Top Photo: Adobe Stock
Rents continued to climb throughout the country in 2021, and low-income renters and renters of color were hurt the most, according to a new Harvard report.
The State of the Nation’s Housing 2022 is an annual report by Harvard University’s Joint Center for Housing Studies. It provides a broad look at the key issues that affect housing markets, availability, and cost in the U.S.
The report found that the share of low-income renters experiencing rent increases, income losses, and housing cost burden has grown since the pandemic began.
Higher burden of housing costs during the pandemic
The nation has long wrestled with a growing housing affordability crisis, but the pandemic has made this worse for low-income renters and renters of color. 2020 saw the first significant uptick in housing cost burden rates in a decade.
In 2020, 30% of all households had housing cost burden. This means they paid more than 30% of their income for rent or mortgage, plus utilities.
Severe cost burden means that households pay more than half their income for housing. In 2020, 14% of all households were severely cost-burdened.
Low-income and minority renters more likely to be cost-burdened
The pandemic hit renters especially hard, with 46% of all renters cost-burdened in 2020. This is a 2.6% jump from the prior year, compared with a 1% increase for homeowners. Almost a quarter (24%) of renters paid more than half their income for rent and utilities in 2020.
Low-income renters and renters of color fared the worst during the pandemic. Over 70% of renters who earned less than $30,000 were cost-burdened in 2020.
The share of Black renters with housing cost burden rose by 2.4%. This is four times the 0.6% increase for white renters paying too much for their housing.
Rising rents put the squeeze on low-income renters
Why have low-income renters struggled to recover from the pandemic even as the economy has been adding jobs? A severe shortfall in the affordable housing stock has driven up rents everywhere.
The pandemic made this worse, with fewer people moving and vacancy rates staying very low.
Rents increased nationally by 12% in 2021. This increase is more than 5 times the average yearly increase in the five years before the pandemic.
The largest rent increases were in the western and southern parts of the country. These are areas that have a lot of job growth that brought new residents. With more people looking for a place to live, it drives up the rent for the small number of vacant apartments.
Continued job and income losses for low-income renters
Professionals who could work from home during the pandemic have largely recovered from the immediate economic crisis. Low-income renters, though, are still facing job and income losses because of disruptions from the COVID-19 pandemic.
When combined with rising rents, low-income renters either find themselves cost-burdened or at risk of eviction.
Among renters earning less than $25,000 a year, 27% reported losing income in the first months of 2022. Among these low-income renters, 21% were behind on their rent. By comparison, only 9% of upper income renters earning more than $75,000 lost income, and only 5% owed back rent.
Housing production fastest in decades, but not enough for demand
The lack of affordable housing is the major reason for skyrocketing rents. The only way to bring rents down in the long run is to build more housing, including more affordable housing.
While most new construction is typically for high-end rentals, when wealthier renters take the new units, they leave their old apartments vacant. New tenants then move in, leaving behind their old apartments, and so on. In the end, this process opens up more affordable apartments to low-income renters.
Even as the pandemic has dragged on, construction of apartments has started to pick up. Multifamily housing production in 2021 was at the highest level in decades, with 474,000 new apartments started.
This is still well below the demand, with a need for 7 million homes affordable to low-income renters. If this production level continues, though, it is a good start on the road to lower rents.