Compared to 10 years ago, there are now 9 million more renters, the highest jump on record. These renters pay record-high rent. Among the 43 million family and individual renters in the US, one of every five pays over 30 percent of their income just in rent, according to a new Harvard Joint Center for Housing Studies report. For some people, rent consumes half their income.
As explained by Chris Herbert, managing director for the Harvard Joint Center, the crisis specific to the number of renters paying huge amounts of income continues because the market cannot meet affordable housing demand for people with lower incomes. Therefore, moderate-income households are negatively impacted.
Making things worse is the number of significantly cost-burdened renters—people who pay 50 percent of their income toward rent. Over the past 10 years, the number of people in this category climbed to 11.4 million, while the average income of renters declined steadily. Overall, this means that 49 percent of people who rent are cost burdened, and of those, 26 percent severely impacted.
In spite of a 35-percent increase in the number of single-family homes following the market crash and a boom of apartment construction throughout the country, supply has been outstripped by demand.
Because of demographic trends, more benefits of renting, and lingering consequences of foreclosure, there is record-setting demand for rental property. As stressed by Herbert, rental occupancy has reached its highest in 30 years, coupled with monthly rents being at record highs.
While there is still a nice selection of smaller multifamily buildings and single-family homes for rent in the suburbs, a significant portion of recent construction for multifamily dwellings has been of luxurious buildings in urban hubs. People making good income have no problem finding a place to live, however, while low- to middle-income families face serious challenges.
Although formation of households is expected to continue rising slowly, most are renter households, not owners. Experts like Frank Nothaft, chief economist of CoreLogic, believe that these market conditions will continue through this year as newly constructed apartments are consumed by demand from young, new households.
Although supply becomes available in large cities, rents there are for luxury space. Because demand continues to be strong, several developers are looking to the suburbs and secondary or “B” markets for new projects. Demand within these areas is high, and supply limited. However, cost is often a deterrent since the return on investment after labor and land often keeps the projects from being worthwhile. And while single-family construction is moving along quickly, new product will not reach the multifamily market for several years.
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