Low-Cost Rental Housing Increasingly Difficult to Find

by Elizabeth La Jeunesse
Research Analyst

While rental markets are cooling nationally, market conditions remain extremely tight at the low end of the market, offering little relief to affordability pressures faced by renters with the lowest incomes, according to our new report, America’s Rental Housing 2017.

In fact, by several metrics, lower-priced housing is increasingly hard to find not only in high-cost coastal areas but also in many inland areas where rents are generally lower. Illustratively, vacancy rates for less expensive units – those with rents below the median for their metropolitan area – were below those for more expensive units in 42 of the nation’s 50 largest metros, including all but one of the nation’s largest 15 metros. Moreover, in 14 of the 50 largest metros, vacancy rates for less expensive units were less than or equal to 5 percent last year, compared to 2006, when just three metros had such tight conditions. The tightest markets were in San Francisco, Los Angeles, Seattle, and Portland, where vacancy rates for less expensive units were under 3 percent (Figure).

Notes: Less (more) expensive units are defined as those below (above) the area median contract rent in the same calendar year. Source: JCHS tabulations of US Census Bureau, 2016 American Community Survey.

Such ultra-low vacancy rates are unusual, at least compared to a decade ago. In San Francisco and Denver, for example, vacancy rates for units renting for less than the area median were closer to 8.5 percent in 2006 (a similar period of relative market strength), but by 2016, they had fallen to 2.0 and 3.4 percent, respectively. Similarly, in Seattle and Portland, vacancy rates for less-than-median-rent units were 5.8 and 5.6 percent respectively in 2006. However, in 2016, the vacancy rate for these units had fallen to just 2.9 percent. In fact, the only major metro to see consistently low vacancy rates in the lower-cost segment during both periods was Los Angeles, where the rate declined from 3.4 percent in 2006 to 2.9 percent in 2016.

Metro areas with the steepest drops in the vacancy rate for less expensive units from 2006 to 2016 generally had high vacancy rates to begin with. For example, in Cincinnati and Kansas City lower-rent vacancy rates declined from 16.7 and 14.2 percent, respectively, in 2006 to 7.5 and 6.7 percent in 2016. The Nashville and Detroit rental markets were also transformed over this period, with vacancy rates for low-rent units dropping from 10.0 and 10.9 percent, respectively, to 4.7 and 6.1 percent.

Data from RealPage, Inc., which classifies professionally managed apartment markets into three segments (according to quality and cost for the area) confirm these trends. Within the 100 markets they track, vacancy rates in the highest-priced Class A segment rose 1.5 percentage points over the past year to 6.0 percent while those in the mid-priced Class B segment rose 1.0 percent to 4.6 percent. In contrast, vacancy rates in the low-cost Class C segment remained relatively unchanged from the past year at 4.1 percent in the third quarter of 2017—their lowest level since the early 2000s. Moreover, in a handful of markets, including Miami, San Jose, Honolulu, San Diego, Sacramento, Minneapolis, Portland, and Orlando, vacancy rates in the Class C segment were below 1.5 percent.

The bottom line is that while rental markets are cooling nationally, households in need of modestly-priced rental housing still face challenging conditions in many areas. Many previously low-demand markets heated up over the past decade, while markets for less-expensive units tightened further in metros that were already expensive. With vacancy rates for less expensive units at rock-bottom levels, relief from market cooling is unlikely to be felt soon by low-income families.

Full data for all metro areas, including median rents, is available in Table W-19 of the report’s appendix tables.

Taking it to the House: Our Most Popular Blogs of 2017

by David Luberoff, Deputy Director

As we turn the calendar to 2018, we took a moment to look back at the past year to see what were the most popular articles in our Housing Perspectives blog.  

The top five articles of 2017 were:

1. When Do Renters Behave Like Homeowners?
   In high-housing cost cities, renters and homeowners both oppose new residential developments proposed for their neighborhoods. (Written by Michael Hankinson, a Joint Center Meyer Doctoral Fellow)


2. Wait... What? Ten Surprising Findings from the 2017 State of the Nation’s Housing Report
   There were a number of surprises in our annual report, including the fact that fewer homes were built over the last 10 years than any 10-year period in recent history and that the homeownership gap between whites and African-Americans widened to its largest disparity since WWII. (Written by Daniel McCue, a Senior Research Associate at the Joint Center)


3. Are Home Prices Really Above Their Pre-Recession Peak?
   While nominal home prices were above their mid-2000s heights in 48 percent of the nation’s 951 local markets, in real dollars, prices reached their peaks in only 15 percent of those markets. (Written by Alexander Hermann, a Research Assistant at the Joint Center)


4. Projection: US Will Add 25 Million Households by 2035
   Revising previous estimates, the Joint Center now predicts that the United States will add 13.6 million households between 2015 and 2025, and another 11.5 million households between 2025 and 2035. (Also written by Daniel McCue)


5. Our Disappearing Supply of Low-Cost Rental Housing
   The number of units renting for $2,000 or more per month (in constant, inflation-adjusted dollars) nearly doubled between 2005 and 2015, while the number of units renting for below $800 fell by 2 percent. (Written by Elizabeth La Jeunesse, a Joint Center Research Analyst)

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.

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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

Who Owns Rental Properties, and is it Changing?

by Hyojung Lee
Postdoctoral Fellow

Institutional investors own a growing share of the nation's 22.5 million rental properties and a majority of the 47.5 million units contained in those properties, according to the US Department of Housing and Urban Development's recently released 2015 Rental Housing Finance Survey (RHFS), a survey administered by the Census Bureau. The changes are notable because virtually all of the household growth since the financial crisis has occurred in rental units, with more than half of the growth occurring in single-family rental units.

According to the RHFS, individual investors were the biggest group in the rental housing market in 2015, accounting for 74.4 percent, or 16.7 million rental properties, followed by limited liability partnerships (LLPs), limited partnerships (LPs), or limited liability companies (LLCs) (14.8 percent); trustees for estates (4.1 percent); and nonprofit organizations (1.6 percent) (Table 1). However, because the share of rental properties owned by individual investors tends to decrease with the property size, individual investors owned less than half (47.8 percent) of rental units, followed by LLPs, LPs, or LLCs (33.2 percent), trustees for estates (3.3 percent), real estate corporations (3.3 percent), and nonprofit organizations (3.2 percent).

Source: Rental Housing Finance Survey, 2015.

When combined with data from the 2012 RHFS and the 2001 Residential Finance Survey (RFS), the new data also show that the number and share of rental properties owned by institutional investors increased for all types of properties between 2001 and 2015 (Figure 1). For example, while about a third of properties with 5 to 24 units were owned by non-individual investors in 2001, that share soared to 47 percent in 2012 and about two-thirds in 2015. Similarly, about 66.1 percent of properties with 25 to 49 units were owned by institutional entities in 2001, which rose to 77 percent in 2012 and about 81 percent in 2015.

Source: Residential Finance Survey, 2001; Rental Housing Finance Survey, 2012 and 2015.
Note: The condominiums and mobile homes the 2001 RFS were excluded as they are excluded in the 2012 and 2015 RHFS. Single-family units were not counted in the 2012 RHFS.

While individual investors (often called "mom-and-pop landlords") still owned about three-quarters of all single-family rental properties in 2015, the share of those properties owned by institutional investors rose from 17.3 percent in 2001 to 24.5 percent in 2015. However, during this time, many individual landlords reportedly created their own LLCs and transferred ownership of their property to protect themselves from liabilities and take advantage of tax benefits. As a result, the figures for single-family rentals may understate the number of mom-and-pop landlords.

Finally, the 2015 RHFS also provides useful information about when these changes occurred. Overall, non-individual investors accounted for about 16 percent of rental properties acquired from 1980 to 2004. That changed dramatically in the years after the financial crisis. Non-individual investors bought 28 percent of rental properties sold between 2010 and 2012 and 49.3 percent sold between 2013 and 2015 (Figure 2). Moreover, this shift was particularly pronounced for properties with 1 to 4 units (compared to those with 5 or more units).

Source: Rental Housing Finance Survey, 2015.

Despite potential implications for both renters and the broader housing market, there have been relatively few studies assessing the impacts of changing ownership patterns for rental properties. However, some research suggest that the changes are more than just paperwork. Illustratively, a 2016 discussion paper published by the Federal Reserve Bank of Atlanta reported that large corporate landlords and private equity investors of single-family rental homes in Fulton county, Georgia were far more likely to file eviction notices than small landlords in the county. Hopefully, the changes documented in the 2015 RHFS will spur additional research on how ownership patterns affect such key issues as rental affordability, housing instability, and the upkeep of rental units.

Our Disappearing Supply of Low-Cost Rental Housing

by Elizabeth La Jeunesse
Research Analyst

It’s not an illusion: low-cost rental housing in the US is disappearing. And our 2017 State of the Nation’s Housing report has the numbers to prove it.

Using ACS data from 2005 and 2015, our new report shows how gains in the supply of high-end units and losses of low and modest-priced units over the past decade has shifted the entire rental stock toward the high end. Nationwide, the number of units renting for $2,000 or more per month (in constant, inflation-adjusted dollars) nearly doubled between 2005 and 2015, while the number of units renting for below $800 fell by 2 percent (Figure 1).

Figure 1: Across the US

Released in conjunction with the report, our new interactive tool shows how this shift played out differently in the nation’s 100 largest metropolitan areas. Metros reporting the most dramatic losses of units renting for less than $800 per month included Austin, Seattle, Portland, and Denver – all places where apartment markets heated up in recent years.

Austin’s transformation was particularly striking. The number of units with rents under $800 declined by nearly 40 percent (a loss of around 27,000 units), while those with rents at $2,000 or more increased more than three-fold (Figure 2).

Figure 2: Austin

The pattern was similar in Denver, where the number of units renting for under $800 declined by nearly a third, a loss of 31,000 modest-priced rentals, even as the number of units with rents over $2,000 per month tripled, an increase of more than 24,000 units (Figure 3).

Figure 3: Denver

The largest aggregate increases in high-cost rentals took place in the New York, Los Angeles, San Francisco, and Washington DC metro areas. According to ACS data, the New York metro added nearly 250,000 units renting for more than $2,000 per month, while it lost more than 120,000 units renting for less than $800 a month (Figure 4).

Figure 4: New York

Los Angeles underwent a similar shift in rental stock, losing over 94,000 units renting for less than $800 between 2005 and 2015, while gaining over 200,000 high-cost units (Figure 5).

Figure 5: Los Angeles

The San Francisco and Washington DC metropolitan areas both added over 100,000 high-cost rental units. In San Francisco, the highest-cost rental segment (those renting for more than $2,400 per month) underwent particularly rapid growth, rising by 145 percent, from almost 60,000 units in 2005 to more than 146,000 units in 2015. In contrast, the stock of low-priced rentals in the region, which was quite low in 2005, was virtually unchanged over the subsequent decade (Figure 6).

Figure 6: San Francisco

In general, areas with large numbers of assisted rental units saw little or no growth in their stock of low-priced rentals but significant growth in the most expensive units. For example, the number of units renting for less than under $800 in the Boston metro was basically unchanged, while the number of units renting for more than $2,000 grew by 70 percent (Figure 7).

Figure 7: Boston

Because of such shifts, in most metro areas the share of units that rented for less than $800 a month fell between 2005 and 2015. In Austin, for example, the share of units renting for under $800 per month declined from over a third in 2005 to less than 15 percent in 2015. Similarly, the share of units renting for under $800 per month in New York City metro, home to around 3.5 million renter households, dropped from 23 percent of all units in 2005 to just 18 percent in 2015. And in the Washington, D.C. metro, the number of units renting for less than $800 per month dropped from 15 percent in 2005 to just 10 percent in 2015.

In contrast, both the number and the share of low-rent units rose in a few metros, including the Las Vegas, Cleveland, Sacramento, and Detroit metros. These areas tended to have larger numbers of distressed properties as well as lower rates of economic growth and multifamily construction, which combined to hold down the growth in real rents between 2005 and 2015. In Detroit, for example, there was a 17 percent increase in the share of units renting for less than $800 a month and only a small rise in the number of high-rent units (Figure 8).

Figure 8: Detroit

Use our interactive tool to see how the distribution of rental units changed in the nation’s 100 largest metro areas between 2005 and 2015.

Download an Excel file with the data for each metro area (W-16).

New Report: Aging Homeowners Drive Growth in Remodeling as Millennials Begin to Gain Footing

Homeowner spending on remodeling is expected to see healthy growth through 2025, according to Demographic Change and the Remodeling Outlook, the latest biennial report in our Improving America’s Housing series. Demographically based projections suggest that older owners will account for the majority of spending gains over the coming years as they adapt their homes to changing accessibility needs. Although slower to move into homeownership than previous generations, millennials are poised to enter the remodeling market in greater force, buying up older, more affordable homes in need of renovations.

The residential remodeling market includes spending on improvements and repairs by both homeowners and rental property owners, and reached an all-time high of $340 billion in 2015, surpassing the prior peak in 2007. [See our Interactive Infographic.] Spending by owners on improvements is expected to increase 2.0 percent per year on average through 2025 after adjusting for inflation, just below the pace of growth posted over the past two decades, and about on par with expected growth in the broader economy.

The large baby boom generation has led home improvement spending for the past twenty years, and its influence shows no signs of waning. Older homeowners will continue to dominate the remodeling market, as they make investments to age in place safely and comfortably. Expenditures by homeowners age 55 and over are expected to grow by nearly 33 percent by 2025, accounting for more than three-quarters of total gains over the decade. The share of market spending by homeowners age 55 and over is projected to reach 56 percent by 2025, up from only 31 percent in 2005.

Gen-Xers are now in their prime remodeling years, and while some are still recovering from home equity losses after the housing crash, many in this generation will undertake discretionary projects deferred during the downturn. And as younger households move into homeownership, they will supplement the already thriving improvement market.

Try the Interactive Infographic

“With national house prices rising sufficiently to help owners rebuild home equity lost during the downturn, and with both household incomes and existing home sales on the rise, we expect to see continued growth in the home improvement market,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies.

Even though increasing house prices are encouraging homeowners to reinvest in their homes, they also are raising housing affordability concerns among younger buyers. Climbing mortgage interest rates and rising house prices not only make homeownership more difficult for younger households, but leave those who are able to buy with fewer resources to make improvements and repairs. And while high rents may provide an incentive to buy homes, they also make it difficult for first-time buyers to save for a downpayment.

Some demographic trends are also presenting challenges to a healthier remodeling market outlook. A disproportionate share of growth over the coming decade will be among older owners, minority owners, and households without young children; groups that traditionally spend less on home improvements.

“Despite these challenges, the remodeling industry should see numerous growth opportunities over the next decade,” says Chris Herbert, managing director of the Joint Center for Housing Studies. “Strong demand for rental housing has opened up that segment to a new wave of capital investment, and the shortage of affordable housing in much of the country makes the stock of older homes an attractive option for buyers willing to in invest in upgrades.”

Finally, as a new generation of homeowners enters the remodeling market, specialty niches focused on energy-efficiency, environmental sustainability, and healthy homes are likely to see significant growth. Home automation—encompassing everything from entertainment systems to home energy management, lighting, appliance control, and security—is also emerging as a strong growth market, particularly among younger households.

Looking ahead, there are several opportunities for further growth in the remodeling industry. The retiring baby boom generation is already boosting demand for accessibility improvements that will enable owners to remain safely in their homes as they age. Additionally, growing environmental awareness holds out promise that sustainable home improvements and energy-efficienct upgrades will continue to be among the fastest growing market segments.

Read the full report, try the Interactive Infographic, or join the conversation on Twitter with #HarvardRemodeling.

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.

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.

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.