Paying the landlord each month always has been a painful economic reality for many low-income renters. But their pain is deepening as rent costs spiral upward, and it's being felt by more people caught in a supply-and-demand squeeze.
That's the conclusion of a new report from housing researchers at Harvard University, who say that, after a pause of several years, demand for rentals has revived. But tenants in most areas are finding fewer units to rent because few rental properties were built in the past decade and the existing ones are increasingly disappearing from the market as they age.
Further, the foreclosure crisis' readily visible damage to homeownership also is spilling over to those who rent.
Harvard's Joint Center for Housing Studies last week released "America's Rental Housing: Meeting Challenges, Building on Opportunities." The neutral tone of the title understates its basic finding: that rent is outstripping income for those least able to pay.
Chris Herbert, director of research at the Joint Center, talked about the report:
Q. There seems to be a boom in media reports now about people who, because of the economy and the housing downturn, are spooked by the prospect of buying a home and are pointedly choosing to rent. Is renting, as some have suggested, the new owning?
A. That's hard to say. There have been a number of surveys done, and they contradict each other.
Certainly, there has been great wariness, not undeservedly, about the financial benefits of owning. People aren't going into it with such rosy assumptions anymore.
But the bottom line is, if you ask people if they would prefer to own or to rent, there's still a stronger preference for owning; a part of that reflects the fact that some reasons people want to own are not primarily financial — they have to do with having control over their living environment, having a stake in a community, having more space to raise your family, etc.
Still, there are plenty of good reasons for people to want to be renters, including economic flexibility and freedom from household maintenance responsibilities.
Q. What are the pressures that rentals are facing these days and how have foreclosures complicated the picture?
A. The pressure comes from several factors: Vacancy rates are falling, and rents have been steadily increasing, along with utility costs. At the same time, renters' incomes have been dropping, especially during the recession.
Very little multifamily housing was built in the early 2000s, particularly for low-income renters. Further, the stock of rental properties is aging. In 2009, the median age was 38. In all, 6.3 percent of the rental stock in 1999 had been permanently lost by 2009. That equates to an average annual loss of 240,000 units.
Foreclosures have increased the number of people looking to rent — 1 million people who owned single-family homes between 2007 and 2009 became renters.
Although foreclosure rates appear to have stabilized, millions of homeowners are delinquent on their mortgages, and further increases in the renter income are likely.
The Joint Center estimates that the number of renter households could increase by 360,000 to 470,000 annually between 2010 and 2020.
Now that the economy is beginning to recover, the growth in younger households is increasing, and that's fueling demand for renter housing. Because of that, vacancy rates are falling now and rents are tightening.
Q. So, how high are rents going to climb?
A. We stay away from economic forecasting (in this report). We do talk about the fact that there's reason to believe that the recovery will lead to further tightening in the rental markets. Rents are going to go up. In the short run, over the next year or so, the situation is likely to make rents rise at levels that will exceed inflation.
Over time, the increase in rents has been dramatic. There's a chart in the report that shows standards of affordability, going back to 1960.
If you use the standard that rent and utilities together should take less than 30 percent of income, in 1960 about 24 percent of renters were (at least) "moderately burdened" by their rents — that is, they were paying 30 to 40 percent of their incomes. In 2000, that number reached 38 percent of renters, and by 2009, the share hits 49 percent.
One of the things that struck me … was that long, upward sweep of unaffordability for renters. I've likened it to a lobster being cooked in a pot. The lobster doesn't notice it right way. The rent pressure is just so much higher than just a generation ago.
http://www.sun-sentinel.com/business/realestate/sc-cons-0428-umberger-rental-study-20110429,0,5540520.column
