Rental Housing Demand Surges, Confirms Importance of Our Workforce Housing
“The decade-long surge in rental demand is unprecedented;” according to a Joint Center for Housing Studies of Harvard University (JCHS) report released December 9, 2015. In mid-2015, 43 million families and individuals lived in rental housing, up nearly 9 million from 2005—the largest gain in any 10-year period on record. In addition, the share of all U.S. households that rent rose from 31 percent to 37 percent, its highest level since the mid-1960s.
But even with the strong rebound in multifamily construction, tight rental markets make it difficult for low- and moderate-income renters to find housing they can afford. As a result, the number of cost-burdened renters set another record last year.
Addressing the challenge of affordability in a time of rising overall demand will require greater efforts from both the public and private sectors to expand the range of rental housing options.
About 90 percent of the rental housing that Freddie Mac Multifamily finances help families with incomes at or below area median income. Known as workforce housing, it is home to people who serve our communities by playing a vital role in our lives, such as teachers, nurses and firefighters. It’s also home to seniors, low-income households that do not qualify for rent subsidies, and aspiring homebuyers. Workforce housing is located everywhere – from the urban core to suburban communities and small towns.
The report findings reinforce the importance of our workforce housing focus. Here are a few highlights:
- The number of renter households soared by roughly 9 million households between 2005 and the third quarter of 2015. This brings the total number of renters to 42.6 million today.
- With growth accelerating in recent years, the 2010s are on track to be the strongest decade of renter growth ever recorded, with the addition of 1.05 million net new households per year so far. This is nearly double the pace of growth in the 1970s when the baby boomers came of age.
- By income, the largest increase in renters – 4 million – was among households earning less than $25,000 annually, both because low-income households are much more likely to rent and because their numbers have swelled following the recession.
- Since the housing market crash, conversions of owner-occupied single-family homes to rentals have accounted for much of the rental housing growth.
- As of 2013, fully 61 percent of the nation’s 44 million rental units were in small structures with two-to-four units, and a quarter in mid-sized buildings with five to 19 units. Contrary to popular perceptions, large rental buildings (20 or more units) accounted for only 18 percent of the overall stock and just 25 percent of the rental supply in central cities.
- The supply of units that renters can afford is not keeping up with demand. The net gain in moderately priced units (rents of $400-$799) was 12 percent, while the increase in renter households that could afford only these units was 31 percent.
- Since 2005, rents have climbed while household incomes have substantially declined. As a result, the number of cost-burdened renters (paying more than 30 percent of income for housing) continues to increase. Plus, the number of these households with severe burdens (paying more than 50 percent of income for housing) jumped from 7.5 million to 11.4 million nationwide, the highest increase in any 10-year period.
Affordability pressures affect renters in every state, with shares of cost-burdened households ranging from over a third to well over half. By 2014, only seven states had cost-burdened shares that were below the 2001 national average of 41 percent.
Click the shaded areas of the map to see housing cost burdens for renter households with incomes under $15,000 within each metro and micro area. (JCHS tabulations of U.S. Census Bureau, 2014 American Community Survey)
You’ll see us continue to focus more on the important issue of workforce housing in the future. It’s an important part of our business, our mission — and Freddie Mac’s commitment to moving housing forward.
Access the full JCHS report.
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