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Demolitions Worsen Rental Affordability Squeeze
The demolition of about 200,000 rental housing units each year is contributing to increasing affordability problems in the middle and lower segments of the rental market, according to research from Harvard’s Joint Center for Housing Studies.
While the Low-Income Housing Tax Credit program and other initiatives are helping to finance more than 100,000 new units of affordable housing annually, significantly more low-rent units are disappearing, according to “America’s Rental Housing: Homes for a Diverse Nation,” which was released on March 8.
“We are taking one step forward and two steps back as gentrification in some neighborhoods and continued deterioration in others lead to the removal of vitally needed lower-cost rental housing,” said Nicolas Retsinas, director of the Joint Center.
Median asking rent rose from $734 in 1994 to $974 in 2004, according to the report. But during that same period, monthly renter income barely grew, rising from $2,272 to $2,348.
Of the nation’s 7 million lowest-income renters, 70% pay more than half of their income for housing, according to the Joint Center.
“Many of the nation’s working poor live in older small multifamily and single-family rentals,” Retsinas said. “But difficulty accessing the resources needed to maintain this much-needed housing too often sets off a cycle of disinvestment and demolition. Even after a period of strong new production of market rate rentals, the available supply of housing that is affordable to the majority of the nation’s low- and moderate-income families continues to shrink.”
Rising land prices and density restrictions in many jurisdictions have substantially raised the long-run supply cost of building new rental housing, the study found, and overall rents now stand at record levels despite recent weakness in market rents for better quality apartments.
The report cites findings from the National Low Income Housing Coalition showing that workers in the vast majority of metro and non-metro area counties must earn two or three times the minimum wage, or live in households with multiple wage earners, to afford to rent a modest two-bedroom apartment.
“Preserving affordable rental housing is sensible public policy,” said Jonathan Fanton, president of the John D. and Catherine T. MacArthur Foundation, the report’s sponsor. “On average across the country, it costs half as much to acquire and improve an existing rental apartment as it does to build a new one.”
The study also reports that despite a growing number of home owners, there are also many households who have the income to purchase a home but who choose to rent instead because it is a lower-cost way to maintain a flexible urban lifestyle. Twenty percent of renters have median annual incomes above $60,000.
“Favorable demographics, including the maturing echo baby boom, along with higher interest rates, should ensure that the market-rate rental market expands in the decade ahead,” said William Apgar, senior scholar at the Joint Center.
Ninety-five percent of Americans rent at some point in their lives.
Among other findings of the Harvard report:
- In line with regional population trends, over the past 10 years nearly half of all rental production has been concentrated in the South and another quarter in the West.
- After years of sub-par spending, rental owners increased their inflation-adjusted expenditures on repairs and improvements by 14% from 2001 to 2003, bringing total outlays to $58.5 billion.
- People and jobs continue to move away from central city locations. By 1970, half of all households in the nation’s 91 largest metro regions lived more than 8.9 miles from the central business district. By 2000, that boundary had pushed to 12.2 miles.
- Half of all Black renters live less than 7.4 miles from the center city, closer than both white and Hispanic renters, and twice as close as white home owners.
- Close to half (3.3 million) of the lowest-income renter families live in center cities, another 2 million live in suburban locations and 1.5 million live in rural areas. Nearly 60% of assisted renters, and almost 70% of assisted minority renters, live in center city locations.
- As rents escalate, affordability problems are moving up the income distribution. In high-cost areas such as Boston and San Francisco, even school teachers, nurses and other essential workers must pay more than 30% of their income to afford a modest two-bedroom apartment.
- After paying more than half of their incomes on rent, households in the lowest expenditure quartile have just $384 a month left over to meet all of their other needs. This means spending only $177 on food, $44 on transportation and $28 on healthcare each month.
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