Housing Perspectives (from the Harvard Joint Center for Housing Studies): rental

Showing posts with label rental. Show all posts

Wednesday, May 23, 2018

How Do We Proactively Preserve Unsubsidized Affordable Housing?

Robust land bank and land trust partnerships, long-term lease-purchase programs, and low-interest renovation loans with affordability requirements are three tools that policymakers and mission-driven organizations can use to get ahead of real estate price appreciation, according to Proactive Preservation of Unsubsidized Affordable Housing in Emerging Markets: Lessons from Atlanta, Cleveland, and Philadelphia, a new working paper jointed published by the Joint Center for Housing Studies and NeighborWorks® America. Written by Matt Schreiber, a Master of Urban Planning student at the Harvard Graduate School of Design who was a 2017 Edward M. Gramlich Fellow in Community and Economic Development, the paper draws on work done by public and non-profit entities in all three cities.

North Philadelphia (Credit: Tony Fischer/Flickr)

In those places, Schreiber notes, median house prices range from $60,000 to $250,000, which suggests that they have an ample supply of affordable units. However, housing in those markets actually remains out of reach for so many residents, whose incomes are not growing as rapidly as house prices, which, according to Zillow's Home Value Index, rose by 8-11 percent in 2017. Such increases, and the fact that prices rose in more than 90 percent of the zip codes in those three cities, led Schreiber to ask what policymakers and the leaders of mission-driven organizations could do to get ahead of real estate price appreciation and, in doing so, proactively preserve their city's stock of affordable housing.

Schreiber used a four-part methodology to answer this question. First, he identified emerging markets; those areas that have not yet experienced the price appreciation effects of gentrification, but are likely to do so in the near future because they are close to each city's central business district, anchor institutions, or its other already-gentrified areas. Second, he reviewed the housing stock in these "likely-to-gentrify" areas, which made it clear that most of the affordable housing in these places are unsubsidized units located in one-to-four unit buildings. Third, he interviewed local stakeholders and national experts to learn their views on promising ways to find the balance between improving the quality of the housing stock while preserving its long-term affordability for low-income residents.

Those interview informed the fourth and final step: identifying and assessing three strategies that may address this challenge: building stronger partnerships between local land banks and local land trusts, creating lease-purchase programs that make homeownership more accessible for people of modest means, and offering low-interest loans that help owners renovate unsubsidized affordable units in return for long-term commitments to keep those units affordable for many years to come. Taken together, he notes, these strategies can help maximize the efficiency of the limited resources available to preserve and develop affordable housing. Moreover, the experiences in the three cities suggest "it is possible for mission-driven organizations and policymakers to get ahead of gentrification and proactively preserve vulnerable, unsubsidized affordable housing for low-income residents."

Thursday, May 10, 2018

With the Foreclosure Crisis Behind Us, Have We Stopped Adding Single-Family Rentals?

by Shannon Rieger
Research Analyst

A decade of growth in the single-family rental market has fundamentally reshaped the nature of rental housing across the country, with states hard-hit by the foreclosure crisis seeing particularly notable changes, according to Joint Center analyses of data from the American Community Survey (ACS) and other sources. Our review also showed that the stock of single-family rental homes, which grew dramatically between 2006 and 2014, has been roughly stable for the last few years.

According to the ACS data, the nation's stock of single-family rentals grew from 12.2 million units to 16.1 million units in 2016, with virtually all of the growth (99 percent) occurring between 2006 and 2014. This 32 percent increase in the single-family rental stock far outpaced the 11 percent increase in the nation's stock of multifamily rental units, which grew from 26.0 million to 28.9 million between 2006 and 2016.

As a result, single-family homes now represent more than one-third (34 percent) of the rental stock nationwide. Additionally, the growth in single-family rentals has provided an important source of housing for families with children. In fact, single-family homes accommodated 84 percent of the growth in renter households with children between 2006 and 2016.

However, most of these new rental units were not new construction. According to our analysis of data collected by the US Census Bureau, between 2006 and 2016, only 366,000 new attached and detached single-family homes were built as rental units. This, in turn, indicates that about 3.5 million of the single-family rental units added to the stock 2006–2016 were existing structures that had previously been owner-occupied homes.

This trend of converting single-family homes to rentals was unevenly distributed across the country, with the greatest increases occurring in the states with higher than average foreclosure rates, according to JCHS analysis of data from the Mortgage Bankers Association and the ACS (Figure 1). For example, between 2006 and 2016, Nevada's stock of single-family rental units grew by 63 percent—faster than any other state in the country. And the foreclosure start rate in Nevada peaked at 3.8 percent in 2009, the highest rate of any state 2006–2016 and more than double the nation's peak rate of 1.4 percent.

Arizona and Florida also experienced particularly high foreclosure rates and unusually large increases in their stocks of single-family rental units. Arizona's foreclosure start rate peaked at 2.6 percent in 2009, and its single-family rental stock grew by 61 percent between 2006 and 2016. Florida's foreclosure start rate hit a high of 2.8 percent in 2009, and its single-family rentals grew by 50 percent int he decade leading up to 2016. While these data do not tell us exactly how many of these homes completed the foreclosure process and were subsequently converted to rental units, they do suggest that, as many have reported, large numbers of foreclosed homes were bought by investors who converted them to rental units.

Figure 1.

Note: Single-family rentals include detached and attached single-family homes. Stock estimates include renter-occupied units and units that are vacant for-rent. The MBA National Delinquency Survey reports the rate of mortgage loans that are in foreclosure as a percentage of the number of loans serviced during the quarter. The survey sample includes about 85% of the US market for first-lien 1-4-unit mortgages.

Source: JCHS tabulations of US Census Bureau, 2006 and 2016 American Community Surveys, and Mortgage Bankers Association National Delinquency Survey, compiled by Moody's Economy.com

However, since 2014, the foreclosure inventory has largely cleared and few new foreclosures have been filed. Not surprisingly, there was also little growth in the stock of single-family rental units 2014–2016. Illustratively, the number of single-family rentals grew by an average of 483,000 a year between 2006 and 2014, but between 2014 and 2016, the stock grew by only 22,000 units. It remains to be seen if this recent shift is a short-terms pause or if it represents the culmination of the past decade's trend of significant growth in single-family rentals.

Wednesday, April 11, 2018

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.

Monday, February 26, 2018

The Number of High-Income Renters Surged, Especially in the Nation's Highest-Cost Markets

by Alexander Hermann
Research Assistant

High-income renters are a growing share of all rental households, particularly in the nation's most expensive metropolitan areas, according to analyses in our most recent America's Rental Housing report and an online interactive tool released in conjunction with the report.

The shift comes amid tremendous growth in the national rental housing market, which added nearly 10 million new rental households between 2006 and 2016. These include 2.9 million "high-income" renters (those with real annual incomes exceeding $100,000). This is a 29 percent increase in a group that represented 9 percent of all renters in 2006 but accounted for 13 percent of renters in 2016 (Figure 1).

Figure 1: Higher-Income Households Represent a Growing Share of Renters

Note: Household incomes are in constant 2015 dollars, adjusted for inflation using the CPI-U for All-Items.
Source: JCHS tabulations of US Census Bureau Current Population Surveys

While the growth in high-income households occurred in virtually all of the nation's major metropolitan areas, there was significant local variation in both the magnitude of that growth and in high-income households' share of rental household growth (Figure 2). Three aspects of those changes are particularly notable.

Figure 2: Change in Renter Households by Real Household Income, 2006-2016 (Interactive)

1. Growth in high-income renter households was especially pronounced in more expensive metropolitan areas. Five metropolitan areas with particularly high rents—San Francisco, New York, Boston, Washington, DC, and Los Angeles—accounted for 30 percent of the national growth in high-income renters. In those areas, high-income renters also represented an unusually high share of new renter households. In the San Francisco metro area, where median rents in 2016 were $1,750, the number of high-income renters nearly doubled from 144,000 households in 2006 to 276,000 in 2016, an increase that accounted for 93 percent of the net change in renters in that region (Figure 3). In the New York metropolitan area, where the median rent was $1,350, high-income households accounted for nearly two-thirds (65 percent) of renter growth between 2006 and 2016. High-income households also were a particularly high share of net growth in renters in Boston (61 percent), Washington, DC (48 percent), and Lost Angeles (42 percent) metros.

Figure 3: Higher-Income Households Represent a Growing Share of Renters, Particularly in High-Cost Metros Like New York, San Francisco, and Washington, DC

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

2. However, the number of high-income renters also grew in lower-cost markets. The rate of growth in high-income renter households outpaced overall renter growth in 92 of the nation's 100 largest metro areas. In the Houston metro area, where median rents were $1,000 and the median renter income was $40,000, the number of high-income renters increased from 58,000 to 133,000 households, a 130 percent increase that far outpaced the 39 percent growth for all renter households in the region. As a result, high-income household growth in the Houston metro accounted for 28 percent of the growth in renter households. High-income renters also comprised high shares of renter growth in a host of other metros including Toledo (31 percent), Milwaukee (36 percent), Pittsburgh (40 percent), Ogden (41 percent), and Baton Rouge (51 percent). Median rents reported in these metros in 2016 ranged from $678 in Toledo to $898 in Ogden. In contrast, the reported number of high-income renters declined in just two markets, Lakeland (FL) and Omaha (NE), where small sample sizes could have played a role.

3. Nevertheless, low- and modest-income renters still outnumber high-income renters in nearly every metro. In 2016, over one-third (35 percent) of the nation's renter households had incomes below $25,000, and nearly two-thirds (62 percent) had incomes below $50,000. Even in the nation's ten most expensive markets, households making less than $25,000 a year still made up to 27 percent of all renter households in 2016, while those making more than $100,000 were 22 percent of the rental households (Figure 4). In fact, renters earning over $100,000 outnumbered those earning under $25,000 only in San Jose, San Francisco, Washington, DC, and Honolulu metropolitan areas. And even in San Francisco and San Jose, which have the largest share of high-income renters (at 35 and 42 percent respectively), roughly 1-in-5 renter households still had incomes below $25,000. Such figures underscore the fact that regardless of local market conditions, low-and moderate-income renters across the country struggle to find affordable rental housing, in part due to the increased demand created by the growing number of high-income renters.

Figure 4: Even With High-Income Renter Growth, Low-Income Renters Still Outnumber High-Income Renters in High-Cost Metros

Source: JCHS Tabulations of US Census Bureau, American Community Survey 1-Year Estimates,

Notes: Highest (lowest) cost metros are those with the ten highest (lowest) median rents among the 100 largest metros in the country in 2016

Thursday, February 1, 2018

Is Rent Growth Finally Slowing?

by Elizabeth La Jeunesse
Research Analyst

Rents rose faster than inflation in almost three-quarters of the nation's major housing markets, according to analyses done for our latest America's Rental Housing report. However, there are multiple signs that while rents are still on the rise, the rate of increase is slowing in most areas, and the long-standing gap between the increases in rents and rise in the cost of other goods is shrinking.

In particular, as our new interactive chart (Figure 1) shows, according to the US Bureau of Labor Statistics’ (BLS) Consumer Price Index, contract rents for primary residences (which covers the broadest range of rental property types) rose by 3.8 percent annually in both November and December 2017. This not only was a tenth of a percentage point lower than the annual rate in September and October (3.9 percent), it was also the first sign of easing rent growth in the CPI measure in over seven years (since late 2010, when rent growth slowed to a near standstill).

Figure 1: Rent Growth Relative to Inflation

The chart also illustrates that, despite slowing somewhat, increases in rents still outpaced increases in the cost of non-housing goods nationally, regionally, and in all but one of the 25 metros tracked by the BLS (the exception was Anchorage). However, the national gap, which expanded from mid-2012 to mid-2016, has fallen from 4.9 percentage points in late 2016 to 2.3 percentage points in late 2017. Moreover, the gap between increases in rents and inflation in non-housing goods narrowed in all four regions of the US, and in 22 of the 25 metros tracked by the BLS.

Data on rents in professionally managed apartments in 100 markets, provided by RealPage through the third quarter of 2017, also indicate that nominal rent increases outpaced inflation in almost three quarters of the 100 markets tracked by that firm. However, as another of our interactive tools shows (Figure 2), the pace of growth slowed in most areas. Indeed, in 70 of these same 100 apartment markets, average annual rent growth as of the third quarter of 2017 was less than annual rent growth as of the third quarter of 2016. The differences were particularly notable in several markets in the West and South. In Nashville, for example, apartment rents, which grew by 7.0 percent annually through the fall of 2016, rose by only 1.1 percent through the fall of 2017. Similarly, in Portland, rents rose by only 2.1 percent through the fall of 2017, compared to 6.8 percent for the same period in 2016.

Figure 2: Rent Increases Moderated in Many But Not All Markets in 2017

These shifts are significant because changes in rent growth for professionally managed units tend to be a leading indicator of broader trends in rents and, as such, can help identify turning points in the national rental market. Therefore, looking forward, the critical question is whether (and how quickly) the slowdown that appears to be occurring in professionally-managed markets will broaden to the rental market’s other segments and, if it does, whether the gap between the pace of rent increases and non-housing inflation rate will close or even be reversed.