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

Showing posts with label renters. 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 18, 2018

Using a Full Portfolio of Tools (Including Vouchers) to Expand Access to High-Opportunity Communities

by Barbara Sard
Center on Budget
and Policy Priorities

The three papers from the rich and provocative A Shared Future symposium that focused on what it would take for housing subsidies to overcome affordability barriers to inclusion in all neighborhoods provide a multi-faceted and nuanced set of approaches that would expand possibilities for lower-income, non-white families to live in higher-opportunity communities. While these are important approaches that should be part of the policy portfolio, efforts to expand opportunities should also recognize that tenant-based vouchers are, and will likely remain, the primary policy tool for enabling poor and near-poor families to live in higher-opportunity communities.

In his paper, Chris Herbert reminds us that, typically, the housing stock in high-opportunity communities is predominantly owner-occupied. So, as part of a comprehensive portfolio, it’s important to consider strategies to make it possible for low-income (and other) families of color to purchase homes in such neighborhoods, including those where rents are starting to rise. However, even a robust set of tools to overcome downpayment and credit barriers may not be sufficient to make for-sale homes in neighborhoods with good schools and other amenities in many regions within reach of low-income families.

Both Steve Norman and Margery Turner highlight the key role acquisition by committed owners of multifamily rental properties can play, both in keeping rents affordable in “emergent” (i.e., gentrifying) neighborhoods and in making more units available to families with housing vouchers in those and already higher-rent communities. Federal housing policy has neglected such acquisition strategies: grants are rarely available to reduce the amount of debt such purchases will require, and tax credits are restricted to new development or substantial rehabilitation. Like the King County Housing Authority, some other mission-driven organizations, such as the National Housing Trust, have patched together state or local assistance with private market debt (and potentially project-based vouchers) to make such acquisitions feasible. Facilitating loans and grants to purchase rental properties tied to long-term affordability restrictions – including obligations not to discriminate against voucher holders – should be a goal of federal housing policy, including housing finance reform.

While it’s important to include for-sale and multifamily acquisition strategies in a comprehensive strategy portfolio, tenant-based vouchers will likely remain the primary tool for enabling more poor and near-poor families to live in higher-opportunity communities. That’s true, given vouchers’ current scale — more than 2.2 million Housing Choice Vouchers are now in use — and their flexibility to rent virtually any type of decent-quality dwelling at a wide range of price points.

Yet vouchers can do much more to expand housing choice. The implementation of HUD’s new Small Area Fair Market Rent (SAFMR) policy is a promising step, but other federal policy changes are needed to create stronger incentives for housing agencies to promote better locational outcomes. It’s also vital to make more funding available, from public as well as philanthropic sources, to meet agencies’ additional administrative costs of promoting voucher mobility. And federal policy should not only permit but encourage agencies to target vouchers combined with mobility assistance to families with young children living in the most severely distressed neighborhoods.

Such efforts to foster inclusion may cost more, though experience with SAFMRs shows this isn’t always the case. But if we really care about outcomes for families over the long term, we can’t wait until there are sufficient resources to make housing affordable to all before we start paying attention to the types of neighborhoods families live in. The desperation and long-term harm of homelessness and housing insecurity create understandable pressure to spread the limited subsidy resources to help as many families as possible. Yet mounting evidence demonstrates the real long-term harm of growing up in a very poor, violent neighborhood and attending low-performing schools. Affordable housing alone doesn’t improve life chances; where families are able to live must also be a first-order concern, not one that we’ll pay attention to if and when we remedy the shortage of subsidies.

While housing practitioners work to do the best job possible with the available resources, we must also build the political will to expand investments in housing subsidies, so that more families have the chance to overcome affordability barriers and live in communities of their choice. The Center for Budget and Policy Priorities, along with the National Low Income Housing Coalition and others, has just launched the Opportunity Starts at Home campaign, a long-term effort to achieve this goal.

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

Monday, January 22, 2018

Really?! Ten Surprising Findings from the America's Rental Housing Report

by Jonathan Spader
Senior Research Associate

Following the release of our America's Rental Housing report last month, one of the most common questions has been: "Which findings are new or surprising to you?" This is never an easy question to answer, and different readers are likely to find different aspects of the report surprising.

Nevertheless, the list below contains the 10 findings that were, in some way, new or surprising to me. Some reflect new trends, some are the result of new analyses and/or data sources, and some are longstanding findings that I continue to find astonishing.

1. The rental stock grew, and all growth has been among units renting for over $850/month.

While the total number of rental units in the US increased by 7.2 million between 2006 and 2016, in constant dollars, there was nearly no increase in the number of units renting for less than $850 per month, and the number of units renting for less than $650 fell by 475,000 units. In contrast, units renting for $850 or more accounted for the entirety of the growth, with 53 percent coming from units renting for over $1,500 per month. As our interactive tool shows, the lack of growth in low-cost units occurred in a wide variety of metro areas.

2. New rental starts slowed in 2017.

Construction starts of new multifamily units are down 9 percent year-over-year through October 2017 on a seasonally-adjusted basis. The slowdown was first evident in 2016 when permitting fell in nearly half of the nation’s 50 largest markets. While this slowdown suggests that the recent rental construction boom is softening, new rental starts nonetheless remain at a healthy level.

3. The rental market is softening, particularly for high-cost units.

After declining for years, the national vacancy rate rose from 6.9 percent in the third quarter of 2016 to 7.2 percent in the third quarter of 2017. The softening is concentrated among high-cost units. RealPage data shows that the vacancy rate for Class A properties increased by 1.5 percentage points year over year through the third quarter of 2017, whereas the vacancy rate for Class C units ticked up only slightly and remains near its post-recession low.

4. Conversions of single-family homes to rentals have slowed.

The number of single-family rental homes increased by 4 million between 2001 and 2016, driven by conversions of formerly owner-occupied properties during the foreclosure crisis. However, this trend moderated in recent years. According to the American Community Survey, 2015 was the first year since 2006 when the number of single-family rentals declined. While growth turned positive again in 2016, it remained well below levels of the prior decade.

5. The number of renter households jumped by nearly a third between 2004 and 2016.

The number of renter households increased from 33 million in 2004 to 43 million in 2016—an increase of 10 million renter households in just over a decade! This isn’t a new finding, per se, but it amazes me every time I see it. And several aspects of this growth are new…

6. Renter households with incomes over $100,000 account for 30 percent of growth over the past decade.

While renters with incomes of $100,000 or more made up just 9 percent of all renters in 2006, they accounted for 30 percent of renter household growth through 2016. As another one of our interactive tools shows, this trend is particularly pronounced in high-cost metros. Renters with incomes over $100,000 accounted for 93 percent of renter household growth in San Francisco and 65 percent in New York City during this period.

7. Households over 50 accounted for more than half of renter household growth over the past decade.

While renters age 50 and over made up 30 percent of all renter households in 2006, they accounted for 52 percent of renter household growth through 2016. In contrast, households under age 35 made up 42 percent of renter households in 2006 but accounted for just 24 percent of renter household growth through 2016.

8. Older renters are almost twice as likely to live in large multi-family buildings than in single-family homes.

Among renter households age 75 and over, 48 percent lived in large multi-family properties (those with 20+ units) and just 26 percent lived in single-family homes. For comparison, across all rental units, just 21 percent of units are in large multi-family properties and 39 percent are single-family homes. Older adults’ preference for large multi-family buildings may in part reflect the improved accessibility features in these buildings such as no-step entry, single-floor living, and extra wide hallways and doors to accommodate a wheelchair.

9. Almost 40 percent of rural renters are cost burdened.

In rural areas—defined as areas with less than 10,000 in population that are outside the Census-defined metropolitan and micropolitan areas—39.5 percent of all renter households are cost burdened, paying more than 30 percent of their income for housing costs. While this figure is below the 51 percent cost burden share observed in the nation’s nine largest metropolitan areas, it is striking because rural areas are likely to have the fewest obstacles to adding new units that would tend to keep housing costs down. As our online map shows, rural areas with relatively high cost burdens can be found throughout much of the country.

10. Low-income renters have seen their residual income decline by 18 percent since 2001.

Renters with incomes in the bottom quartile of all U.S. incomes had, on average, just $600 left over per month in 2001 after paying for housing costs. By 2016, this figure fell to below $500, an 18 percent decline. In contrast, among renters with above-median incomes, income growth has outpaced the rising cost of rental housing, leaving them with more to spend after paying for housing than similar renters in 2001.

Wednesday, January 3, 2018

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.

Wednesday, December 27, 2017

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:

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)

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)

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)

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)

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)

Thursday, December 14, 2017

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

Thursday, November 30, 2017

Rebuilding from 2017's Natural Disasters: When, For What, and How Much?

by Kermit Baker and
Alexander Hermann

The bulk of repairs to homes damaged by this year's record-setting disasters will not be done until 2019 or 2020, according to our analysis of post-disaster spending between 1994 and 2015. The analysis, which looked at the estimated annual cost of natural disasters alongside annual estimates of disaster-related home repairs and improvements, suggests that an increase of $10 billion in total disaster losses any time in the previous three years is associated with about $300 million in additional annual spending on disaster-related home repairs and improvements.

Notes: Dollar values are adjusted for inflation using the CPI-U for all items. Natural disaster costs include only natural disasters that generate over $1 billion in damages after adjusting for inflation.
Sources: JCHS tabulation of US Housing and Urban Development, American Housing Survey, and National Oceanic and Atmospheric Administration data.

The finding is significant because 2017 was an unusually destructive year. While inflation-adjusted, disaster-related damages averaged about $40 billion a year between 1994 and 2015, Hurricanes Harvey, Irma, and Maria together caused about $150 billion in damages, according to estimates from CoreLogic and Moody’s Analytics (Figure 1). Moreover, damages from 2017’s winter storms, droughts, and wildfires will push these numbers even higher. In fact, the total cost of 2017’s disasters could exceed damages from any year in the last two decades, including 2005, the previous record year, when Hurricanes Katrina and Rita (and a host of smaller but significant disasters) combined to cause more than $200 billion in damages (in inflation-adjusted dollars).

As in other years that were marked by particularly destructive storms and other disasters, this year’s damages should lead to a spurt in construction activity. Some of it will be construction of and renovations to infrastructure and commercial buildings. Some will be the construction of new single-family homes and multifamily housing units. And some will be disaster-related repairs and improvements to both owner-occupied and rental housing.

Extensive flooding from Hurricane Harvey in Port Arthur, Texas.

To estimate how much will be spent on post-disaster home repairs, and when that spending is likely to occur, we combined information on disaster-related damages reported by the National Oceanic and Atmospheric Administration (NOAA) with data on disaster-related home repairs and improvements for the same years found in the U.S. Census Bureau’s American Housing Survey (AHS). The AHS, as a survey of households, only asks owners to report spending on their homes. The comparison suggests that renovation spending continues to increase for about two to three years after the natural disaster occurs, and that an increase of $10 billion in disaster losses any time over the prior three years generates about $300 million in additional disaster-related home improvement spending during the year studied. If this pattern holds, the bulk of the spending from 2017 losses won’t occur until 2019 or 2020. But when it occurs, there is likely to be a substantial increase in spending on home renovations in those years.

While the delay between disaster losses and repair expenditures may seem unusually lengthy, it is consistent with a study funded by the U.S. Department of Housing and Urban Development (HUD) that examined the rebuilding that took place following Hurricanes Katrina and Rita. In a recent Joint Center blog on that study’s implications, our colleague Jonathan Spader (who worked on the initial HUD study) reported that only 70 percent of hurricane-damaged properties in Louisiana and Mississippi had been rebuilt by early 2010, five years after the storms. The study further found that 74 percent of owner-occupied homes had been rebuilt, compared to only 60 percent of the rental properties.

The delays are due to many factors. Insurance companies need to assess the extent of the damage and determine how much is covered. Home improvement contractors, stretched to the limit and suffering from a labor squeeze, must delay certain projects. Owners have to consider local housing and labor market conditions to determine if repairs or improvements make financial sense. Often, federal, state, and local government entities may slow down rebuilding while they decide whether it’s feasible and, if so, whether building codes and insurance guidelines should be more stringent.

Nevertheless, spending will occur and, when it does, it can be substantial. Illustratively, in 2015 (which came after a few relatively mild years for disasters) spending on disaster-related home renovations accounted for almost $11 billion of the $220 billion spent nationally improving owner-occupied homes according to the 2015 AHS. (Lightning and fires accounted for $2.4 billion of this spending, floods for $2.0 billion, and tornados and hurricanes for $1.6 billion. Winter storms, thunderstorms, earthquakes, and drought accounted for the remainder.)

In short, 2017’s hurricanes and other disasters are likely to result in substantial spending on rebuilding, repairs, and improvements to disaster-damaged homes. Moreover, while that spending will ramp up slowly, it is likely to stretch into next decade.