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Despite Strong Rental Housing Market, Harvard JCHS Report Finds Housing Affordability Challenges Persist
The multifamily rental housing market has shown signs of rebounding after the onset of the COVID-19 pandemic, but not all households have benefitted.
The Harvard Joint Center for Housing Studies' (JCHS’) America's Rental Housing 2022 report found that rents have increased across the board for all classes of properties, driven in large part by increased demand from higher-income renters and the market’s efforts to meet their needs. A decrease in vacancy rates shows a tightening market and construction starts and completions in 2021 are at the highest levels seen in the past two decades. Still, as JCHS reports, these signs of a strengthening market belie the hardships felt by various subsets of renters who continue to struggle to find rental housing they can afford.
JCHS’s latest in a biennial series of renter reports analyzed rental trends from January 2020 through December 2021 as well as the government interventions introduced to assist households feeling the negative economic effects of the pandemic. There are 44 million renters in the United States, which make up about one-third of all households in the country
Renters include households of all ages, races and ethnicities, family type, including related and unrelated individuals, and income levels. Of these renter households, 48% were led by people of color while households earning less than $30,000 were more likely to have an adult over 62 years old at the helm, according to the JCHS report. And so, there are households still suffering from the affordable rental crisis that was exacerbated by the global pandemic. A renewed effort to legislate effective, equitable and timely programs are needed to solve the nation’s housing crisis.
Specifically, the affordable housing provisions in the Build Back Better Act (BBBA) reconciliation bill could help create and preserve affordable housing across the country. Novogradac analysis estimates that nearly 1 million affordable homes could be financed from 2022 to 2031 based on the Senate version of the BBBA.
Increasing Rental Rates, COVID-19-Related Job Losses Caused Renters to Fall Behind on Rental Payments
Affordable housing analysis released in March 2021 by the National Low Income Housing Coalition (NLIHC) reported that low-income renters comprise a significant percentage of employees in the service, restaurant and other hard-hit industries that shut down during the pandemic. The NLIHC report found that 70% of all renters with household incomes less than $25,000 who were still seeking work reported a loss of employment income in the household since mid-March 2020. The NLIHC report goes on to detail that low-wage work was disproportionately impacted by the pandemic.
The loss of employment made it that much harder for lower income households to make rent payments–in 2020, nearly 25% of renter households reported a loss of employment income and 15% of renters were still behind on payments during the third quarter of 2021, according to JCHS. The JCHS report found that renters of color continue to exceed the national averages with almost 25% of Black renters, 19% of Hispanic renters and 18% of Asian renters were behind on rent during this same time period compared to 9% for white renters. A tight housing market, marked by the lowest vacancy rates seen since the 1980s and a 2021 typical rent of $1,838, according to the JCHS report, which is 11% higher than last year, means it is that much harder for lower-income renters to find homes they can afford.
Unprecedented Levels of Government Intervention Assisted Renters During Pandemic
The pandemic initially caused an unprecedented legislative response on the federal level. Throughout the pandemic, the federal government issued the CARES Act, CDC eviction moratoriums, pandemic unemployment assistance, the Consolidated Appropriations Act of 2020 and the American Rescue Plan Act of 2021, both of which included emergency rental assistance, and direct payments to households. However, the federal eviction moratorium expired in July 2020 and the Centers for Disease Control and Prevention (CDC) continued to issue these moratoriums from September 2020 until August 2021. Through existing HUD subsidy programs, a total of 4.6 million renters received assistance. Of these households, 38% were led by an older adult over 62 years old, 29% included children, and 22% had persons with disabilities.
Even with this temporary influx of renter assistance funding, more is needed to address broader affordability issues. Out of the 13.3 million households that are eligible for housing assistance, the Center on Budget and Policy Priorities found that 5.2 million American households use federal rental assistance to afford modest housing. Though 3.6 million affordable rental homes have been financed using the low-income housing tax credit (LIHTC) incentive since its inception, the loss of homes due to units nearing Year 30, when affordability requirements lapse in many states, and owners opting out of the incentive through the qualified contract process, means without targeted preservation efforts thousands of rental homes could be lost. Moreover, HUD’s Housing Choice Vouchers have assisted 2.3 million very low-income renters by making for-market rentals affordable, as noted in the JCHS report. However, vouchers have been widely underfunded since inception and require continued support through legislation in order to continue to serve low-income households.
Renters Demographics Continue to Change
As in previous years, the JCHS report found that the increased cost of single-family homes has led moderate and high-income households that, in normal housing markets would become homeowners, to rent. Even though in 2021 multifamily homes were being produced at higher average rates from 2014 to 2020 (466,000 rental homes in 2021 compared to 350,000 homes in the previous time frame), the focus in recent years has been on meeting the needs of these higher-income renters seeking amenity-rich rentals in ideal locations. This focus does nothing to address the 7.2 million affordable and available homes needed to meet the needs of low-income Americans, according to the NLIHC report.
While more moderate-income households are renters due to the high costs of single-family homes, more moderate-income households are experiencing housing cost burdens. In 2019, 57% of renters making between $30,000 and $44,999 per year were cost burdened, up from 36% in 2001, and 15% of those renters were severely cost burdened, according to JCHS. Due to their higher income levels, these households do not qualify for LIHTC homes, but if the Middle-Income Housing Tax Credit (MIHTC), which is included in the Decent, Affordable, Safe Housing for All (DASH) Act, were to be passed, 344,000 affordable rental homes for these households could be financed over 10 years, according to Novogradac estimates. More information about the MIHTC and DASH Act can be found on this previous Notes from Novogradac post.
For low-income renters, the affordable housing supply is at risk due to aging housing and low-resilient housing stock. The JCHS report found that of the 17.6 million rental homes in the United States, 40% of the occupied rental supply is located in moderate-risk disaster areas. Of these units within the moderate-risk disaster areas, 1.5 million occupied units were built before 1940. The aging affordable housing stock is not being replaced at the rates needed to stop future displacement by climate change and general aging condition.
The JCHS’s report paints a picture of two rental housing markets–on one hand, the rental housing market is strong, especially on the high end of the market, and more rental homes are being produced now than in past years, but on the other hand, a large segment of the rental population, especially low-income and renters of color, continues to struggle. The pandemic exacerbated housing problems that already existed and comprehensive housing reform is needed to provide all with affordable, equitable, fair housing options. Policies are needed to better accessibility, sustainability and resilience to maintain, improve and grow affordable rental homes.
The federal government did step up and provide emergency rental assistance, which played and continues to play a huge role to keep people in their homes despite increases in rents and hardships brought on by the pandemic. Though many of these interventions have expired, current legislation, like the (BBBA could address the affordability crisis in this country. As negotiations continue on BBBA, it is imperative that the housing provisions remain intact and housing advocates continue to stress the need for the housing resources in BBBA.