December 19, 2013
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Harvard University’s Joint Center for Housing Studies has released a report entitled, “America’s Rental Housing:  Evolving Markets and Needs,” which describes the growth in the number of American renters, the sharp escalation in the proportion of cost-burdened renters, and the increased need for affordable rental housing.  The report highlights the success of the Housing Credit program in providing affordable housing opportunities, calls for deeper subsidies to make units affordable for extremely low-income residents, and recommends that housing finance reform help ensure the availability of multifamily financing to maintain rental affordability and support the market more broadly during economic downturns.

The report indicates that the renter share of all U.S. households climbed to 35 percent in 2012, bringing the total number of renter households to 43 million by early 2013.  Renting has increased sharply across most age groups, according to the report.  Over the next decade, the report predicts that the aging of the population and the growth of minority households will drive continued expansion in rental demand. 

According to the Joint Center, the rental stock provides a broad array of housing choices nationally, including many single-family homes which migrated from the owner-occupied to the rental stock.  The report says the rental sector of the housing market has bounced back relatively quickly from the Great Recession both because demand is so strong and because it was less involved in the lending excesses that fueled housing bubble.  Construction of multifamily properties has accelerated since 2011.  The rental housing recovery is widespread across the U.S., with lower vacancies, higher rents, and higher construction levels evident in a large majority of markets.

The report says the share of renters paying more than 30 percent of their income for housing has grown significantly over the past decade, reaching 50 percent in 2010.  The percent of renters facing severe cost burdens—paying more than half of their income for rent—rose to 27 percent of all renters.  The Joint Center found that 83 percent of renters with incomes of less than $15,000 were housing cost-burdened in 2011, including 71 percent who were severely cost-burdened.  The largest increase in the percentage of cost-burdened renters between 2001 and 2011 occurred among moderate-income renters, rising 11 percentage points.

The report emphasizes that the gap between the number of lower-income renters and the supply of affordable units is growing, noting that much unassisted affordable housing is aging and at risk of being demolished or lost from the housing stock.  To increase the availability of affordable rental housing, the Joint Center calls for a multi-faceted approach, including efforts to reduce regulatory barriers to the construction of rental housing; greater incentives to invest in existing affordable housing, including tax breaks for maintenance and improvements, exemption from certain local building code requirements, and allowing rehabilitation of properties in cost-effective ways that fully protect residents’ safety but may not meet new construction standards; and continued public subsidies for low-income households.

The report notes that while the universe of very low-income renters eligible for rental subsidies grew by 3.3 million between 2007 and 2011, the share of income-eligible renters actually receiving assistance shrank from 27.4 percent to 23.8 percent.  The Joint Center notes that funding for the Housing Choice Voucher program, the Project-Based Section 8 program, and public housing have been cut by Congress due to federal sequestration and other budgetary pressures.  The report notes that since 1986, the Housing Credit program has provided critical financing to support construction or preservation of 2.2 million affordable housing units, filling a void left by the termination of most other assisted housing production programs several decades ago.  The report states that the program has been highly successful in part because it puts private investors at risk of loss if developments fail.

The Joint Center observes that the Housing Credit does not provide deep enough subsidies to make units affordable for extremely low-income residents, so it is often combined with other forms of assistance.  The report warns that the Housing Credit will come under scrutiny when Congress debates tax reform and recommends that the program’s exceptional track record and unique role in adding to the affordable housing supply should be highlighted.  The authors suggest the need to look holistically at reform of the Housing Credit program and other assisted housing efforts to ensure that these resources work together effectively to meet the needs of the nation’s lowest income renters. 

Finally, the report advises that housing finance reform must not lose sight of the critical federal role in ensuring the availability of multifamily financing to help maintain rental affordability, as well as supporting the market more broadly during economic downturns.

For more information, please contact Ellen Lurie Hoffman.