Rental Demand Still Going Strong
Affordability Continues To Be a Growing Concern
According to The State of the Nation’s Housing 2016 report by the Joint Center for Housing Studies (JCHS) of Harvard University, “rental demand is expected to remain robust over the next decade.” Factors affecting this statement include millennials moving out of their parents’ homes to establish their own households and aging baby boomers increasing the number of older renters. Homeownership rates for households in their 30s and 40s continue to slide, as well.
Robust Multifamily Growth
To meet this strong demand, multifamily construction ramped up for the fifth straight year, reaching a 27-year high. The majority, about 36 percent, of new units are located in dense urban areas, while 30 percent each was located in medium- and low-density areas. Nearly half of the units delivered in 2014 were in buildings with 50 or more units.
Growing Number of Units Remain Out of Reach
Although the new supply may help accommodate the demand, the newest units are intended for the upper end of the market. The median asking rent on new apartments was $1,381 per month in 2015, well out of reach for the typical renter earning $35,000 a year.
Growth in low-rent supply is largely driven by downward filtering of older units. Over the last ten years, the number of low-rent units increased by less than half of the gain in higher-rent units, and far below the growing number of low-income renters for which these units would be affordable.
While large everywhere, the gap is especially wide in many faster-growing metros of the South and West. For example, Austin, Dallas, Las Vegas, Los Angeles, Orlando, Phoenix, Portland, Riverside, Sacramento and San Diego all had no more than one affordable and available unit for every five extremely low-income renter households living in the area. The housing shortage for extremely low-income renters is even most acute in the New York (610,000) and Los Angeles (382,000).
Affordable Housing Challenges
The need for more affordable rental housing is urgent. Here are a few points addressed in this report that I found to be particularly pertinent:
- Affordable rentals that can accommodate larger families are particularly difficult to find; about one in four larger families live in overcrowded conditions
- High construction costs make it difficult to build new affordable units without government subsidies
- Low-income households often trade off location for affordability and as a result spend almost three times more on transportation
- Low-income renters settle for inadequate living conditions and face housing instability, with units that lack complete plumbing, kitchen facilities or other physical defects
This annual report includes more interesting observations. Read JCHS’ full report here.
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