Have Incomes Kept Up with Rising Rents?

by Whitney
Airgood-Obrycki

While renters’ median housing costs rose, in real terms, by 11 percent between 2001 and 2016, their incomes fell by two percent, according to our latest America’s Rental Housing report. Moreover, these changes were unevenly distributed across renter households, primarily affecting those who are least able to afford it. Housing costs (rents plus utilities) consumed an increasing portion of household income for renters who made less than the median income for all households. In contrast, incomes increased more than housing costs for higher-income renter households (Figure 1).

Notes: Income quartiles include both owners and renters. Median housing costs and household incomes are in constant 2016 dollars, adjusted for inflation using the CPI-U for All Items. Housing costs include cash rent and utilities. Indexed values are cumulative percent change.

Source: JCHS tabulations of US Census Bureau, American Community Surveys.

Illustratively, the median monthly income for renters in the bottom income quartile fell by $50, dropping from $1,270 in 2001 to $1,220 in 2016 (a 4 percent decline). However, their median monthly housing costs increased by $70, rising from $690 to $760 (a 10 percent increase). This means that after paying for housing, renters in the bottom income quartile had less than $500 left to cover all other expenses (Figure 2), such as food, health care, insurance, transportation, and savings they could use for emergencies, retirement, education, repairs, or other needs.

Notes: Income quartiles include both renters and owners. Housing costs include cash rent and utilities.

Source: JCHS tabulations of 2016 American Community Survey.

While residual incomes for the lowest-quartile group are slightly higher than they were in recent years, they are still 18 percent less than in 2001, when these households had $600 in residual income (in inflation adjusted dollars). Moreover, 48 percent of households in the lowest-income quartile consist of more than one person, and 27 percent have at least one child present.

The situation is particularly bleak for renters in the lowest income quartile who spend more than 30 percent of income on housing. These cost-burdened renters had a residual income of only $360 per month in 2016, down 18 percent since 2001. In contrast, households in the same quartile that weren’t cost burdened had a residual income of $1,180 in 2016, down 6 percent since 2001. Part of this difference is due to the higher rates of cost burden among the very lowest-income renters within the quartile. Even so, cost burden reduces residual income.

As noted above, the story is quite different for higher-income renters. Monthly housing costs for renters in the top income quartile rose by $320, increasing from $1,360 to $1,680 (a 24 percent rise). However, their monthly incomes rose by $890, increasing from $10,440 to $11,330 (a 9 percent rise). As a result, these renters saw their residual incomes increase from $9,030 in 2001 to $9,660 per month in real terms.

New Report: Surge in the Supply of Higher-Cost Rental Housing is Slowing Amidst Persistent Affordability Challenges for Working-Class Households

A decade of unprecedented growth in the rental housing market may be coming to an end, according to our 2017 America’s Rental Housing report, being released today. Fewer new renter households are being formed, rental vacancy rates have risen, and rent increases have slowed. At the same time, renter demographics are changing and nearly 21 million households continue to pay more than 30 percent of their income for rent.

This year’s report paints a complicated picture of the rental market. We’re finally seeing the record growth in renters slow down, but while the market has responded to rental housing needs for higher-income households, there are alarming trends that suggest a growing inability to supply housing that is affordable for middle- and working-class renters, let alone those with very low incomes. Addressing these challenges will require bold leadership and hard choices from both the public and private sector.

The report is accompanied by a series of interactive tools and charts that explore rental housing trends at the state and metro level, including cost burdens, affordability, and changes in rental supply and demand. Highlights of the 2017 findings include:

• SIGNS OF A SLOWDOWN. Overall, rents increased more slowly in most markets across the country. Starts of new multifamily units reached a plateau in 2016 and have now fallen by about 9 percent through October 2017.


• THE CHANGING NATURE OF RENTERS. While renters are disproportionately younger and lower-income, growing shares of renters are older and higher-income. For example, the number of renter households earning more than $100,000 per year increased from 3.3 million in 2006 to 6.1 million in 2016.
  
  
• THE CHANGING NATURE OF NEW RENTAL UNITS. Additions to the rental stock are increasingly concentrated at the high end of the market. The share of new units renting for $1,500 or more (in real terms) soared from 15 percent in 2001 to 40 percent in 2016. Additionally, the share of new units renting for less than $850 per month fell from 42 percent of the rental stock to 18 percent. The challenges to building low- and moderate-cost units are most severe in metros like San Jose, San Francisco, Honolulu, and Washington, D.C., where more than 50 percent of all rental units rent for over $1,500 a month.
  
  
• AFFORDABILITY CONTINUES TO BE A MAJOR PROBLEM. Despite rising incomes, nearly half (47 percent) of all renter households (21 million) are cost burdened—meaning they pay more than 30 percent of their income for housing, including 11 million households paying more than 50 percent of their income for housing. While these figures are down slightly from recent years, the number and share of cost-burdened renters is much higher than it was in 2001, when 41 percent (15 million) were cost burdened. Burdens are particularly high in Miami, Los Angeles, New Orleans, and San Diego, where 55 percent or more of renters are cost burdened.


• AVAILABILITY OF RENTAL ASSISTANCE HAS SHRUNK. Even as low-cost housing units are disappearing, rental assistance is becoming harder to access for very-low-income households. The share of very-low-income households who receive rental assistance declined from 28 percent in 2001 to 25 percent in 2015.

Addressing these challenges—particularly expanding the availability of low- and moderate-cost housing options—will require that all levels of government ensure that the regulatory environment does not stifle innovation, and that tax policy and public spending support the efficient provision of moderately-priced housing.

You can view the full report and interactive metro-level tools here.

---

LIVE WEBCAST TODAY @ 1pm ET

The release event for America’s Rental Housing 2017, being held today at the Newseum in Washington, DC, will be webcast live from 1:00 – 3:00 p.m. The event will feature keynotes by Senator Maria Cantwell (D-WA) and Pamela Hughes Patenaude, Deputy Secretary, U.S. Department of Housing and Urban Development, as well as a panel discussion moderated by Laura Kusisto, housing reporter for the Wall Street Journal.

For the full agenda or to watch the livestream, visit www.jchs.harvard.edu.

You can also join the conversation on Twitter with #harvardhousingreport

Growing Demand and Tight Supply are Lifting Home Prices and Rents, Fueling Concerns about Housing Affordability

A decade after the onset of the Great Recession, the national housing market has, by many measures, returned to normal, according to the 2017 State of the Nation’s Housing report, being released today by live webcast from the National League of Cities. Housing demand, home prices, and construction volumes are all on the rise, and the number of distressed homeowners has fallen sharply. However, along with strengthening demand, extremely tight supplies of both for-sale and for-rent homes are pushing up housing costs and adding to ongoing concerns about affordability (map + data tables). At last count in 2015, the report notes, nearly 19 million US households paid more than half of their incomes for housing (map + data tables).

National home prices hit an important milestone in 2016, finally surpassing the pre-recession peak. Drawing on newly available metro-level data, the Harvard researchers found that nominal prices in real prices were up last year in 97 of the nation’s 100 largest metropolitan areas. At the same time, though, the longer-term gains varied widely across the country, with some markets experiencing home price appreciation of more than 50 percent since 2000, while others posted only modest gains or even declines. These differences have added to the already substantial gap between home prices in the nation’s most and least expensive housing markets (map).

“While the recovery in home prices reflects a welcome pickup in demand, it is also being driven by very tight supply,” says Chris Herbert, the Center’s managing director. Even after seven straight years of  construction growth, the US added less new housing over the last decade than in any other ten-year period going back to at least the 1970s. The rebound in single-family construction has been particularly weak. According to Herbert, “Any excess housing that may have been built during the boom years has been absorbed, and a stronger supply response is going to be needed to keep pace with demand—particularly for moderately priced homes.”

Meanwhile, the national homeownership rate appears to be leveling off. Last year’s growth in homeowners was the largest increase since 2006, and early indications are that homebuying activity continued to gain traction in 2017. “Although the homeownership rate did edge down again in 2016, the decline was the smallest in years. We may be finding the bottom,” says Daniel McCue, a senior research associate at the Center.

Affordability is, of course, key. The report finds that, on average, 45 percent of renters in the nation’s metro areas could afford the monthly payments on a median-priced home in their market area. But in several high-cost metros of the Pacific Coast, Florida, and the Northeast, that share is under 25 percent. Among other factors, the future of US homeownership depends on broadening the access to mortgage financing, which remains restricted primarily to those with pristine credit.

Despite a strong rebound in multifamily construction in recent years, the rental vacancy rate hit a 30-year low in 2016. As a result, rent increases continued to outpace inflation in most markets last year. Although rent growth did slow in a few large metros—notably San Francisco and New York—there is little evidence that additions to rental supply are outstripping demand. In contrast, with most new construction at the high end and ongoing losses at the low end (interactive chart), there is a growing mismatch between the rental stock and growing demand from low- and moderate-income households.

Income growth did, however, pick up last year, reducing the number of US households paying more than 30 percent of income for housing—the standard measure of affordability—for the fifth straight year. But coming on the heels of substantial increases during the housing boom and bust, the number of households with housing cost burdens remains much higher today than at the start of last decade. Moreover, almost all of the improvement has been on the owner side. “The problem is most acute for renters. More than 11 million renter households paid more than half their incomes for housing in 2015, leaving little room to pay for life’s other necessities,” says Herbert.

Looking at the decade ahead, the report notes that as the members of the millennial generation move into their late 20s and early 30s, the demand for both rental housing and entry-level homeownership is set to soar. The most racially and ethnically diverse generation in the nation’s history, these young households will propel demand for a broad range of housing in cities, suburbs, and beyond. The baby-boom generation will also continue to play a strong role in housing markets, driving up investment in both existing and new homes to meet their changing needs as they age. “Meeting this growing and diverse demand will require concerted efforts by the public, private, and nonprofit sectors to expand the range of housing options available,” says McCue.

---

Live Webcast Today @ Noon ET

Tune into today's live webcast from the National League of Cities in Washington, DC, featuring:

Kriston Capps, Staff Writer, CityLab (panel moderator)
Chris Herbert, Managing Director, Joint Center for Housing Studies
Robert C. Kettler, Chairman & CEO, Kettler
Terri Ludwig, President & CEO, Enterprise Community Partners
Mayor Catherine E. Pugh, City of Baltimore, Maryland

Tweet questions & join the conversation on Twitter with #harvardhousingreport

New Report: Number of Older Adults in the US Expected to Surge, Highlighting Need for Accessible Housing and Policy Improvements

Download the Report

By 2035, more than one in five people in the US will be aged 65 and older and one in three households will be headed by someone in that age group, according to our new report, Projections and Implications for Housing a Growing Population: Older Adults 2015-2035, released today. This growth will increase the demand for affordable, accessible housing that is well connected to services beyond what current supply can meet.

As the baby boom generation ages, the US population aged 65 and over is expected to grow from 48 million to 79 million, and the number of households headed by someone over 65 will increase by 66 percent, to nearly 50 million. This growth will increase the demand for housing units with universal design elements such as zero-step entrances, single-floor living, and wide halls and doorways.  However, only 3.5 percent of homes offer all three of these features.

“The housing implications of this surge in the older adult population are many,” says Chris Herbert, managing director of the Joint Center. “and call for innovative approaches to respond to growing need for housing that is affordable, accessible and linked to supportive services that will grow exponentially over the next two decades.”

In the coming years, many older adults will have the financial means to pay for appropriate housing and supportive services that allow them to live longer in their own homes. However, many others will face financial hardships, particularly because their incomes will decline in retirement. Low-income renters are particularly vulnerable, notes the report, which projects that nearly 6.4 million low-income renters will be paying more than 30 percent of their income for housing by 2035. The report adds that 11 million homeowners will be also be in this position by that time. In total, the report estimates, 8.6 million people will be paying more than half their income for housing by 2035. The report also projects that 7.6 million older adults will have incomes that would qualify them for federal rental subsidies by 2035, an increase of 90 percent from 2013. “Today, however, we only serve one-third of those who qualify for assistance,” says Jennifer Molinsky, a senior research associate at the Joint Center and lead author of the report. “Just continuing at this rate—which would be a stretch—would leave 4.9 million people to find affordable housing in the private market.”

The report notes that in many surveys, older adults express a strong desire to live at home for as long as possible. Achieving that goal will require public and private action to support modifications to existing homes, take steps to address the affordability challenges facing both owners and renters, and adapting the health care system to enhance service delivery in the home. There is also a need to expand the range of housing options available to better meet the needs of an aging population and improve options for older adults to remain in their community when their current home is no longer suitable. 

“The implications of our aging US population on the housing industry are unambiguous,” says Lisa Marsh Ryerson, President of AARP Foundation, which provided funding for the report. “It will be imperative, in the coming years, that the housing industry, policymakers, and individuals take action to address the need for housing that will enable millions of older adults in this country to live with security, dignity, and independence.”

Read the full report

Join the conversation on Twitter: #harvardhousingreport

Metro Data on Rental Cost Burdens Show Uneven Improvement

by Alexander Hermann
Research Assistant

The national trend in cost burdens is reflected across most metropolitan areas of the US. Looking at the 100 largest Metropolitan Statistical Areas (MSAs) by population that have not undergone geographic boundary changes between 2005 and 2015, shows that in most metros, cost burden rates declined modestly for renters in 2015, but were still high relative to their levels in 2005. (A household is defined as cost-burdened when it spends more than 30 percent of its income on housing.)

Looking at cost burden rates among the top metros as a group, we find the number of metro areas with exceedingly high cost burden rates declined in 2015. Indeed, the number of metros where cost burdens affect at least half of all renters declined from 44 metros in 2014 to 33 in 2015, which is a significant improvement from 2010 levels, when cost burdens affected half of all renters in 65 metros. In total, between 2010 and 2015, fully 83 metros saw declines in the share of cost burdened renters.

Even with these improvements, however, the share of cost-burdened renters is still above 2005 levels in most metros. More than half of rental households were cost-burdened in 33 metros in 2015, an increase of 11 metros from 2005 (Figure 1). Moreover, renter cost burden rates in 66 metros were higher in 2015 than they were in 2005.

Source: JCHS tabulations of US Census Bureau, 1-Year American Community Survey estimates via Factfinder.

This trend is also evident for the more extreme measure of severe cost burdens (those paying more than 50 percent of income for housing). From 2014 to 2015, the number of metros with severe renter cost burden rates of 25 percent or more declined from 63 to 49 of the top 100 metros, respectively (Figure 2). This is a big improvement from 2010, when 79 metros had such high rates of severely cost-burdened renters, but still worse than in 2005, when it was just 37 metros.

Source: JCHS tabulations of US Census Bureau, 1-Year American Community Survey estimates via Factfinder.

Indeed, despite significant near-term improvement, severe cost burdens have yet to return to 2005 levels in most metros. In the 100 largest metros for which data extends back to 2005, 60 had larger shares of severely cost-burdened renters 2015 than in 2005.

Lastly, initial analysis finds that the 2015 data also show the profile of metros with the highest burden rates appears to have shifted somewhat. In 2015, metros with the highest shares of severely cost-burdened renters are generally the large metros with tight housing markets along both coasts, including New York, Miami, and Honolulu. In 2005, the profile of metros with this high share of severe cost burdens was different; though some coastal metros were included (like Miami and Stockton, CA), midwest and declining industrial metros were more prevalent among the severely cost-burdened metros (including Cleveland, Detroit, Rochester, and Memphis).

We’ll post additional analysis on this dataset in the coming weeks and months.

See the full metro Excel table for a complete set of metro-level cost burden data for 2015.

New Data Shows US Renter Cost Burdens Easing, But Still Elevated

by Dan McCue
Senior Research
Associate

The number of renters paying 30 percent or more of their income on housing decreased in 2015 by 240,000 households, reversing an eight-year trend of annual increases in the number of “cost-burdened” renters, according to new data released last week by the US Census Bureau. Unfortunately, however, the decrease was very modest in comparison to previous years. Indeed, the decrease in rent-burdened households recorded in 2015 was less than half the increase recorded in 2014. Moreover, the data show that there still are 21.4 million “cost-burdened” renters in 2015, 1.15 million more than in 2010 and fully 4.0 million more than in 2005 (Figure 1).

Source: JCHS tabulations of US Census Bureau, 2015 1-Year American Community Survey estimates via FactFinder

The data also show some improvement in the number and share of “severely burdened” renters (those paying 50 percent or more of their income on rent). However, this growth was not enough to return to the pre-recession levels of 2008 and earlier. Overall, the number of renters paying 50 percent or more on rents decreased from 11.50 million to 11.28 million in 2014–2015, which was the lowest number since 2010. The share of renters with severe burdens dropped from 26.6 percent of all renters in 2014 to 25.8 percent in 2015. This is the lowest rate recorded since 2008, when 25.0 percent of renters paid 50 percent or more of incomes on housing.

In addition, the decline in the overall number of cost-burdened renter households in 2015 masked some worsening of cost burden rates within many income groups (Figure 2). Among people earning $20,000-to-$34,999 annually (which in many areas is still a low and/or moderate income), the share of those who were cost-burdened rose from 70.8 percent in 2014 to 71.3 percent in 2015. While a much smaller share of renters making more than $35,000 a year are cost-burdened, there were modest (less than one-percentage point) increases in the share of cost-burdened households, for these renters as well. In comparison, while more than 80 percent of the renters who make less than $20,000 a year are cost-burdened, that figure fell by less than one percent between 2014 and 2015.

Source: JCHS tabulations of US Census Bureau, 2014 and 2015 1-Year ACS data.

Taken together, these shifts suggest that the overall decline in cost-burden rates for renters is due to growth in the number of renters with higher incomes and a decline in the number of low-income renters. While this could be viewed as a positive trend for renter households as a group, the fact that renter burden rates continue to grow within and among higher income groups suggests affordability problems are growing across the income spectrum and even for higher income groups.

Tomorrow, we’ll take a closer look at the improvement trends across various metropolitan areas.

New Census Data on Incomes Suggests Growing Demand for Housing

Dan McCue
Senior Research Associate

New data released by the Census Bureau on Tuesday suggests that the demand for housing – particularly among young adults – may be growing.

As many news outlets have reported, the CPS 2016 Annual Social and Economic Supplement with household income data for 2015  showed that real median household income rose 5.2 percent from 2014 to 2015, to $56,516. It was the first annual increase in median household income since 2007. Median household incomes were up for each region of the country, and for non-Hispanic white, black, and Hispanic households, and across all age groups (Figure 1).

Source: JCHS tabulations of US Census Bureau, Current Population Survey Annual Social and Economic Supplements

The data release also showed significant increase in real median earnings at the person level in 2015, which grew 5.0 percent for all adults over age 15. Incomes were up most sharply among younger adult age groups under the age of 40 (Figure 2).

Source: JCHS tabulations of US Census Bureau, Current Population Survey Annual Social and Economic Supplements

For several reasons, this growth is likely to have significant implications for housing markets. First, at the individual level, higher incomes increase demand for housing. For young adults, housing independence is closely linked to income. Those with higher incomes are more likely to be able to rent their own apartment. Analyses in the Joint Center’s 2016 State of the Nation’s Housing report describe this, adding that nearly half of the decline in household formation among young adults aged 25-34 across the Great Recession was due to declines in income suffered by people in this age group. Income growth can therefore work in the reverse, helping enable young adults to move out of their parents’ basement and into their own home.

At the household level, income growth also increases housing demand, particularly for homeownership. As higher income households are more likely to own homes, increases in incomes among households will work against the continued decline in the US homeownership rate. In terms of affordability, the strong association between household income and housing cost burdens also means income growth may help alleviate some people who are stressed with housing costs, but on the affordability front there is still a long way to go.

Finally, it is worth noting that the Current Population Survey Annual Supplement is a relatively small survey with a high degree of annual volatility year to year, so the exact movements of household income and personal earnings measured year to year should be viewed with the wide margin of error they require. That said, the income growth reported in the latest survey is still a good sign that improvement in jobs and the economy is now translating into increased earnings that is likely to lead to growth in households and greater demand for housing.

As Baby Boomers Age, Older Single Women Will Face the Greatest Housing Challenges

Shannon Rieger
Research Assistant

While high-quality, age-friendly, affordable housing will be a critical need for all of America’s growing number of aging households, for two reasons, the needs of older single women require particular attention for policymakers, providers, and others.

First, because women generally outlive their male spouses or partners, they will continue to be a major share of all older households. Women living alone already comprise 44 percent of all households (and three-quarters of all single-person households) where the householder is age 80 or over (Figure 1). Such women—particularly women who rent rather than own their homes—are among those older people who are most at risk of housing, financial, and health insecurity as they age.

Source: JCHS tabulations of 2014 American Community Survey data.

These challenges are one aspect of a larger demographic transformation that will occur over the next several decades as the aging of the baby boomer generation and increases in longevity swell the elderly American population. The US Census Bureau projects that the population aged 65 and over will reach 79 million by 2035, an increase of more than 30 million in just two decades (Figure 2). Further, longer life expectancy could nearly double the number of individuals aged 85 and over to 12 million by 2035.

Source: US Census Bureau 2015 Population Estimates and 2014 National Population Projections.

This so-called “Silver Tsunami” has already begun to reshape housing needs across the nation, generating demand for accessible, affordable housing that can help older households age safely and comfortably in place. As people age, finding the resources to make age-friendly home modifications, to pay for assistance with daily activities and self-care, or even keep up with housing payments often becomes increasingly difficult. The risk of falling into financial and housing insecurity grows when households cross into their retirement years (age 65), as incomes begin to drop dramatically while out-of-pocket health care expenditures rise (Figure 3). While some households may be able to adequately supplement shrinking incomes with retirement savings, home equity, and other forms of wealth, a recent report from the Employee Benefit Research Institute shows that many households on the verge of retirement today have insufficient savings to independently finance their retirement years.

Source: Median household income derived from JCHS analysis of 2014 American Community Survey Data. Out-of-pocket personal health care spending data derived from the Centers for Medicare and Medicaid Services’ National Health Expenditure Data, 2012 Age and Gender Tables.

Some aging households are particularly vulnerable to the consequences of financial insecurity and loss of independence. Older individuals who live by themselves, for example, often have neither the option to seek help with daily activities or unexpected emergencies from another person in the home, nor the financial cushion of a second income from a spouse or housemate. Women are disproportionately impacted. Older women, who are more likely to live alone in later life, continue to have lower lifetime earnings than their male peers, and are also more likely than men to need expensive long-term care. As a result, single women are projected to experience the largest retirement savings shortfalls over the next several decades.

Single older women who rent rather than own their homes are most at risk of falling into housing and financial insecurity. Older renters lack housing equity and typically also have far lower overall net worth than older owners, leaving many unable to sufficiently bolster limited retirement incomes with financial reserves. Analysis of the most recent Survey of Consumer Finances data shows median net worth for renters age 65 and over to be just $6,150—a mere 2.4 percent of median net worth for owners of the same age. For single older women renters, median net worth is even lower—just $3,910—and the risk of financial insecurity is especially high, intensified by comparatively lower incomes and even higher housing cost burdens than older renters overall (Figure 4). In 2014, annual median income for single women renters age 65+ was just $15,600. Meanwhile, fully 63 percent had a housing cost burden, with 38 percent paying at least 50 percent of their income toward housing. This combination of high housing cost burdens, low incomes, and little net wealth mean that older single women renters have few resources left to pay for assistance with self-care and other needs. But with median annual costs for non-residential long-term care ranging from $17,680 for adult day health care to $45,760 for full-time homemaker services, formal care is far out of reach for many single older women. With the aging of the baby boomer generation poised to increase the number of single older women living alone to unprecedented proportions over the next several decades, finding ways to mitigate housing and financial instability among this most vulnerable group is fast becoming a critical need.

Source: JCHS tabulations of 2013 Survey of Consumer Finances (SCF) and 2014 American Community Survey (ACS) data. Dollars are nominal.

Notes: "Moderate" burden is defined as housing costs of 30-50 percent of income. "Severe" burden is defined as housing costs of more than 50 percent of income. Due to survey design differences between SCF and ACS, "single women renters" refers to single-person female-headed households for data describing median household income and housing cost burdens, and to women whose marital status is "single" for data describing median net worth.

As previous Joint Center work has highlighted, our aging population will re-shape housing demand across the nation over the next several decades, greatly increasing the need for affordable, accessible, age-friendly housing. Ensuring that older single women, especially renters, have access to high-quality housing and home care will require particular attention, given their low incomes, low wealth, high likelihood of need for care, and the absence of a spouse, partner, or other household member able to provide daily assistance in the home. As the older population grows in coming years, it will be critical for policymakers and providers to take special care to ensure that our nation’s most vulnerable older households—particularly older single women—have access to tools that can help them age safely and successfully in their own homes and communities. Such tools may include affordable rental options and in-home care and homemaking services, as well as loan and grant assistance opportunities for age-friendly home modifications. Finding ways to expand access to these and other solutions will be critical to protecting the health, happiness, and well-being of our aging population today and in years to come.

How Do US Renters Fare Compared to Those Around the World?

by Michael Carliner
Senior Research Fellow

The Joint Center’s biennial America's Rental Housing reports examine the rental housing market in the US and have documented the increasing cost burdens faced by renters in this country. To provide further context for US rental housing, Ellen Marya and I looked at rental housing in a number of other advanced countries in a new working paper. Although numerous countries, as well as the European Union, issue reports with rental housing data, they use different measures of income, housing cost, affordability, unit size, number of rooms, and quality, making comparisons difficult. To develop comparable measures, we obtained and analyzed household survey data from Canada and ten European countries, as well as several US household surveys.

Notes: Data for 2013, except Canada 2011

Sources: U.S. Census Bureau, American Housing Survey; Statistics Canada, National Household Survey; Eurostat, European Union Survey of Income and Living Conditions

Figure 1 shows the twelve countries we included. The share of all households who were paying rent in 2013 ranged from 15 percent in Spain to 59 percent in Switzerland. The 33 percent share in the US was in the middle of the range and similar to several other countries. Some non-homeowning households were living rent-free, generally because of their employment or relationship to the property owners. Such rent-free occupants represent a small share of households in the US and most other countries, but account for more substantial shares of households in Italy, Spain, and Austria.

Comparing rental markets in the twelve countries revealed that the US was exceptional in a number of (often unfavorable) ways. The median ratio of housing cost to household income (Figure 2) was greater in the US than in any of the other countries studied, except for Spain, where there are relatively few renters. Moreover, the share of renters with severe cost burdens — paying more than 50 percent of their income for housing — was greater than in any of the other countries (Figure 3.)

Notes: Data for 2013, except Canada 2011

Other exceptional characteristics of renter households in the US included an average household size of 2.39, which is greater than in any of the other countries, except Spain. The share of US renter householders aged 65 or over (12.1 percent) was less than in any of the other countries, again with the exception of Spain. Also, the share of renters living in single-family detached houses was much higher in the US compared to the other countries.

In many other respects, rental housing in the US was not exceptional. While the median living area and number of rooms in US rentals is greater than in most of the other countries, several countries had comparably-sized rental units, especially after adjusting for the number of occupants. (This is in contrast to owner-occupied housing, where units in the US tend to be substantially larger than those in other countries.)

In all of the countries studied, foreign-born householders were more likely than native-born householders to be renters. In the US, 14 percent of all householders, and 20 percent of renters were foreign-born. The foreign-born share of all householders ranged from 7 percent in Germany to 38 percent in Switzerland. The foreign-born share of renter householders was more than 45 percent in Spain and Switzerland.

In each country, lower income households were more likely to be renters than those with relatively high incomes. In the US, about 33 percent of renter households were in the lowest quintile of the income distribution. In six of the other countries, the share of renters in the lowest income quintile were greater than in the US, so the US did not exhibit unusual concentration of rentership at the low end. Because of greater overall income inequality in the US, however, households in the bottom quintile had lower incomes, relative to the national median. Indeed, the median income of households in the bottom income quintile in the US (the 10th percentile) was 24.5 percent of the overall median household income, while among the other countries that ratio ranged from 27.9 percent to 39.1 percent.

Much of the focus of our analysis was on affordability and on the reasons why it is a greater problem in the US than elsewhere. The degree of income inequality is one factor. Another important influence on renters' cost was the availability of housing allowances, known in the US as vouchers. Although US renters with vouchers are provided with fairly generous subsidies, only a small share of renters actually receive vouchers. In France and the UK, about half of all renters benefit from housing allowances. In the Netherlands, Sweden, and Germany, as well, large shares of renters receive housing allowances. Our analysis shows that the effects of housing allowances on affordability are substantial in those countries.

Although affordability in the US is typically measured by comparing housing cost to gross (before-tax) income, in Europe it is common to look at housing cost relative to disposable (after-tax) income. On that basis, the median ratios of housing cost to income for renters in Belgium, the Netherlands, UK, and Spain, were higher than in the US, where taxes are lower. But the share of renters with severe cost burdens (greater than 50 percent of disposable income) was still greater in the US than in every country except Spain.

While the objective of the paper was largely to provide comparable statistics regarding the characteristics of renters and the rental housing stock in a number of developed countries, it underscores the severity of rental housing affordability problems in the US. It doesn't provide a clear answer to the question of how to improve affordability in the US, but it does suggest where to look.

 Read the working paper.

Are Renters and Homeowners in Rural Areas Cost-Burdened?

by Sonali Mathur
Research Assistant

As our latest report and interactive map illustrate, housing affordability is one of the biggest challenges faced by owner and renter households in most metro areas across the US. However, maps that use metro areas to display the local-level story miss the fact that cost burdens are also a major concern in non-metro/rural areas and are severely high for millions of low-income rural households. To address this gap in visibility, we created a set of interactive maps (Figure 1) using 2010-2014 American Community Survey (ACS) estimates. In doing so, we found that housing cost burden rates in some rural counties are significant. We also learned that rural counties of the Northeast and west, that are adjacent to high-cost metros, have even higher cost burden rates than those in parts of the Midwest.

 (Click to launch interactive map; may take a moment to load.)

Housing cost burdens are particularly stark for rural renters. Indeed, fully 41 percent of all rural renters are cost-burdened (meaning they spend 30 percent or more of their income on housing), including 21 percent who are severely cost-burdened (spending 50 percent or more of their income on housing). Among owners, 22 percent are cost-burdened including nearly 9 percent who are severely cost-burdened. Overall, nearly 5 million rural households pay more than 30 percent of their monthly income toward housing and more than 2.1 million rural households spend more than half of their income on housing.

And cost burdens have been growing in rural areas (Figure 2). Since 2000, housing costs in rural areas have increased over 5 percent and one in every four rural households is now cost-burdened. Comparing burden rates from 2014 to those from 2000 in the maps above shows the increasing cost burdens in many rural areas over the last decade, including areas in and around the traditional Black Belt counties of the Southeast and areas in the west and Northeast that are contiguous to areas that had high cost burdens in 2000.

Source: JCHS tabulations of US Census Bureau, American Community Survey 2010-2014 and census 2000 for all non-metropolitan census tracts. 

Rural affordability issues tend to receive less attention due to a perception that housing costs are lower in rural areas, which is true as compared to metro areas. According to the 2013 American Housing Survey (AHS) the median monthly rent in metro areas is $800, while the median monthly rent in non-metro areas is $530. Monthly owner costs are also fully 43 percent lower in non-metro areas than in metro areas. However, low incomes and poverty are prevalent in rural areas. According to estimates from the American Community Survey, fully 15 percent of all households in non-metro area census tracts earn less than $15,000 annually and nearly 36 percent earn less than $30,000. Poverty is a widespread problem in rural areas, with 18 percent of population living in poverty compared to 15 percent in metro areas.

In addition to poverty and affordability, rural areas face several other major housing challenges. The share of housing stock that would be considered inadequate, as measured by the number of units lacking complete plumbing or a complete kitchen, is higher in non-metro areas. The share of units lacking complete plumbing is 4 percent in non-metro areas, compared to 2 percent nationally.

Among units in non-metro areas that lack complete plumbing facilities, 10.3 percent also have more than one occupant per room (compared to 8.2 percent in metro areas). This suggests that in non-metro areas there is likely to be overcrowding in the same units that lack adequacy. It is probable that the households facing affordability problems are dealing with it alongside other issues.

While it is true that cost burdens are high and a growing problem in most metro areas across the country, it is important to remember that non-metro areas also face increasing housing affordability issues, in addition to other housing-related challenges and should not be forgotten in policy discussions of a comprehensive approach to the escalating housing affordability problem.

Addressing the Housing Insecurity of Low-Income Renters

Irene Lew
Research Analyst

As our recently released 2016 State of the Nation’s Housing report highlights, rental housing affordability remains a pervasive—and growing—problem for millions of renter households in the US. The number of renter households devoting more than half of their income to housing costs (those considered severely burdened) climbed to a record high of 11.4 million in 2014. Among renter households earning under $15,000 a year, severe cost burdens are widespread, with 72 percent falling into this category. Severe cost burdens can adversely impact the housing security of very low-income households, leaving them little money left over to pay for necessities or to cover unexpected expenses. Indeed, compared to those with similar incomes who live in housing they can afford, very low-income renters paying more than half of their income on housing in 2013 were nearly two times more likely to fall behind on their rent, were at higher risk of having their utilities being shut off due to nonpayment, and were more likely to believe that they would be evicted within the next two months—all elements of housing insecurity (Figure 1).

Notes: Very low-income refers to households with incomes no higher than 50% of area medians. Severely cost burdened refers to households that pay more than 50% of income for housing. Households with zero or negative income are assumed to be severely burdened. Rent payment(s) were missed within the previous three months. Felt under threat of eviction refers to households who reported that they were likely to be evicted within the next two months. 
Source: JCHS tabulations of HUD, 2013 American Housing Survey. 

Furthermore, very low-income renter households with children are also more likely than those without children to be housing insecure and believe that they are at risk for eviction (Figure 2). Eviction is a leading cause of homelessness for families with children living in major cities like Washington, DC, Philadelphia and Baltimore, according to the most recent US Conference of Mayors Hunger and Homelessness Survey. As I point out in a previous blog post, homelessness among people in families with children persists in the highest-cost cities even as homelessness continues to decline steadily among veterans and those with chronic patterns of homelessness.

Notes: Very low-income refers to households with incomes no higher than 50% of area medians. Severely cost burdened refers to households that pay more than 50% of income for housing. Households with zero or negative income are assumed to be severely burdened. Rent payment(s) were missed within the previous three months. Felt under threat of eviction refers to households who reported that they were likely to be evicted within the next two months. Households with children refer to any households headed by an adult aged 18 and over with at least one child (related or unrelated). 
Source: JCHS tabulations of HUD, 2013 American Housing Survey.

Permanent federal housing subsidies that account for changes in tenant incomes, such as housing choice vouchers,  have proven to be the best option for improving housing stability, especially among homeless families exiting shelter. However, spending on federal housing assistance remains scarce, with direct housing subsidies representing just 4 percent of total discretionary funding approved by Congress in FY2015, a share that has barely budged over the past two decades.

Given the scarcity of federal funding, how can we address financial instability among low-income renters and reduce housing insecurity among this group? Enterprise recently proposed a promising master lease model program with built-in tenant savings accounts that could, without federal subsidies, improve the stability of low-income renters. Under this program, rents would remain affordable because a nonprofit or mission-driven organization would obtain long-term access to units in existing buildings through a multi-year master lease arrangement with fixed prices similar to the ones used for commercial leases. Unique to this model is a savings component in which a small amount of money from a tenant’s monthly lease payment would be allocated toward a custodial account in the tenant’s name. Tenants would not only have stable housing costs but would also be able to accumulate a savings cushion to pay for unanticipated expenses such as emergency room visits, and bounce back from income disruptions such as involuntary job loss or a significant reduction in income. In fact, a recent Urban Institute report analyzing data from the Census Bureau’s Survey of Income and Program Participation panel found that low-income families with savings of at least $2,000 to $4,999 are more financially resilient than middle-income families without any savings. Among low-income families with savings of $2,000–$4,999, just 20 percent experienced hardship after an income disruption, compared to about 30 percent among middle-income families without any savings.

However, financial issues are not the only contributor to housing insecurity among low-income households—some households may also struggle with additional challenges such as domestic violence, former incarceration, and mental health and substance abuse issues. As a result, improving housing insecurity may also require expanding access to supportive services that help address these underlying issues.

The MacArthur Foundation’s annual How Housing Matters Survey released last month confirms that a majority of Americans have a grim outlook on housing affordability—81 percent of respondents stated that they believe housing affordability is a problem in America today. Nearly seven in ten adults responded that it is more challenging to secure stable, affordable housing today than it was for previous generations. Furthermore, a recent Gallup poll found that 63 percent of renters with annual household income of less than $30,000 were worried about being able to pay their rent or other housing costs. Existing proposals to increase the number of affordable rentals built or preserved through the Low Income Housing Tax Credit program, and to reform federal rental assistance programs in order to serve more low-income households, can help alleviate the rental affordability crisis. However, it is equally important to offer programs that can help low-income renters better weather income disruptions or unexpected financial emergencies and avoid missed rent payments that can lead to eviction.

What Can Measures of Residual Income Tell Us About Affordability?

Shannon Rieger

Research Assistant

JCHS analysis of American Community Survey data in our recent State of the Nation's Housing indicates that the share of households with housing cost burdens—those paying 30 percent or more of income toward housing—has increased since the turn of the 21st century (Figure 1). Rising cost burdens have hit low-income households especially hard: among households with annual incomes under $15,000, 83.4 percent had housing cost burdens in 2014, with 70 percent facing severe cost burdens—paying at least 50 percent of income toward housing.

This changing distribution of housing cost burdens clearly indicates that housing affordability has become more of a problem for a larger share of households in recent years. However, cost burden measures alone provide limited insight into the extent to which housing costs constrain a household’s resources, capacity to save, and overall financial wellbeing. To answer these questions, we need an additional way to measure housing affordability. This blog post therefore constructs measures of residual income after housing costs using data from the Consumer Expenditure Survey (CES) to examine the extent to which rising housing cost burdens have eroded households’ ability to afford other basic costs of living during the first years of the 21st century.

Source: JCHS tabulations of 2001 and 2014 1-Year American Community Survey data.

This discussion examines average residual income for consumer units that participated in the Consumer Expenditure Survey between years 2000 and 2013. For simplicity, we use the term “household” to refer to the CES-defined consumer units, which are occasionally smaller than households in cases where financially independent families or roommates live in the same housing unit. Dollars are adjusted for inflation using CPI-U All Items Less Shelter, a deflator neutral to housing cost increases. To account for the introduction of income imputation in 2004, we analyze reported (non-imputed) rather than imputed income data even in years where imputed data is available, and limit our sample to complete income reporters.

Analysis of CES data confirms that rising housing cost burdens are the result of countervailing trends in housing expenditures and incomes (Figure 2). Households in every income quartile spent more on housing in 2013 than in 2000, with households in the bottom income quartile experiencing the steepest increases. For the bottom income quartile, average housing expenditures climbed almost 20 percent over the period. The second quartile saw more moderate but still sizeable increases of just over 10 percent, and the two upper income quartiles each spent an average of 6 percent more on housing in 2013 than in 2000.

While housing expenditures were on the rise between 2000 and 2013 for all income quartiles, real income growth trended in opposite directions during the same period for households at the top and bottom of the income ladder. Analysis of CES data indicates that real average income fell by almost 4 percent for the lowest income quartile, while the highest income quartile saw average income grow by fully 10 percent—more than offsetting concurrent increases in housing expenditures.

Notes: Adjusted to 2013 Dollars using CPI-U All Items Less Shelter. Top and bottom 2.5% of incomes are excluded. Incomes are non-imputed annual incomes for complete reporter consumer units only.
Source: JCHS tabulations of Consumer Expenditure Survey data.

These divergent trends in housing expenditures and incomes have produced a widening residual income inequality gap. For all but the highest income quartile, the average amount of residual income remaining after paying for housing has declined, with households in the lowest income quartile seeing the sharpest declines (Figure 3). The lowest-income households already had very little monthly residual income in 2000 ($575 per month), yet by 2013, residual income had fallen even farther, to just $423 per month—a decline of over 26 percent in real terms. As these figures show, between 2000 and 2013 all but the highest income households became less able to afford basic costs of living after paying for housing.

Figure 3: Average Monthly Residual Income after Housing, 2013 Dollars

	2000	2013	Percent Change
Lowest Quartile	$575	$423	-26.4
Second Quartile	$1,879	$1,809	-3.7
Third Quartile	$3,980	$3,958	-0.6
Fourth Quartile	$8,017	$8,886	+10.8

Notes: Adjusted to 2013 Dollars using CPI-U All Items Less Shelter. Top and bottom 2.5% of incomes are excluded. Incomes are non-imputed annual incomes for complete reporter consumer units only.
Source: JCHS tabulations of Consumer Expenditure Survey data

The hardships associated with housing cost increases may be particularly severe for low-income seniors, single parents, individuals with disabilities, and other households with fixed incomes or necessary expenditures on healthcare, childcare, or other basic needs. For example, analysis of CES data indicates that in 2013, while a household in the first income quartile headed by an individual under the age of 65 paid an average of $166 per month in healthcare costs, a senior-headed household in the first quartile paid more than one and a half times that, averaging $275 per month. After accounting for housing costs, a senior household in the first income quartile had just $519 left to finance all other costs of living—meaning that in 2013, the average low-income senior household paid more than half their residual income toward healthcare. As these figures illustrate, rising housing costs do not carry similar consequences for all households. Instead, households with the least cushion in their budgets are the most vulnerable to increases in the cost of housing.

The use of residual income measures highlights the implications of rising housing costs for household budgets, shedding light on the extent to which rising housing costs have exacerbated the consequences of growing income inequality. As the figures above show, income growth stagnated or declined for all but the highest income households between 2000 and 2013. At the same time, households with the lowest incomes experienced the largest percentage change in their housing costs, compounding the effects of the income trends. The upshot is that lower-income households have become less able to afford not only housing, but also all other non-housing costs of living since the turn of the 21st century.

As the Housing Recovery Strengthens, Affordability and Other Challenges Remain

The national housing market has now regained enough momentum to provide an engine of growth for the US economy, according to the latest The State of the Nation’s Housing report released today, June 22, by the Joint Center (live webcast today @ 12:30 ET). Robust rental demand continues to drive the housing expansion, and sales, prices, and new construction of single-family homes are on the rise. Even more important, income growth has picked up, particularly among the huge millennial population that is poised to form millions of new households over the coming decade. At the same time, however, several obstacles continue to hamper the housing recovery—in particular, the lingering pressures on homeownership, the eroding affordability of rental housing, and the growing concentration of poverty.

The national homeownership rate has been on an unprecedented 10-year downtrend, sliding to just 63.7 percent in 2015. Tight mortgage credit, the decade-long falloff in incomes that is only now ending, and a limited supply of homes for sale are all keeping households—especially first-time buyers—on the sidelines. And even though a rebound in home prices has helped to reduce the number of underwater owners, the large backlog of foreclosures is still a serious drag on homeownership.

As these lingering effects of the housing crash fade, homeownership may regain some lost ground, but how soon and how much are open to question. Moreover, the report finds that income inequality increased over the past decade, with households earning under $25,000 accounting for nearly 45 percent of the net growth in US households in 2005–2015. The question is not so much whether families will want to buy homes in the future, but whether they will be able to do so.

Mirroring the persistent weakness on the owner-occupied side is the equally long surge in rental housing demand, with increases across all age groups, income levels, and household types. With vacancy rates down sharply and rents climbing, multifamily construction is booming across the country. But with strong growth among high-income renters, so far most of this new housing is intended for the upper end of the market, with rents well out of reach of the typical renter making $35,000 a year. Because of the widening gap between market-rate rents and the amounts many households can afford at the 30-percent-of-income standard, the number of cost-burdened renters hit 21.3 million in 2014. Even worse, 11.4 million of these households paid more than half their incomes for housing, a record high. The report finds that rent burdens are increasingly common among moderate-income households, especially in the nation’s 10 highest-cost housing markets, where three-quarters of renters earning $30,000–45,000 and half of those earning $45,000–75,000 paid at least 30 percent of their incomes for housing in 2014.

Cost burdens are nearly universal among the nation’s lowest-income households. (View our interactive maps.) Federal assistance reaches only a quarter of those who qualify, leaving nearly 14 million households to find housing in the private market where low-cost units are increasingly scarce. Low-income households with cost burdens face higher rates of housing instability, more often settle for poor-quality housing, and have to sacrifice other needs—including basic nutrition, health, and safety—to pay for their housing. These conditions have serious long-term consequences, particularly for children’s future achievement. And compounding these challenges, residential segregation by income has increased. Between 2000 and 2014, the number of people living in neighborhoods of concentrated poverty more than doubled to 13.7 million.

The report notes that a lack of a strong federal response to the affordability crisis has left state and local governments struggling to expand rental assistance and promote construction of affordable housing in areas with access to better educational and employment opportunities through inclusionary zoning and other local resources. Our researchers noted that these efforts are falling far short of need. Policymakers at all levels of government need to take stock of what can and should be done to expand access to good-quality, affordable housing that is so central to the current well-being and potential contribution of each and every individual.

Are Renter Worst Case Housing Needs Easing?

by Ellen Marya
Research Associate

Every two years, the Department of Housing and Urban Development (HUD) issues its Worst Case Housing Needs Report to Congress (WCN). This report highlights the challenges faced by low-income renter households in finding affordable, good-quality housing. In addition to data on characteristics of renter households and units, HUD’s report provides a count of renters facing worst case needs—defined as households who earn less than 50 percent of the area median income (AMI) who do not receive housing assistance from the government, who also are severely cost burdened (spending more than 50 percent on income on housing costs), and/or live in severely inadequate units. 

In its most recent WCN report released in May 2015, HUD noted a full 9 percent decline in the number of households with worst case needs, falling from 8.5 million in 2011 to 7.7 million in 2013. It was the first decline in that measure since a slight (1 percent) decrease in 2005-2007 and followed two periods of increases of about 20 percent. The change was surprising given that it coincided with a time of broadly stagnant incomes, rising rents, and a rapid increase in the number of renters. Do HUD’s numbers reflect genuine improvements in conditions for renters or are other factors at work?

A potential explanation for the decrease in worst case needs explored by HUD is a change in the income limits the agency uses to identify households earning less than 50 percent of AMI (very low-income households). Between 2011 and 2013, HUD reduced the maximum income for very low-income households by $516, decreasing the number of households in this group eligible to be counted among those with worst case needs by about 1 percent. When HUD compared the tallies of renters with worst case needs using the new and old cutoffs, however, it found that only 20,000 of the 750,000 total reduction 2011–2013 could be attributed to the new lower income limit.

Much of the decrease in worst case needs is due to a drop in households with severe cost burdens, which account for the vast majority of worse case needs. HUD reported that the total number of renter households with severe cost burdens fell from 10.4 million in 2011 to 9.7 million in 2013, a decline of over 6 percent. Counter to these findings, however, calculations from the Joint Center for Housing Studies (JCHS) using a different data source, the American Community Survey, found a negligible decline (just over 1 percent) in severely cost burdened renters, from 11.3 million in 2011 to 11.2 million in 2013.

Notes: Severe burdens are defined as housing costs of more than 50% of household income. In HUD tabulations, households with zero or negative income are excluded unless they pay Fair Market Rent or more for housing. For households paying no cash rent, utility costs are used to represent housing costs. In JCHS tabulations, households with zero or negative income are assumed to have severe burdens, while renters paying no cash rent are assumed to be without burdens.

Sources: HUD Worst Case Housing Needs: 2015 Report to Congress and JCHS tabulations of US Census Bureau, American Community Surveys.

Several unique methodological differences help contextualize why HUD and JCHS estimates vary (Figure 1). The first key distinction between the measures reported by HUD and JCHS is the source data. HUD estimates of cost burdens rely on the American Housing Survey (AHS), a biennial survey jointly administered by HUD and the Census Bureau assessing characteristics of the housing stock and its occupants. JCHS calculates cost burdens using the American Community Survey (ACS), an annual Census Bureau survey of households designed to supplement the short form decennial census. The surveys vary in size and scope. The AHS reaches 50,000-70,000 housing units in its national longitudinal sample, gathering detailed information on housing quality and cost, assisted status, and location. The ACS reaches 3.0-3.5 million households in the years since its full implementation and collects information on many demographic, economic, and employment characteristics, along with selected housing cost and unit information.

In addition to their variations in design, the AHS and ACS use distinct methods for defining occupied units that result in different counts for the most basic variables of total households (equivalent to total occupied housing units) and households by tenure. While several reports have examined these differences in more depth, essentially the ACS uses a broader definition of occupancy and makes more attempts to contact sampled households. These features of the survey tend to increase the number of occupied units reported and can count households in a seasonal residence (often rented) rather than their usual residence (possibly owned), increasing the number of renter households over the AHS (Figure 2). While not unique to the 2011-2013 period to explain the divergent trends, this difference in methodology consistently results in about 2 million more renter households in the ACS over the AHS, likely contributing in part to a higher ACS count of burdened renters

Sources: HUD Worst Case Housing Needs: 2015 Report to Congress and JCHS tabulations of US Census Bureau, American Community Surveys.

There are also important distinctions in how cost burdens are measured and what adjustments are made to the data. According to its WCN report, HUD excludes households reporting zero or negative income when calculating cost burdens, unless these households report paying the local Fair Market Rent (FMR) or more for housing. In this case, HUD assumes the negative income reported to represent a temporary situation and imputes a higher income for the household. If these households pay more than FMR and live in adequate, uncrowded housing, an income slightly higher than the local area median is assigned, again assuming a temporary period of income loss. HUD also makes adjustments for households that report paying no cash rent. For these households, HUD relies on reported utility costs to represent housing costs and identify housing cost burdens.

In contrast, JCHS assumes all households reporting zero or negative income to be severely cost burdened and all those paying no cash rent to be unburdened (in the case of a household reporting both zero or negative income and no cash rent, the household is assumed to be unburdened). The difference in adjustments may have had an especially large impact in 2011-2013 as JCHS tabulations of the AHS find the number of renter households reporting zero or negative income rose by nearly 13 percent, about four times the rate of growth of renters reporting positive income. ACS numbers do not mirror this rise, as renters reporting zero or negative income increased by 3 percent 2011-2013. Excluding zero or negative income households may better isolate households with perennially low incomes from those potentially higher-wealth households reporting temporary annual business losses. However, excluding these households from ACS analysis finds that severe cost burdens still do not drop nearly as much in 2011-2013 as HUD methods shows. Subtracting all households with zero or negative incomes from the ACS burden count shifts the totals to 10.4 million severely burdened renters in 2011 and 10.3 million in 2013, a decline of just 1.4 percent—much smaller than that reported by HUD for the period. Conversely, if all zero or negative income households in the AHS were considered burdened regardless of rent level, the decline in renters with severe cost burdens 2011–2013 would be about 4.6 percent.

In addition to varying counts of zero and negative income households, a disparity in median renter income patterns between 2011 and 2013 may also explain part of the divergent cost burden trends in that period. HUD cites an increase in median renter income of 7.2 percent in 2011-2013 in real terms as a factor driving down the number of severely burdened renters. While JCHS estimates of ACS data also find an increase in real median renter income in that time—the first increase since 2006-2007—the gain is a distinctly smaller 5.2 percent. HUD notes in its WCN report that some of the observed increase in median income may be due to newly formed higher income renter households, but does not further explore this possibility. Analysis of ACS data indeed shows that an influx of higher income renters occurred over this time. Of the net 1.7 million increase in renter households measured in the ACS 2011-2013, fully 1 million or 60 percent had incomes of $75,000 or more, over twice the median renter income (Figure 3). With this group pulling up the median figure, aggregate income gains may not have impacted lower income households sufficiently to meaningfully decrease the number of severely burdened renters.

Source: JCHS tabulations of US Census Bureau, American Community Surveys.

Indeed, analysis of the most recent 2014 ACS reveals the number of severely burdened renters is once again on the rise, climbing to 11.4 million—the highest number on record. Whether new AHS data expected in the upcoming months and the next WCN report due the following spring confirm this trend or show a further drop in severely burdened renters, the results of both surveys again underscore the acute unaffordability of housing for millions of renter households. Understanding whether affordability pressures are worsening or easing is therefore crucial to making informed decisions concerning rental assistance and other housing policy actions. Given additional data showing persistent rent growth and  tightness in the rental market, the larger sample size of the ACS, the benefit of an added year of ACS data showing rising burdens, and the unusually large recent shifts in renter incomes in the AHS, it seems likely that the enduringly high severe cost burden levels reported by the ACS are more accurate and affordability pressures for renter households continue to build.