Housing Perspectives (from the Harvard Joint Center for Housing Studies): america's rental housing

Showing posts with label america's rental housing. Show all posts

Wednesday, April 11, 2018

Have Incomes Kept Up with Rising Rents?

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

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

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

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

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

Source: JCHS tabulations of 2016 American Community Survey.

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

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

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

Monday, February 26, 2018

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

by Alexander Hermann
Research Assistant

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, February 1, 2018

Is Rent Growth Finally Slowing?

by Elizabeth La Jeunesse
Research Analyst

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

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

Figure 1: Rent Growth Relative to Inflation

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

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

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

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