A report from Harvard University’s Joint Center for Housing Studies (JCHS) sheds new light on the nation’s rental market, which faces a crisis in supply and affordability as properties shift from owners individual to institutional investors, and the gap between low- and high-income households — as well as families of color and white families — is widening.
The study found that demand for rentals, similar to demand for homes, soared in 2021, bringing the apartment vacancy rate to its lowest level since the 1980s, at just under 6%. .
At the same time, however, low-income renters and black and Hispanic renters have all suffered disproportionately from rising rental costs and an overall decline in affordable housing. Nearly a quarter of all black renters and 19% of Hispanic renters were behind on rental payments in Q3 2021, compared to 9% of white renters. The availability of available housing for low-income families has also decreased during the pandemic.
This is supported by other data that indicates growing affordability issues as rental costs rise.
Whitney Airgood-Obrycki, a research associate at JCHS, told a panel held to discuss the report that “longstanding discrimination” in wages, education and employment has left black and Hispanic families struggling. prepared for the pandemic and the current accessibility crisis. .
Even before the pandemic, the overall share of renters who are cost-burdened – paying 30% or more of their income in rent – had increased across the board, with low-income families being hit the hardest. More than three-quarters (80%) of renters earning $30,000 or less were cost overburdened in 2019, and even those earning between $30,000 and $75,000 had a 41% chance of being cost overburdened.
The report’s executive summary said these findings supported “the need for a permanent, fully funded housing safety net”, also detailing how much more dire the past two years or so would have been for tenants without government assistance in the form a freeze on student loan payments, unemployment assistance and direct rental assistance.
“The pandemic has only underscored the importance of safe and affordable housing as a foundation for health and well-being,” Airgood-Obrycki said. “Additional investments…can help ensure that low-income tenants have a safe place to live.”
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While this affordability and equity crisis is clearly a matter of extreme urgency, the report revealed a host of other interesting trends in the rental industry during and before the pandemic. Rental buildings are becoming larger, that is, there are more and more larger multi-unit buildings. The share of buildings with 20 or more units increased by 1.7 million between 2014 and 2019 to reach 23% of the total share of rentals. Three-quarters of all rental properties built in 2020 fell into this largest category.
According to the report, new multi-family housing starts also hit a three-decade high, driven by increased demand from high-income renters. Construction of these types of homes “is expected to remain robust for some time,” the report said.
“The people feeling the strength of the market are people in the professionally managed apartment industry,” said Chris Herbert, JCHS chief executive. “It’s really put them in a really good financial position…the multi-family developers are also feeling good.”
However, these housing units are changing hands from small family owners to larger institutions. Between 2001 and 2018, the share of properties owned by businesses rose from 18% to 26%, and investors bought a record 18.2% of all homes in the third quarter of 2021, even though not all of them were not necessarily intended to be rentals. In the short term, the rapidly rising cost of homes and building materials is pushing more inventory into the hands of well-heeled investors and large corporations, which may pose further problems for renters.
Institutional owners are less likely to invest in their properties, according to the report. About 40% of retail investors invested at least $3,000 in their rental properties, while only 33% of non-retail investors did the same. While overall investment in the rental stock nearly doubled between 2009 and 2019, only a tiny fraction of that increase went to maintenance costs, with most landlords adding amenities or otherwise expanding their buildings.
A 2020 survey of major metro owners found nearly a third chose to postpone maintenance that year, up from just around 5% in 2019.
The deterioration of the aging rental stock promises to be a problem in the future, again, disproportionately affecting low-income families. Rental properties, especially affordable or subsidized units, were more likely to bear the brunt of extreme weather events brought on by climate change, and received less disaster relief than landlords in their aftermath.
Peggy Bailey, Senior Advisor to the Federal Office of Housing and Urban Development (HUD), stressed that harmful and alarming trends in affordability and equity must be addressed through policy, and referred to the significant funding for affordable rental housing in the blocked Build Back Better bill championed by the Biden administration.
“Relying solely on the market or the charity of landlords and landlords to meet the needs of low-income people is misplaced,” she said.
Jesse Williams is RISMedia’s Associate Online Editor. Email him your real estate news ideas at [email protected].