If you're looking to rent, affordability is a key consideration—and, for many people, a serious concern. Study after study has documented the ongoing affordability crisis—particularly for those who earn less than an area's average income.
But are rents becoming more affordable, or less?
A new Freddie Mac analysis takes a close look at this issue, and uncovers some concerning results. In fact, as the Washington Post reports, the study finds that over the past six years, the gap in affordable rental units has widened into a chasm.
The report looks at apartments that Freddie Mac Multifamily has financed more than once between 2010 and 2016—and compares the affordability of the same rental units at two different points during that time.
The findings were striking. At the initial financing, 11.2% of the total number of rental units were affordable to very low–income (VLI) households, who earn no more than 50% of the average area income. However, by the second financing, rents had increased so significantly relative to income that just 4.3% of the same rental units were affordable to VLI households. That's more than a 60% drop—over just a few years.
Several factors contribute to this shortfall. The main factor is a combination of increasing rents and stagnant household incomes. The growing demand for rental housing and the rising cost of building new units has only made this problem worse. In fact, our previous research confirmed that—taking all U.S. housing into account—supply has fallen short by approximately 400,000 units each year since the economic crisis. If actions are not taken to increase the supply of affordable units, this housing shortage could become even worse.
In a matter of just a few years, we found that a large number of units previously affordable to very–low income families could no longer be considered affordable.
The report also looked at nine states where Freddie Mac Multifamily financed the most rental units during this period. In seven of the states—Texas, Georgia, Colorado, North Carolina, Arizona, Nevada and Washington State—the number of units affordable to VLI households decreased significantly.
At Freddie Mac, we commit ourselves every day to supporting the creation and preservation of affordable rental housing. Nearly 90% of the apartment units we finance each year offer rents that are affordable to individuals who earn the average area income or less. Many of the properties we finance likely would have trouble securing funding elsewhere.
Read our report for more details.