Affordability isn't just an issue for potential homeowners, it's also a major problem facing renters today. Despite more units entering the market every year, property values continue to appreciate nationally and rents continue to rise, averaging about a 3 percent annual increase so far this year.
This is largely driven by an unprecedented demand for rentals. Every day, more Baby Boomers and Millennials enter the rental market in record numbers. A growing portion of the nation's 67 million Boomers are looking to downsize into more easily managed units, while many Millennials are entering rental homes for the first time. New renter households have increased by 9 million over the past 10 years — the largest decade increase on record.
Meanwhile, our nation's supply of housing, particularly affordable rental housing, is not keeping up with demand. Per some estimates, there are only 7.3 million affordable rental units to serve 11.2 million households living on very low incomes. A recent study from the Joint Center for Housing Studies found that more than a quarter — 27 percent– of all renters are severely "rent burdened"–spending more than half of their income on rent. In the 1960s, this number was around 12 percent.
We're now hearing these concerns growing within the apartment industry itself. According to new opinion research released today by Freddie Mac Multifamily, those working in the multifamily industry are less optimistic about the outlook for affordable housing as compared to just one year ago.
The survey looked at how lenders, developers, builders and investors feel about the market–where we are, where it's going, and the challenges that lie ahead.
In term of challenges, affordability rose to the top of the list. A plurality, 42 percent, of those surveyed said they were less optimistic about affordable rental housing today than last year. Most often costs, such as those associated with land and construction, were cited as the greatest challenge. When asked how they are responding to these affordable housing challenges, most in the industry could not cite specific action they are taking to address it.
These findings were not particularly encouraging. But one additional result did provide some optimism. The survey also asked industry participants about the areas that should be a focus for future. Respondents rated several as extremely or very important: enhancing the energy efficiency of rental properties, increasing the supply of affordable housing, addressing the housing needs of America's seniors, and creating more properties affordable to working families.
These areas all help address our nation's affordability crisis. Here at Freddie Mac we've made all of these areas a priority, and continue to work hard to ensure we're doing all we can to bring affordability to the rental housing market.
Learn more about how Freddie Mac Multifamily is helping lenders, owners, developers, and non–profit organizations provide affordable rental housing.