served with the funds. The number of HUD program recipients has fallen from 4.8 million in 2013 to 4.6 million in 2018. Rural areas have also felt the squeeze in federal housing assistance. USDA’s rural rental program recipients have fallen from 413,090 to 390,110 from 2013 to 2018.
The report’s data show how low-income renters continue to struggle, especially in booming markets where the heated economy is driving up rents. Developers are targeting new units for wealthier renters, leaving low-income renters scrambling to find apartments they can afford. And when low-income renters do find a place, they too often have to pay more than half of what they earn to keep a roof over their heads.