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November 28, 2014

Rental Demand Slowing, Except in These Areas

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Rental Demand Slowing, Except in These Areas

Harvard’s Joint Center for Housing Studies released its biennial housing report today, offering predictions for the U.S. rental market in the next two years. While the study finds that growth in demand for multifamily housing will slow its pace within the next few years, demographic forces alone will mean an increase of between 4 million and 4.7 million renters over the next decade.

The report gives voice to some anxiety about possible overbuilding, noting that long development periods in multifamily housing make it harder to determine the actual volume of new multifamily housing coming onto the market. The study also finds that “vacancy rates do appear to be bottoming out and rent increases are slowing in many markets, suggesting that supply and demand are moving into balance.” Still, there are two areas where rental availability is far lower than demand: Low-income rentals and affordable senior housing.

The report notes that the “growing number of seniors on fixed incomes is likely to outstrip the limited supply of affordable rentals. With the number of families with children also on the rise, demand for larger rental units will increase as well, particularly in communities with access to good schools and employment centers.”

Yet while demand is growing, so too are rents, putting further pressure on these groups. For the first time, more than half of all U.S. renters spend more than 30 percent of their income on rent. Between the year 2000 and 2012, real median rents (adjusted for inflation) increased by 6 percent across the country. During the same period, the real median income of renters dropped by 13 percent.  The report also says that the private market is struggling to keep up with the growth in demand in this demographic.

The study’s authors note that the deficiency in low-income rental options is growing faster than it has in previous years.

“The shortfall in the number of units affordable to extremely low-income renters in the U.S. more than doubled from 1.9 million in 2001 to 4.9 million in 2011. The situation just keeps getting worse,” says Chris Herbert, Research Director at the Harvard Joint Center for Housing Studies. “For many low-income families, the rental housing affordability crisis is like a game of musical chairs in which there is never a chair left for them.”

Source: "America's Rental Housing: Evolving Markets and Needs," The Joint Center for Housing Studies of Harvard University (Dec. 9, 2013)

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