In the wake of the 2015 report on rental housing released Wednesday by the Harvard Joint Center for Housing, Realtor.com Chief Economist Jonathan Smoke says the country is mired in a rental affordability crisis.
Among the major findings of the Harvard report: Renters paid more than 30% of their income for housing last year, more than ever before, and 49% of households struggle to pay their other bills because of the high cost of housing.
“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead,” Smoke says.
The economist says the country needs more construction that is not skewed toward higher-rate units that can deter some from renting. According to the Harvard study, less than 10% of newly constructed units were priced at or under $850 per month, a level about half of all renters can afford.
“And it’s not like developers are just being Grinches,” Smoke adds. “Local regulations, exclusionary zoning, and complex, long entitlement processes drive up the cost of developing new units to a level that requires high rents to make the construction financially viable. Meanwhile, the supply of affordable units is actually declining as older subsidized programs expire and older units are torn down and replaced.”
He says the problems are worse in urban areas where more than 85% of people renting in one of the country’s 378 metro areas pay 30% or higher for housing.
“That forces those renters to limit spending on other essentials such as food and health care,” Smoke says. “They also cannot save for a rainy day, making them more susceptible to financial catastrophe.”
Read the full story and the full Harvard report.
