The lower end of the rental housing market continues to lose ground, according to the new The State of the Nation’s Housing report by the Joint Center for Housing Studies of Harvard University.
Modestly priced rental units available for under $800 declined by 261,000 between 2005 and 2015, with most of the loss occurring at the lowest rent levels. At the other end, the number of units renting for $2,000 or more surged by 1.5 million.
The shift in the rental stock toward the high end of the market is also clear from the 32% rise in real median asking rents since 2000, says the report.
As a result, there is a worsening mismatch of demand and supply, with the number of low-income renters far outstripping the number of available affordable units. Indeed, more than 11 million renter households pay at least half of their incomes for housing.
The new report shows that the affordable rental housing crisis continues even though foreclosures are ebbing and the homeownership market has rebounded since the recession.
In examining the threats to the affordable housing supply, the report finds that housing created under the low-income housing tax credit (LIHTC) is a concern. The federal program has driven the construction and preservation of affordable housing in the country for 30 years, helping to add about 3 million units since its creation in 1986.
However, the Trump administration’s desire to cut corporate tax credits have dampened investor demand for the credits. In addition, affordability restrictions on more than 500,000 LIHTC units will expire over the next decade.
“While only 5% of LIHTC units typically convert to market rate at the end of their affordability periods, absent additional subsidies, units in low-poverty neighborhoods are at higher risk,” says the report. “The possible loss of affordable units in these areas—where lower-income households typically have more access to employment, education, and other opportunities—is of great concern.”
Looking ahead, being intentional and being committed about developing affordable housing will be critical to addressing the rental housing crisis, said Terri Ludwig, president and CEO of Enterprise Community Partners, during a webcast held to discuss the report’s findings.
Traditional tools like the LIHTC also remain essential. “While the margins absolutely have been squeezed,” she said. “It’s still a very highly productive program, which is generating 100,000 units of either new or preserved affordable housing every year and also creating about 100,000 jobs in the same time.”
Demand for housing credits still outpaces supply, so Enterprise and others support legislation to expand the LIHTC program, according to Ludwig.
The State of the Nation’s Housing report also finds that:
· Nearly half of the nation’s 100 largest metro areas posted absolute declines in their stocks of low-rent units (defined as having real gross rents under $800) between 2005 and 2015. Metros with the largest losses in percentage terms included Austin, Denver, Portland, and Seattle, where supplies were down by a third or more;
· Despite a slight improvement from 2014, fully one-third of U.S. households paid more than 30% of their incomes for housing in 2015. The number of cost-burdened renters (21 million) outstrips the number of cost-burdened owners (18 million) even though nearly two-thirds of U.S. households own their homes;
· Nearly half (48%) of all renters were cost burdened in 2015, but shares among lower-income households were much higher—83% for renters with incomes under $15,000 and 77% for those with incomes between $15,000 and $29,999. In addition, some 26% of renter households paid more than half their incomes for housing in 2015. Among those earning under $15,000 per year, the share with severe burdens exceeded 70%;
· Between 2000 and 2015, the number of people living below the federal poverty line soared from 33.8 million to 47.7 million. Over half of the nation’s poor now live in high-poverty neighborhoods (places where at least 20% of the residents are poor), up from 43% in 2000;
· The number of high-poverty neighborhoods rose from 13,400 to more than 21,300. Although most high-poverty neighborhoods are still concentrated in high-density urban cores, their recent growth has been fastest in low-density areas at the metropolitan fringe and in rural communities
· Nearly 25 million children lived in households with cost burdens in 2015;
· One-third of older adults faced cost burdens in 2015, including 54% of renters and 43% of owners with mortgages on their homes;
· Three-quarters of renter households eligible for rental assistance on the basis of their income do not receive it; and
· The value of multifamily debt outstanding rose by nearly $100 billion in 2016, marking the second year of record-high increases and lifting the total to over $1.1 trillion. More than two-thirds of the growth ($67 billion) came from federal sources, while banks and thrifts contributed $39 billion. In contrast, multifamily mortgage debt in commercial mortgage backed securities continued to shrink, by $15 billion.
