Affordable rental housing scarce in U.S., study finds

April 26, 2011

The share of renters who spend more than half their income on housing is at its highest level in half a century and it’s no longer just low-income tenants who are feeling the pain, according to a Harvard University study scheduled for release Tuesday.

About 26 percent of renters — or 10.1 million people — spent more than half their pre-tax household income on rent and utilities in 2009. That’s because incomes slipped dramatically from their peak at the start of the decade even as rents kept rising.

The study offers the latest in a series of grim statistics about the scarcity of rental housing, especially for the working poor. The supply has not kept up with demand in part because of a shortage of apartments, a key source of new rentals. Developers cut back on such projects when the economy deteriorated in 2009, which drove down vacancies and boosted rents. Analysts say they expect rents to keep climbing as developers try to ramp up new projects and catch up with demand.

In many areas, the demand is driven by families who lost their homes to foreclosure during the housing bust and ended up searching for rentals. Meanwhile, as the job market recovers, more newly employed young adults appear to be seeking their own apartments instead of living with their parents, putting even more upward pressure on rental rates, according to one of the study’s researchers.

Ideally, renters should not spend more than 30 percent of their income on housing, the study said. Low-income tenants have struggled during the past decade to stay within that limit. And increasingly so have renters with moderate incomes, defined as making between two and three times the minimum wage. By 2009, 7.5 percent of moderate-income renters spent more than half their income on rent, twice as many as in 2001.

“It’s a real squeeze for the lower-income and moderate-income families, and we’re even starting to see it affecting middle-income families, too,” said Erick Belsky, managing director of Harvard’s Joint Center for Housing Studies. “The prospects for improvement any time soon are dim.”

Against this backdrop, finding a cheap place to rent can be daunting, the Harvard study concluded.

In a report to Congress, the Obama administration acknowledged in February that financing to build high-end rental properties is more readily available. That helps explain why for every 100 extremely low-income American families, only 32 adequate rental homes are available, the report said.

A separate study released in February by the Department of Housing and Urban Development concluded that higher-income families who are struggling with shrinking incomes are competing for a limited amount of affordable rental housing, further driving down already low vacancy rates.

The scarcity of affordable rental units was most pronounced in the West, where only 53 units were available for every 100 very-low-income households that are looking to rent, according to the study, which analyzed federal survey data from 2009. That compared with 65 in the South, 66 in the Northeast and 87 in the Midwest.

The Harvard study likewise identified a supply problem. The study analyzed 6 million units that private landlords were renting in 1999 for less than $400 a month. It found that nearly 12 percent of them were demolished by 2009. An even larger number were no longer available because of other factors, such as disrepair or conversion to non-residential use.

The study also analyzed the share of people who were spending more than half their income on rent by region. In the Washington area, the share of such renters shot up to 21.5 percent in 2009 from 15.9 percent in 2000.

A separate Washington Post analysis found that rental prices soared 22 percent in 2009 from a decade earlier, according to inflation-adjusted census figures. Rates jumped in part because 10,000 single-family houses that were occupied by their owners two years ago are now rental properties. Those houses tend to be larger and have higher rents than apartments.

Although the high foreclosure rate helped push more people into rentals nationwide, that factor was less influential in this region. Instead, the growth in the local rental market had to do with the region’s supply of jobs, which lured newcomers who were unable or unwilling to purchase a home here.

The number of people who rent shot up 8 percent nationally and 12 percent locally between 2007 and 2009, Census Bureau figures show. As demand surged, rents climbed 3 percent nationwide and 5 percent in this region.

Dina ElBoghdady covers housing policy for The Washington Post.
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