The number of USA households spending more than 50% of their income on rent is expected to rise at least 11% to 13.1 million by 2025, according to new research by Harvard University’s Joint Center for Housing Studies and Enterprise Community Partners.
The findings suggest that even if trends in incomes and rents turn more favorable, a variety of demographic forces—including the rapid growth of minority and senior populations—will exert continued upward pressure on the number of severely cost-burdened renters.
Under the report’s base case scenario for 2015-2025, the number of severely burdened households aged 65-74 and those aged 75 and older rise by 42% (830,000 to 1.2 million) and 39% (890,000 to 1.2 million); the number of Hispanic households with severe renter burdens increases 27% (2.6 million to 3.4 million); and the number of severely burdened single-person households jumps by 12% (5.1 million to 5.7 million).
Graph from the report. The blip of an improvement from 2010 to 2013 is due to the decline in home ownership which changed the makeup of the “rental population.” Moderate (severe)
burdens are defined as housing costs of 30–50% (more than 50%) of household income. Households with zero or negative income are assumed 30 to be severely burdened, while renters not paying cash rent are assumed to be unburdened.
Enterprise Community Partners argues for more government action on affordable housing. I am worried about such efforts being done in a sensible way but I do agree with the concept of supporting affordable housing. I would use zoning to require affordable housing construction along with market rate housing.
Doing such things well requires a government that is not corrupt and fairly competent which isn’t so easy looking across the USA (unfortunately). An example of somewhere that does this fairly well is Arlington Country, Virginia (which also has a good non-profit focused on affordable housing). Good non-profits can play a vital part in affordable housing over the long term.
I would likely also support some measure where affordable housing cost was subsidized in some manner (I am not an expert in this area so I haven’t figured out the best way to do that). I would probably do something like provide benefits (tax credit or payments or …) when rental costs were 40% below median market rates and individual/family income x% below median income. And then scale the benefit down. Possibly I would consider having the benefits go to the rental unit owners (reduction in real estate tax or assessment or something for affordable units).
The macro-economic factors that are pushing rental rates up also indicate a favorable long term market for real estate investing (for housing), as does a growing population. Some of the problem of affordable housing is related to income decline and retirees not saving enough for retirement (those factors) don’t aid the investment case for real estate.
Related: Home Values and Rental Rates – Real Estate Tax Compared to Rental Income in Several Cities in the USA – Apartment Vacancies Fall to Lowest in 3 Years in the USA (2011) (vacancy rates have continued to be low in most of the USA – a favorable situation for investors)