US tenants are increasingly struggling to make ends meet, as homeownership falls, placing stress upon the rented sector.
The latest State of the Nation’s Housing report by the Joint Center for Housing Studies of Harvard University found that homeownership rates have continued to fall, with single-family construction remaining near historic lows, and existing home sales cooling.
In contrast, rental markets have continued to grow, fueled by another large increase in the number of renter households. However, with rents rising and incomes well below pre-recession levels, the US is also seeing record numbers of “cost-burdened” renters – not just among the poor, but households higher up the income scale.
“While soaring demand is often attributed to the millennials’ preference to rent, households aged 45–64 in fact accounted for about twice the share of renter growth as households under the age of 35,” comments Chris Herbert, managing director of the Joint Center for Housing Studies.
“Similarly, households in the top half of the income distribution, although generally more likely to own, contributed 43 per cent of the growth in renters. The other byproduct of this surge in rental demand is that the national vacancy rate fell to its lowest point in nearly 20 years. Given the limited supply of rental units, rents rose at a 3.2 per cent rate last year — twice the pace of overall inflation.
“To meet this demand, construction started on more multifamily units in 2014 than in any year since 1989,” comments Daniel McCue, a senior research associate at the Joint Center. “And if job growth continues to pick up, we could see even more demand, as young adults increasingly move out of their parents’ homes and
into their own apartments.”
More than a quarter of renters had “severe burdens” or spent more than half of their income on rent. The median income among all renters is approximately $33,000, while the median rent is $900 per month.