This document provides an overview of trends in the US rental housing market from 2004-2013. Key points include:
- Renting increased significantly during this period, with the renter share of households rising from 31% to 35%. This was driven by foreclosures, economic struggles, and a renewed appreciation of renting's benefits.
- Growth was widespread across age groups and included many families. However, renter incomes declined over this period, pushing a record number to pay excessive shares of their income for housing.
- Looking ahead, an aging population and minority household growth will be major drivers of continued demand for rental housing in the coming decade. However, the pace of growth is expected to slow from recent high
The purpose of this video is to provide an overview of the recent events and trends that have transpired in the residential housing environment, and to provide an overview of the home-price level for a select group of cities that make up the Adkins 60-City Home Price Index. This analysis is for the second quarter of 2015.
Small Apartment Buildings Vital for Urban Workforce HousingIvan Kaufman
Small balance multifamily loans typically range between $1-5 million and finance small and mid-cap apartment properties of 5-50 units. Data shows that small apartment buildings accommodate more lower-income households, with 63% earning below $50k compared to 54% in large buildings. Nearly 33% of all working-age US households live in small apartment properties, second only to single-family rentals. Working-age households in small apartment buildings earn on average $50k, significantly less than those in single-family rentals or large apartment buildings.
Checklist the process of writing a cause and effect paragraphreSONU61709
This document provides a checklist of steps for writing a cause and effect paragraph, including narrowing the topic, deciding whether to focus on causes or effects, composing an introductory sentence, brainstorming potential causes and effects, selecting the best ones to develop the paragraph, outlining the paragraph, writing and revising a draft, and proofreading. It also provides 15 suggested topics for cause and effect paragraphs and reviews vocabulary and grammar useful for describing causes and effects.
The City has exhausted 93 percent of
its Constitutional Tax Limit, and can
only raise an additional $505,000
through property taxes, limiting its
financial flexibility.
Over the past decade, the market for single-family rentals (SFRs) has evolved and emerged as an institutionally viable asset class. In a few years, we will likely look back and consider 2019 to be the sector’s inflection point, where it transitioned from a niche-alternative asset class to a mainstream property type. As the sector gains interest from both investors and renters alike, build-to-rent strategies have emerged as a solution to match supply levels with growing demand.
The purpose of this video is to provide an overview of the recent events and trends that have transpired in the residential housing environment, and to provide an overview of the home-price level for a select group of cities that make up the Adkins 60-City Home Price Index. This analysis is for the second quarter of 2015.
Small Apartment Buildings Vital for Urban Workforce HousingIvan Kaufman
Small balance multifamily loans typically range between $1-5 million and finance small and mid-cap apartment properties of 5-50 units. Data shows that small apartment buildings accommodate more lower-income households, with 63% earning below $50k compared to 54% in large buildings. Nearly 33% of all working-age US households live in small apartment properties, second only to single-family rentals. Working-age households in small apartment buildings earn on average $50k, significantly less than those in single-family rentals or large apartment buildings.
Checklist the process of writing a cause and effect paragraphreSONU61709
This document provides a checklist of steps for writing a cause and effect paragraph, including narrowing the topic, deciding whether to focus on causes or effects, composing an introductory sentence, brainstorming potential causes and effects, selecting the best ones to develop the paragraph, outlining the paragraph, writing and revising a draft, and proofreading. It also provides 15 suggested topics for cause and effect paragraphs and reviews vocabulary and grammar useful for describing causes and effects.
The City has exhausted 93 percent of
its Constitutional Tax Limit, and can
only raise an additional $505,000
through property taxes, limiting its
financial flexibility.
Over the past decade, the market for single-family rentals (SFRs) has evolved and emerged as an institutionally viable asset class. In a few years, we will likely look back and consider 2019 to be the sector’s inflection point, where it transitioned from a niche-alternative asset class to a mainstream property type. As the sector gains interest from both investors and renters alike, build-to-rent strategies have emerged as a solution to match supply levels with growing demand.
A Millennial’s Guide to Homeownership
This is a content-packed guide that offers powerful marketing materials to share with your clients, while also helping you simply and effectively explain the market’s current homeownership opportunities to a booming demographic that often finds itself stuck in the rental trap. Learn More
Regional Snapshot: Affordable Housing - July 2017 ARCResearch
- Home ownership and household formation rates have declined dramatically compared to historic trends, while home prices have risen significantly faster than wages due to dwindling housing supply. Adding transportation costs further worsens housing affordability.
- Rental costs have also risen sharply, especially in the suburbs, while the number of affordable units, particularly for extremely low-income households, has decreased.
- Most affordable housing is located in low-opportunity areas, maintaining the cycle of generational poverty.
Regional Snapshot: ARC Employment Centers: Core Locations for Jobs, not for A...ARCResearch
This month’s Regional Snapshot picks up where the July Regional Snapshot on Affordable Housing left off. In the October Regional Snapshot we take a deeper dive into affordable housing data, mapping it onto our region’s employment centers in an effort to visualize the relationship between housing affordability and concentrations of regional employment.
The document provides an overview of the December 2020 Arizona housing market. It includes various data points and metrics on housing demand, prices, inventory, mortgage rates, and forecasts for 2021. Experts are quoted discussing topics like the strong price growth, low inventory levels, and factors that suggest the current market conditions differ from the 2006 housing bubble. The resources section lists sources for further details on the data discussed.
The document provides information for millennials considering homeownership. It begins by noting that millennials now represent the largest generation in the US. It aims to break down myths that have prevented millennials from considering homeownership.
It discusses how experts often lump all millennials together but there are important differences between younger ("young") and older ("older") millennials. It notes that older millennials are entering their "responsibility zone" and many are achieving milestones like marriage, children, and homeownership.
The document also addresses common reasons cited for low millennial homeownership like student loans. It argues that factors like education level are more important indicators of future earnings than debt alone. Having a college degree still typically
The document provides information for Millennials considering homeownership. It notes that Millennials now represent the largest generation and are increasingly buying homes. Common myths that have prevented Millennials from considering homeownership include that they cannot afford homes or qualify for mortgages due to student loan debt. However, the document argues that many Millennials can qualify for mortgages and that a college degree still increases earning potential despite student loans.
The Atlanta region population grew by over 78,000 people between 2016 and 2017, with Fulton County experiencing the largest growth of 17,100 new residents. While population growth has slowed compared to previous decades, the 2017 increase was higher than the annual average of the 1990s and 2000s. Most new residential development, both single and multi-family, is occurring in the northern suburbs of the region. The City of Atlanta permitted over 8,000 new units in 2016, mostly multi-family, more than any other jurisdiction.
The residential and now commercial mortgage problem is still the biggest
issue facing the U.S. Economy. A year ago, I presented this Powerpoint
Slide show, "The Mortgage Mess" (see the attachment). It is very
interesting to see what has happened in the past almost 12 months.
* The situation has become worse, not better, in spite of throwing
hundreds of billions of dollars at the problem. The TARP funds were not
used as intended, and are being redirected for other purposes.
* The problem hasn't gone away. There will be as many foreclosures in the
next couple of years as have already occurred. One out of every seven
houses in the country is underwater: the home values are less than the
mortgages on the homes.
* Although the GDP shows some slight improvement, that is mostly due to
artificial stimulus, which cannot last.
* We are still losing 200,000 jobs every month; better than the 700,000
per month we were losing in the Spring, but still increasing nonetheless.
* Mark Zandi of Moody Economics has said within the last two days that
unemployment can be expected to peak at 10.6%; when counting in those who
have stopped looking and those who are underemployed (the engineer flipping
burgers), it is closer to 18% - 20%. Such unemployment rates cannot sustain
any solid economic recovery.
* The credit card bust is well underway. Whereas there were 400 million credit cards issued a year, now there are only 300 million in circulation,
and interest rates have increased significantly.
Characteristics of Households and Families 2015_1Coleen Duncan
There were 263,649 households in the District of Columbia according to 2009-2013 Census data. Families made up 43% of households, including 23% married couples and 20% other families. 57% of households were non-families, mostly individuals living alone. 14% of residents were foreign-born, mostly from Latin America (45%) and Asia (19%). Housing units numbered 298,327, with 62% in multi-unit structures and 38% in single-unit homes. The median rent was $1,242 and median mortgage was $2,344 according to the data.
This document summarizes the declining supply of workforce housing in high-cost US cities and tools to enable its development and preservation. It discusses how middle-income neighborhoods have declined since the 1970s due to job losses and rising housing costs. While subsidies largely target low-income households, moderate-income households earning 60-120% of the area median income also struggle with high rents and home prices. This shortage of affordable workforce housing impacts teachers, police officers, nurses and other key professions that are vital to local communities. The document examines the challenges faced and potential solutions to preserve and increase the supply of housing for moderate-income families.
The demand for rentals in the United States has been increasing steadily. Between 2004 and 2012, the percentage of renter households grew from 31% to 35% of all U.S. households. This trend is projected to continue with renter households increasing by 4 to 4.7 million between 2013 and 2023. Factors driving this increase include the 2008 financial crisis and foreclosures, as well as a renewed appreciation for the benefits of renting such as flexibility and less responsibility. The National Rental Home Council represents owners and operators that provide professionally-managed single family homes as an attractive alternative to multi-unit rentals or unknown investors, offering stability, quality maintenance and resident services.
The document discusses the possibility of a national housing shortage in the United States in the coming years. It notes that while housing inventories are currently high due to the recession and foreclosures, population growth means the country needs around 1.6 million new housing units per year, but construction is currently only around 500,000-600,000 units annually. Several economists predict that demand for housing will outstrip supply by 2011, leading to rising home and rent prices. The shortage is already occurring in some high-growth areas, but low construction rates mean new development is not keeping up with demand nationally.
This document provides an overview of the housing market and economy for 2014. It discusses projections that 2014 will be a year of growth after recovery in 2012 and stabilization in 2013. Several sections analyze data on home sales, prices, inventory levels, and mortgage rates. The document also covers households and demographics, the impact of immigration reform, and the role of content marketing in real estate. Overall it analyzes factors that will influence the housing industry and economy in 2014 such as interest rates, home affordability, distressed sales, and buyer purchasing power.
The document analyzes data on the U.S. housing market from multiple sources. It shows that homeownership remains an important part of Americans' net worth and financial well-being. Home equity has rebounded from the housing crash, and rising home values are allowing more homeowners to build equity and fueling trade-up demand. Inventory remains low while home prices and pending sales are rising, suggesting the housing recovery is continuing. However, some experts warn price growth cannot last at its current rapid pace and will likely moderate in the coming years. Mortgage rates are also expected to inch up from current historic lows in 2014.
The document discusses the history and politics surrounding the mortgage interest deduction (MID) in the US tax code. It begins by explaining that the MID was originally an unintended consequence of the 1913 Revenue Act, which allowed the deduction of all interest paid, including mortgage interest. Over time, as homeownership increased, the MID became codified in American culture and politically difficult to reform despite its inefficiencies. The document aims to analyze the political history and alternatives to the MID.
Pintar Investment Company invests in single family homes, providing consistent returns through rentals and home flipping. It has invested over $1 billion since 2008, averaging 11% annual returns. The company benefits from scale and vertical integration across strategic advisory, property management, lending, and other services. Growing demand for rentals is driven by increasing households, low housing construction, and preferences for renting. Tight rental markets support rising rents as renter growth outpaces ownership. The company offers investors exposure to the single family rental sector through its PICR Fund III.
This document contains a variety of charts and data related to the housing market from multiple sources such as NAR, Case-Shiller, Freddie Mac, and Moody's. It is divided into three main sections. The first section contains charts on pending home sales, existing home sales projections vs actuals, and year-over-year sales changes by price point. The second section discusses mortgage rates, affordability, home price valuations, and opinions on whether the housing market could be in a bubble. The third section focuses on marketing strategies and resources for staying up-to-date on housing market trends. The document aims to provide a comprehensive overview of the current state of the housing market from both economic and real estate professional
AMERICA’S RENTAL HOUSING EVOLVING MARKETS AND NEEDS Joint Center for Housing ...JerryLewless
Rental housing has always provided
a broad choice of homes for people at
all phases of life. The recent economic
turmoil underscored the many advantages
of renting and raised the barriers to
homeownership, sparking a surge in
demand that has buoyed rental markets
across the country. But significant erosion
in renter incomes over the past decade has
pushed the number of households paying
excessive shares of income for housing to
record levels. Assistance efforts have
failed to keep pace with this escalating
need, undermining the nation’s longstanding
goal of ensuring decent and affordable
housing for all.
During the war years President Franklin Delano Roosevelt once said that a nation of homeowners is unconquerable. Margaret Thatcher, with a mantra that homeowners become responsible citizens, privatized and moved 1.7 million families from public housing into private ownership. President Bill Clinton has stated his belief that homeownership and decent housing are an essential part of the American Dream and wanted to make the dream of homeownership a reality for all Americans. President George W. Bush has said ownership has the power to transform people. Thus, the promotion of homeownership has been an integral part of President Bush’s vision of an “ownership society.” Even in the earliest days of civilization, before the collection and touting of statistical data, Aristotle had argued that ownership promotes virtue and responsibility.
20 THE NEW” HOUSING AND MORTGAGE MARKET SPRING 2016The .docxlorainedeserre
20 THE “NEW” HOUSING AND MORTGAGE MARKET SPRING 2016
The New Housing
and Mortgage Market
DOUGLAS DUNCAN
DOUGLAS DUNCAN
is chief economist and
a senior vice president
at Fannie Mae in
Washington, DC.
[email protected]
com
O
ne hears various individuals
ask whether the housing and
mortgage markets are back to
“normal,” or perhaps they con-
jecture that the markets are, in fact, back to
“normal.” Of course, that question implies an
understanding of what constitutes “normal.”
Others suggest there is a “new normal,”
which indicates a view that what was, is no
longer, and that the market has somehow
permanently changed. We will explore that
dichotomy of views in this brief article.
Our primary interests in this article
are in the production and delivery of and
investment in mortgage-related assets as well
as exploring what has changed and what the
future looks like in this market. Because the
number and volume of those assets are deriv-
ative of the underlying real estate, we will
also brief ly describe the U.S. demographic
profile that will drive demand for places to
live. People live in residences that they own
or rent and both are f inanced, so we will
comment on both types of property and what
brings people to live in one or the other.
Finally, we will offer a perspective on what
this means for mortgage asset volumes.
The next subject we will comment
upon is the organization of firms that make
mortgage loans to consumers in the primary
market. A number of post-crisis economic
and policy forces have been acting on these
f irms and changing the opportunities and
constraints they face. The environment has
altered the product set they offer. We offer
a view of how the demographic factors and
the implied potential mortgage-related asset
volumes might look going forward and how
they are likely to impact the number and type
of firms operating in the primary market.
The number and nature of firms oper-
ating in the secondary market have changed
significantly, as well. From a policy perspec-
tive, however, this is the area of least progress.
Irrespective of the lack of legislated change,
there are changes taking place in the sec-
ondary market under the direction of the
conservator.1 The primary market has seen
a shift of volume between traditional f irm
types, but the secondary market awaits poten-
tially greater structural change. This change
includes the mix of investors who ultimately
hold the mortgage assets as well as the types
of assets available to be held.
Much of the change to be discussed is
a result of the policy reaction to the housing
recession. The policy changes were both
monetary and fiscal. The drivers of change
also include what might be called the evo-
lutionary aspects of any market, perhaps
enabled in this case by technologic advance-
ment. We will not discuss the causes of the
recession but rather focus on the changes
wrought by the policy response to it. Not
all ...
20 THE NEW” HOUSING AND MORTGAGE MARKET SPRING 2016The .docxnovabroom
20 THE “NEW” HOUSING AND MORTGAGE MARKET SPRING 2016
The New Housing
and Mortgage Market
DOUGLAS DUNCAN
DOUGLAS DUNCAN
is chief economist and
a senior vice president
at Fannie Mae in
Washington, DC.
[email protected]
com
O
ne hears various individuals
ask whether the housing and
mortgage markets are back to
“normal,” or perhaps they con-
jecture that the markets are, in fact, back to
“normal.” Of course, that question implies an
understanding of what constitutes “normal.”
Others suggest there is a “new normal,”
which indicates a view that what was, is no
longer, and that the market has somehow
permanently changed. We will explore that
dichotomy of views in this brief article.
Our primary interests in this article
are in the production and delivery of and
investment in mortgage-related assets as well
as exploring what has changed and what the
future looks like in this market. Because the
number and volume of those assets are deriv-
ative of the underlying real estate, we will
also brief ly describe the U.S. demographic
profile that will drive demand for places to
live. People live in residences that they own
or rent and both are f inanced, so we will
comment on both types of property and what
brings people to live in one or the other.
Finally, we will offer a perspective on what
this means for mortgage asset volumes.
The next subject we will comment
upon is the organization of firms that make
mortgage loans to consumers in the primary
market. A number of post-crisis economic
and policy forces have been acting on these
f irms and changing the opportunities and
constraints they face. The environment has
altered the product set they offer. We offer
a view of how the demographic factors and
the implied potential mortgage-related asset
volumes might look going forward and how
they are likely to impact the number and type
of firms operating in the primary market.
The number and nature of firms oper-
ating in the secondary market have changed
significantly, as well. From a policy perspec-
tive, however, this is the area of least progress.
Irrespective of the lack of legislated change,
there are changes taking place in the sec-
ondary market under the direction of the
conservator.1 The primary market has seen
a shift of volume between traditional f irm
types, but the secondary market awaits poten-
tially greater structural change. This change
includes the mix of investors who ultimately
hold the mortgage assets as well as the types
of assets available to be held.
Much of the change to be discussed is
a result of the policy reaction to the housing
recession. The policy changes were both
monetary and fiscal. The drivers of change
also include what might be called the evo-
lutionary aspects of any market, perhaps
enabled in this case by technologic advance-
ment. We will not discuss the causes of the
recession but rather focus on the changes
wrought by the policy response to it. Not
all.
A Millennial’s Guide to Homeownership
This is a content-packed guide that offers powerful marketing materials to share with your clients, while also helping you simply and effectively explain the market’s current homeownership opportunities to a booming demographic that often finds itself stuck in the rental trap. Learn More
Regional Snapshot: Affordable Housing - July 2017 ARCResearch
- Home ownership and household formation rates have declined dramatically compared to historic trends, while home prices have risen significantly faster than wages due to dwindling housing supply. Adding transportation costs further worsens housing affordability.
- Rental costs have also risen sharply, especially in the suburbs, while the number of affordable units, particularly for extremely low-income households, has decreased.
- Most affordable housing is located in low-opportunity areas, maintaining the cycle of generational poverty.
Regional Snapshot: ARC Employment Centers: Core Locations for Jobs, not for A...ARCResearch
This month’s Regional Snapshot picks up where the July Regional Snapshot on Affordable Housing left off. In the October Regional Snapshot we take a deeper dive into affordable housing data, mapping it onto our region’s employment centers in an effort to visualize the relationship between housing affordability and concentrations of regional employment.
The document provides an overview of the December 2020 Arizona housing market. It includes various data points and metrics on housing demand, prices, inventory, mortgage rates, and forecasts for 2021. Experts are quoted discussing topics like the strong price growth, low inventory levels, and factors that suggest the current market conditions differ from the 2006 housing bubble. The resources section lists sources for further details on the data discussed.
The document provides information for millennials considering homeownership. It begins by noting that millennials now represent the largest generation in the US. It aims to break down myths that have prevented millennials from considering homeownership.
It discusses how experts often lump all millennials together but there are important differences between younger ("young") and older ("older") millennials. It notes that older millennials are entering their "responsibility zone" and many are achieving milestones like marriage, children, and homeownership.
The document also addresses common reasons cited for low millennial homeownership like student loans. It argues that factors like education level are more important indicators of future earnings than debt alone. Having a college degree still typically
The document provides information for Millennials considering homeownership. It notes that Millennials now represent the largest generation and are increasingly buying homes. Common myths that have prevented Millennials from considering homeownership include that they cannot afford homes or qualify for mortgages due to student loan debt. However, the document argues that many Millennials can qualify for mortgages and that a college degree still increases earning potential despite student loans.
The Atlanta region population grew by over 78,000 people between 2016 and 2017, with Fulton County experiencing the largest growth of 17,100 new residents. While population growth has slowed compared to previous decades, the 2017 increase was higher than the annual average of the 1990s and 2000s. Most new residential development, both single and multi-family, is occurring in the northern suburbs of the region. The City of Atlanta permitted over 8,000 new units in 2016, mostly multi-family, more than any other jurisdiction.
The residential and now commercial mortgage problem is still the biggest
issue facing the U.S. Economy. A year ago, I presented this Powerpoint
Slide show, "The Mortgage Mess" (see the attachment). It is very
interesting to see what has happened in the past almost 12 months.
* The situation has become worse, not better, in spite of throwing
hundreds of billions of dollars at the problem. The TARP funds were not
used as intended, and are being redirected for other purposes.
* The problem hasn't gone away. There will be as many foreclosures in the
next couple of years as have already occurred. One out of every seven
houses in the country is underwater: the home values are less than the
mortgages on the homes.
* Although the GDP shows some slight improvement, that is mostly due to
artificial stimulus, which cannot last.
* We are still losing 200,000 jobs every month; better than the 700,000
per month we were losing in the Spring, but still increasing nonetheless.
* Mark Zandi of Moody Economics has said within the last two days that
unemployment can be expected to peak at 10.6%; when counting in those who
have stopped looking and those who are underemployed (the engineer flipping
burgers), it is closer to 18% - 20%. Such unemployment rates cannot sustain
any solid economic recovery.
* The credit card bust is well underway. Whereas there were 400 million credit cards issued a year, now there are only 300 million in circulation,
and interest rates have increased significantly.
Characteristics of Households and Families 2015_1Coleen Duncan
There were 263,649 households in the District of Columbia according to 2009-2013 Census data. Families made up 43% of households, including 23% married couples and 20% other families. 57% of households were non-families, mostly individuals living alone. 14% of residents were foreign-born, mostly from Latin America (45%) and Asia (19%). Housing units numbered 298,327, with 62% in multi-unit structures and 38% in single-unit homes. The median rent was $1,242 and median mortgage was $2,344 according to the data.
This document summarizes the declining supply of workforce housing in high-cost US cities and tools to enable its development and preservation. It discusses how middle-income neighborhoods have declined since the 1970s due to job losses and rising housing costs. While subsidies largely target low-income households, moderate-income households earning 60-120% of the area median income also struggle with high rents and home prices. This shortage of affordable workforce housing impacts teachers, police officers, nurses and other key professions that are vital to local communities. The document examines the challenges faced and potential solutions to preserve and increase the supply of housing for moderate-income families.
The demand for rentals in the United States has been increasing steadily. Between 2004 and 2012, the percentage of renter households grew from 31% to 35% of all U.S. households. This trend is projected to continue with renter households increasing by 4 to 4.7 million between 2013 and 2023. Factors driving this increase include the 2008 financial crisis and foreclosures, as well as a renewed appreciation for the benefits of renting such as flexibility and less responsibility. The National Rental Home Council represents owners and operators that provide professionally-managed single family homes as an attractive alternative to multi-unit rentals or unknown investors, offering stability, quality maintenance and resident services.
The document discusses the possibility of a national housing shortage in the United States in the coming years. It notes that while housing inventories are currently high due to the recession and foreclosures, population growth means the country needs around 1.6 million new housing units per year, but construction is currently only around 500,000-600,000 units annually. Several economists predict that demand for housing will outstrip supply by 2011, leading to rising home and rent prices. The shortage is already occurring in some high-growth areas, but low construction rates mean new development is not keeping up with demand nationally.
This document provides an overview of the housing market and economy for 2014. It discusses projections that 2014 will be a year of growth after recovery in 2012 and stabilization in 2013. Several sections analyze data on home sales, prices, inventory levels, and mortgage rates. The document also covers households and demographics, the impact of immigration reform, and the role of content marketing in real estate. Overall it analyzes factors that will influence the housing industry and economy in 2014 such as interest rates, home affordability, distressed sales, and buyer purchasing power.
The document analyzes data on the U.S. housing market from multiple sources. It shows that homeownership remains an important part of Americans' net worth and financial well-being. Home equity has rebounded from the housing crash, and rising home values are allowing more homeowners to build equity and fueling trade-up demand. Inventory remains low while home prices and pending sales are rising, suggesting the housing recovery is continuing. However, some experts warn price growth cannot last at its current rapid pace and will likely moderate in the coming years. Mortgage rates are also expected to inch up from current historic lows in 2014.
The document discusses the history and politics surrounding the mortgage interest deduction (MID) in the US tax code. It begins by explaining that the MID was originally an unintended consequence of the 1913 Revenue Act, which allowed the deduction of all interest paid, including mortgage interest. Over time, as homeownership increased, the MID became codified in American culture and politically difficult to reform despite its inefficiencies. The document aims to analyze the political history and alternatives to the MID.
Pintar Investment Company invests in single family homes, providing consistent returns through rentals and home flipping. It has invested over $1 billion since 2008, averaging 11% annual returns. The company benefits from scale and vertical integration across strategic advisory, property management, lending, and other services. Growing demand for rentals is driven by increasing households, low housing construction, and preferences for renting. Tight rental markets support rising rents as renter growth outpaces ownership. The company offers investors exposure to the single family rental sector through its PICR Fund III.
This document contains a variety of charts and data related to the housing market from multiple sources such as NAR, Case-Shiller, Freddie Mac, and Moody's. It is divided into three main sections. The first section contains charts on pending home sales, existing home sales projections vs actuals, and year-over-year sales changes by price point. The second section discusses mortgage rates, affordability, home price valuations, and opinions on whether the housing market could be in a bubble. The third section focuses on marketing strategies and resources for staying up-to-date on housing market trends. The document aims to provide a comprehensive overview of the current state of the housing market from both economic and real estate professional
AMERICA’S RENTAL HOUSING EVOLVING MARKETS AND NEEDS Joint Center for Housing ...JerryLewless
Rental housing has always provided
a broad choice of homes for people at
all phases of life. The recent economic
turmoil underscored the many advantages
of renting and raised the barriers to
homeownership, sparking a surge in
demand that has buoyed rental markets
across the country. But significant erosion
in renter incomes over the past decade has
pushed the number of households paying
excessive shares of income for housing to
record levels. Assistance efforts have
failed to keep pace with this escalating
need, undermining the nation’s longstanding
goal of ensuring decent and affordable
housing for all.
During the war years President Franklin Delano Roosevelt once said that a nation of homeowners is unconquerable. Margaret Thatcher, with a mantra that homeowners become responsible citizens, privatized and moved 1.7 million families from public housing into private ownership. President Bill Clinton has stated his belief that homeownership and decent housing are an essential part of the American Dream and wanted to make the dream of homeownership a reality for all Americans. President George W. Bush has said ownership has the power to transform people. Thus, the promotion of homeownership has been an integral part of President Bush’s vision of an “ownership society.” Even in the earliest days of civilization, before the collection and touting of statistical data, Aristotle had argued that ownership promotes virtue and responsibility.
20 THE NEW” HOUSING AND MORTGAGE MARKET SPRING 2016The .docxlorainedeserre
20 THE “NEW” HOUSING AND MORTGAGE MARKET SPRING 2016
The New Housing
and Mortgage Market
DOUGLAS DUNCAN
DOUGLAS DUNCAN
is chief economist and
a senior vice president
at Fannie Mae in
Washington, DC.
[email protected]
com
O
ne hears various individuals
ask whether the housing and
mortgage markets are back to
“normal,” or perhaps they con-
jecture that the markets are, in fact, back to
“normal.” Of course, that question implies an
understanding of what constitutes “normal.”
Others suggest there is a “new normal,”
which indicates a view that what was, is no
longer, and that the market has somehow
permanently changed. We will explore that
dichotomy of views in this brief article.
Our primary interests in this article
are in the production and delivery of and
investment in mortgage-related assets as well
as exploring what has changed and what the
future looks like in this market. Because the
number and volume of those assets are deriv-
ative of the underlying real estate, we will
also brief ly describe the U.S. demographic
profile that will drive demand for places to
live. People live in residences that they own
or rent and both are f inanced, so we will
comment on both types of property and what
brings people to live in one or the other.
Finally, we will offer a perspective on what
this means for mortgage asset volumes.
The next subject we will comment
upon is the organization of firms that make
mortgage loans to consumers in the primary
market. A number of post-crisis economic
and policy forces have been acting on these
f irms and changing the opportunities and
constraints they face. The environment has
altered the product set they offer. We offer
a view of how the demographic factors and
the implied potential mortgage-related asset
volumes might look going forward and how
they are likely to impact the number and type
of firms operating in the primary market.
The number and nature of firms oper-
ating in the secondary market have changed
significantly, as well. From a policy perspec-
tive, however, this is the area of least progress.
Irrespective of the lack of legislated change,
there are changes taking place in the sec-
ondary market under the direction of the
conservator.1 The primary market has seen
a shift of volume between traditional f irm
types, but the secondary market awaits poten-
tially greater structural change. This change
includes the mix of investors who ultimately
hold the mortgage assets as well as the types
of assets available to be held.
Much of the change to be discussed is
a result of the policy reaction to the housing
recession. The policy changes were both
monetary and fiscal. The drivers of change
also include what might be called the evo-
lutionary aspects of any market, perhaps
enabled in this case by technologic advance-
ment. We will not discuss the causes of the
recession but rather focus on the changes
wrought by the policy response to it. Not
all ...
20 THE NEW” HOUSING AND MORTGAGE MARKET SPRING 2016The .docxnovabroom
20 THE “NEW” HOUSING AND MORTGAGE MARKET SPRING 2016
The New Housing
and Mortgage Market
DOUGLAS DUNCAN
DOUGLAS DUNCAN
is chief economist and
a senior vice president
at Fannie Mae in
Washington, DC.
[email protected]
com
O
ne hears various individuals
ask whether the housing and
mortgage markets are back to
“normal,” or perhaps they con-
jecture that the markets are, in fact, back to
“normal.” Of course, that question implies an
understanding of what constitutes “normal.”
Others suggest there is a “new normal,”
which indicates a view that what was, is no
longer, and that the market has somehow
permanently changed. We will explore that
dichotomy of views in this brief article.
Our primary interests in this article
are in the production and delivery of and
investment in mortgage-related assets as well
as exploring what has changed and what the
future looks like in this market. Because the
number and volume of those assets are deriv-
ative of the underlying real estate, we will
also brief ly describe the U.S. demographic
profile that will drive demand for places to
live. People live in residences that they own
or rent and both are f inanced, so we will
comment on both types of property and what
brings people to live in one or the other.
Finally, we will offer a perspective on what
this means for mortgage asset volumes.
The next subject we will comment
upon is the organization of firms that make
mortgage loans to consumers in the primary
market. A number of post-crisis economic
and policy forces have been acting on these
f irms and changing the opportunities and
constraints they face. The environment has
altered the product set they offer. We offer
a view of how the demographic factors and
the implied potential mortgage-related asset
volumes might look going forward and how
they are likely to impact the number and type
of firms operating in the primary market.
The number and nature of firms oper-
ating in the secondary market have changed
significantly, as well. From a policy perspec-
tive, however, this is the area of least progress.
Irrespective of the lack of legislated change,
there are changes taking place in the sec-
ondary market under the direction of the
conservator.1 The primary market has seen
a shift of volume between traditional f irm
types, but the secondary market awaits poten-
tially greater structural change. This change
includes the mix of investors who ultimately
hold the mortgage assets as well as the types
of assets available to be held.
Much of the change to be discussed is
a result of the policy reaction to the housing
recession. The policy changes were both
monetary and fiscal. The drivers of change
also include what might be called the evo-
lutionary aspects of any market, perhaps
enabled in this case by technologic advance-
ment. We will not discuss the causes of the
recession but rather focus on the changes
wrought by the policy response to it. Not
all.
Even if enough time has passed since a foreclosure, many lenders are loath to make loans to borrowers with any blemish on their credit history. The average credit score on purchase mortgage loans sold to Fannie Mae last year was close to 745. In a more typical housing market, like that prior to the housing bubble, the average score was closer to 715. This 30-point difference represents several
million potential homebuyers.
Lab42 - A Closer Look at Millennials & HousingRobert Maihofer
- Millennials are less likely to own homes than previous generations due to high college debt, difficult economic conditions, and a preference to rent. While most Millennial renters and homeowners are satisfied with their current housing arrangements, nearly 70% of renters plan to purchase a home.
- Housing is considered affordable for the majority of Millennial renters and homeowners based on their reported monthly costs. However, renters are more likely to have lower monthly costs and incomes.
- The top reasons for both renting and owning are affordability and location preferences. Millennials also value flexibility when renting but financial security when owning. Most Millennials plan to self-fund down payments without family assistance.
This study projects the impact of population aging on future housing stock and prices in both provincial and national markets.
Mario Fortin,
Professor,
Université de Sherbrooke
TTLC_Whitepaper_Millenials Power the Next Wave in HousingJoe Fraser
This document discusses how millennials are poised to have a major impact on the housing market as the largest generation. Despite challenges from student debt and the recession, millennials are now starting to form new households and purchase homes in large numbers. As their financial situations continue improving and they seek the stability of homeownership, millennials will drive increased demand for single-family homes and developed residential land over the next 5-10 years.
A Millennial’s Guide to Homeownership | KM Realty Group Chicago, ILTammy Jackson
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This paper reviews housing markets in 11 countries that are members of the International Housing Association (IHA). It finds that several issues have emerged post-recession, including a lack of affordable low-income housing and improper regulation of mortgage markets. Canada is highlighted as stabilizing its housing market since 2009 through early Bank of Canada intervention and later macroprudential policies that tightened mortgage lending guidelines. The paper also examines factors driving up housing prices in Australia such as resource sector booms lacking adequate planning and infrastructure.
The document discusses findings from a survey of over 1,000 millennial households about their living situations and future home preferences. It finds that contrary to myths: (1) most millennials are optimistic about their financial futures and plan to move out on their own to establish households, (2) while many millennials currently rent, the majority aspire to home ownership and see it as a good investment, and (3) as millennials begin starting families, they will increasingly seek out single-family homes in the suburbs, preferring more space over urban living.
A report from the Center for Rural Pennsylvania, a bipartisan, bicameral legislative agency that serves as a resource for rural policy within the Pennsylvania General Assembly. This latest report looks at how housing is affected in areas impacted by Marcellus drilling.
This work is designed to provide a practical resource for local government to address housing affordability, using census data-based time series analysis, to quantify:
- Who is in housing stress?
- How many are there?
- Where are they? and
- What can be done about it?
Small Buildings Still Dominate Apartment Renter SharesIvan Kaufman
This document discusses trends in the small balance multifamily property market in the United States. It finds that while properties with 5-49 units (small apartments) make up over a quarter of the rental housing market, their renter population declined slightly in 2015-2016 compared to overall population growth. In contrast, properties with 50+ units saw strong growth, likely due to new supply. On average, small apartment buildings house 2.2 people per unit, catering to diverse households.
Chandan Economics Research on Arbor Chatter 2018 q2Ivan Kaufman
The Arbor team led by Ivan Kaufman has released research completed by Chandon Economics. Research includes looking at the Millennials' demographic to see where they are concentrated in small rental properties. Research also includes where families with children and older households are mainly renting.
- The growing senior population will increase demands for affordable and accessible housing as more seniors face challenges with independent living.
- The number of seniors is projected to grow by 30 million by 2030, increasing the share of the population over 65 from 13% to 20%.
- Seniors want to age in place but many homes lack accessibility features, creating challenges for independent living, especially for low-income renters and those with disabilities.
The document discusses housing in Fort Worth, including:
1) Rapid housing growth over the past decade, decreasing affordability, and central city redevelopment.
2) Housing goals of increasing affordable, accessible, and mixed-income housing as well as expanding homeownership and revitalizing neighborhoods.
3) Rising home prices and rents outpacing income growth, creating affordability challenges for middle- and lower-income households.
The document provides information on housing counseling and direct services for homeowners transitioning to rental housing. It discusses the current housing landscape and trends of increased renting. It also outlines homeowners' rights under the Fair Housing Act and Equal Credit Opportunity Act. The presentation covers the rental process including locating a unit, applying, signing a lease, and obtaining renters insurance. The goal is to assist clients through the transition and ensure a comfortable, affordable rental situation.
Similar to America's Rental Housing: Evolving Markets and Needs 2013 (20)
Explore Star Home Avenue: Luxury Living in the Heart of the CityDhivyabharathiDurai
Welcome to Star Home Avenue, where luxury living meets urban convenience in the heart of the city. Nestled amidst the vibrant pulse of [City/Area], Star Home Avenue offers an unparalleled residential experience designed for those who appreciate the finer things in life. With a commitment to quality craftsmanship and modern design, our homes provide the perfect blend of comfort, style, and functionality. Explore a community where every detail is crafted to exceed your expectations, from spacious interiors to thoughtful amenities. Embrace a lifestyle where luxury and convenience converge seamlessly at Star Home Avenue.
Expressways of India: A Comprehensive Guidenarinav14
India’s expressway network is a testament to the nation’s dedication to improving infrastructure and connectivity. These high-speed corridors facilitate seamless travel across vast distances, reducing travel time and fuel consumption
M3M Sector 58 Gurgaon is a residential project that provides 2 BHK, 3 BHK, and 4 BHK luxury residences at the best prices. The development will feature advanced security systems with 24/7 surveillance to ensure the safety of all residents. Ample parking facilities will be available to accommodate the vehicles of residents and visitors.
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🌟 Find Your Balance with Oree Reality
Happy International Yoga Day! 🌿 At Oree Reality, we believe in the harmony of mind, body, and home. Just as yoga brings balance and peace, finding the perfect home can do the same for your life.
Where Luxury Meets Convenience
Sunil Agrawal and Associates has recently revealed its most exquisite and upscale plotting project in Indore named Meadows by the Orchard.
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SAA has recently revealed its most exquisite and upscale plotting project named Meadows by the Orchard. This extraordinary venture is a true embodiment of a high-end lifestyle, combining opulence, aesthetics, and functionality for an unparalleled living experience.
Here we will discuss the real estate investment checklist that will help you make an informed decision when investing in Indore.
Real estate investment is a popular way to grow your wealth and secure your financial future. It involves buying, owning, and managing a property for the purpose of generating income or appreciation.
Selling your home can be easy. Our team helps make it happen.Eric B. Slifkin, PA
Why hire one realtor when you can hire a team for the exact cost? Our team ensures better service, communication, and efficiency, which can make all the difference in finding your perfect home or securing the right buyer. See how we market homes for sellers.
As the festive season approaches, there are several compelling reasons why this is the best time to consider buying property in Indore.
Indore, often called the "Mini Mumbai" of India, has witnessed remarkable growth in recent years, making it an attractive destination for property investment.
With its booming economy, well-planned infrastructure, and cultural diversity, Indore has become a hub for real estate development. As the festive season approaches, there are several compelling reasons why this is the best time to consider buying property in Indore.
Find Your Dream Home at Urban Sereno: Premium 2-3 BHK Apartments in Bhubaneswargraphicparadice786
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When it comes to purchasing a house in Indore, you'll often find yourself facing a crucial decision: should you pay in cash or opt for financing?
In the realm of real estate, the age-old debate between paying for a house in cash or financing it through a mortgage is a topic that continues to intrigue prospective buyers.
3. INTRODUCTION AND SUMMARY
Rental housing has always provided
THE RESURGENCE OF RENTING
Reversing the long uptrend in homeownership, American
households have increasingly turned to the rental market
for their housing. From 31 percent in 2004, the renter share
of all US households climbed to 35 percent in 2012, bringing
the total number to 43 million by early 2013.
a broad choice of homes for people at
all phases of life. The recent economic
turmoil underscored the many advantages
of renting and raised the barriers to
A confluence of factors drove this increase. The enormous
wave of foreclosures that swept the nation after 2008 certainly played a role, displacing millions of homeowners. The
economic upheaval of the Great Recession also contributed,
with high rates of sustained unemployment straining household budgets and preventing would-be buyers from purchasing homes. Meanwhile, the experience of the last few years
highlighted the many risks of homeownership, including the
potential loss of wealth from falling home values, the high
costs of relocating, and the financial and personal havoc
caused by foreclosure. All in all, recent conditions have
brought renewed appreciation for the benefits of renting,
including the greater ease of moving, the ability to choose
housing that better fits the family budget, and the freedom
from responsibility for home maintenance.
homeownership, sparking a surge in
demand that has buoyed rental markets
across the country. But significant erosion
in renter incomes over the past decade has
pushed the number of households paying
excessive shares of income for housing to
record levels. Assistance efforts have
failed to keep pace with this escalating
need, undermining the nation’s longstanding
goal of ensuring decent and affordable
housing for all.
Households of all but the oldest age groups have joined in
the shift toward renting (Figure 1.1). The largest increase in
share is among households in their 30s, up by at least 9 percentage points over an eight-year span. But shares of households across all five-year age groups between 25 and 54 also
rose by at least 6 percentage points. In fact, the jump in
rental rates for most age groups was well above the 4.0 percent overall rise, reflecting how the movement of the population into older age groups (when owning is more prevalent)
stemmed some of the drop in homeownership.
With these widespread increases in the shares opting to
rent, the 2000s marked the strongest decade of growth in
renter households over the past half-century. After a modest
rise early in the decade, the number of renter households
soared after 2005, boosting average annual growth to more
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
1
4. FIGURE 1.1
Renting Has Increased Sharply Across Most Age Groups…
Change in Share of Households Renting 2004–2013:2 (Percentage points)
12
10
8
6
4
2
0
-2
Under
25
25–29
30–34
35–39
40–44
45–49
50–54
55–59
60–64
65–69
70–74
75 and
Over
Overall
Age of Household Head
Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys.
hold incomes, the direction of prices and rents, and the
availability and terms of mortgage finance. But given the
ongoing recovery in the homeowner market and the fact
that rentership rates for households aged 30–64 are at their
highest in the last 30 years, further increases in renter
share are likely to be small and growth in the number of
renters is likely to slow.
FIGURE 1.2
…Generating a Surge in Renter Household Growth
Average Annual Growth in Renter Households (Millions)
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1960s
1970s
1980s
1990s
Decennial Census
2000s
2010s
HVS
CPS
Note: Renter growth in 2013 in the HVS was calculated by averaging the number of renters in the
first and second quarters of the year and subtracting the average number of renters in the first
and second quarters of 2012.
Source: JCHS tabulations of US Census Bureau, Decennial Censuses, Current Population Surveys
(CPS), and Housing Vacancy Surveys (HVS).
The Joint Center for Housing Studies has estimated renter
household growth over the next decade applying current
homeownership rates to recent household projections—in
essence isolating the contribution of demographic forces from
changes in rentership rates. Depending on the pace of immigration, the number of renter households is likely to increase
by between 4.0 million and 4.7 million in 2013–23. While a
considerable slowdown from the current rate, growth would
still outstrip increases in both the 1960s and 1990s. These projections would of course understate renter household growth
if renting becomes more popular over the next decade and
overstate growth if homeownership rates rebound.
HOMES FOR A DIVERSE AMERICA
than 500,000. Although estimates from the two key Census
Bureau sources for 2010–13 differ widely, they both indicate
that renter household growth continued at a torrid pace—
rising at double the rate of recent decades (Figure 1.2).
The future pace of growth will depend largely on how the
share of households that rent evolves. This in turn depends
primarily on economic factors such as changes in house-
2
Offering greater flexibility and requiring less of a financial
stretch than homeownership, renting is most common
during the young adult phase of life when changes in work
and relationships are frequent. But while four out of ten
renters are under age 35, renting has appeal for households of all ages. In fact, more than a third are middleaged (between 35 and 54), similar to that age group’s share
among all households.
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
5. FIGURE 2
Families with Children Are Nearly as Likely to Rent
Their Homes as Single Persons
Share of Households (Percent)
40
35
30
25
20
$15,000 (roughly equivalent to earnings from full-time work
at the minimum wage), while only 13 percent of all households fall into this income category. A similar share of renters takes home between $15,000 and $30,000 a year, again
much higher than this group’s share of all households. Still,
people at all income levels rent. More than a third of renters have moderate incomes (between $30,000 and $75,000),
roughly matching their share of all households. The most
underrepresented income group, earning $75,000 or more a
year, still accounts for 17 percent of renters.
15
10
5
0
Single
Persons
Families
With Children
Married
Without
Children
Non-Family
Other Family
Household Type
■ Renters ■ All Households
Notes: Families with children may be headed by married couples or single parents, and only include
children of the household head that are under age 18. Other family households include children under
age 18 that are not those of the household head, such as grandchildren.
Source: JCHS tabulations of the US Census Bureau, 2013 Current Population Survey.
Even during the phases of life when people are most likely to
own, many households rent for at least some period of time.
For example, nearly one in five households that were in their
30s in 2001 switched from owning to renting at some point in
2001–11, as did nearly one in seven of those in their 40s. Even
among households in their 50s and 60s in 2001 with longer
histories of homeownership, 11 percent of those switched
from owners to renters at some point during the ensuing
decade. A return to renting is even more common later in
life, with 24 percent of households over age 70 making that
transition between 2001 and 2011.
Rental living often conjures up images of single people and
unrelated roommates. Singles are indeed the most common
type of renter, reflecting both their growing share of all households and the fact that renting often suits their need for less
space at a lower cost. But contrary to the stereotype, families
with children account for nearly as many renters as single
persons (Figure 2). In fact, the share of families with children
among renters is higher than the share among owners.
Since renting is more financially feasible for households
of modest means, renters’ incomes are disproportionately
low. Nearly a quarter of renters have annual incomes under
Over the next decade, two broad demographic trends—the
aging of the population and the increasing importance
of minorities for household growth—will drive significant
changes in rental demand. Assuming current rentership
rates, the aging of the baby-boom generation will lift the
number of renters over age 65 by 2.2 million in the ten years
to 2023, generating roughly half of overall renter growth. The
older profile of renters means much of the increase will be
among single persons and married couples without children,
each group accounting for about 30 percent of growth. Many
of these older households are already renters, but will be
aging into the next phase of life. This trend suggests growing
demand for smaller rentals, with good access to transportation and located near communities where households in
their 50s and 60s are currently living.
Mirroring overall population growth, minorities will contribute virtually all of the net increase in renters over the coming decade, with Hispanics alone accounting for more than
half of the total. Again assuming today’s rates of renting,
minorities will add between 1.8 million and 2.2 million renter
households in the 25–44 age group, with the wide range
reflecting different assumptions about future immigration
levels. Significant shares of these younger renter households
will be married couples with children and single-parent
families, which together will account for another 30 percent
of new renters. This group of households will seek more
spacious homes to accommodate their larger families and
in locations with access to good schools and employment
opportunities.
THE RANGE OF RENTAL HOUSING OPTIONS
Unlike owner-occupied housing, rentals come in a variety of
configurations. Still, nearly four out of ten rental properties
are single-family homes, and another fifth are in small buildings with two to four units (Figure 3). The more prototypical
apartment buildings of 10 or more units account for 30 percent of rentals. Rental housing is more likely to be located
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
3
21
6. in urban areas, with central cities home to 43 percent of
renters. But nearly as large a share (40 percent) of renters
reside in the suburbs—only slightly below the 49 percent of
all households that live in these areas.
In keeping with the large share of renters of modest income,
rental housing is concentrated in low-income communities.
Based on American Community Survey (ACS) data from 2007
to 2011, 45 percent of occupied rental homes in the 100 largest metropolitan areas were located in low-income neighborhoods (with median incomes below 80 percent of the metro
area median). In contrast, only 28 percent of all households
lived in these areas. Nonetheless, rental housing is found
in neighborhoods across the income spectrum, with nearly
a fifth in communities where median income exceeds 120
percent of the metro area median.
Yet the location of newly built rental units within metropolitan areas nearly matches the distribution of existing owner
and renter housing combined. Indeed, renter-occupied housing units built since 2000 are evenly distributed across neighborhoods by income level, as well as across core cities, suburbs, and exurban areas. In contrast, new owner-occupied
units are highly concentrated in higher-income neighborhoods and in exurban areas.
The recent housing market upheaval has highlighted the
dynamic nature of the housing stock. According to the
Current Population Survey, the number of renter households increased by 3.4 million from 2007 through 2011. With
construction volumes depressed, most of this new demand
was met by the migration of 3.0 million units—primarily single-family homes—from the owner-occupied to the
rental housing stock. This influx pushed the share of singlefamily rentals up 4 percentage points, to 35 percent, in 2011.
While still a small share of the overall market, institutional
investors also began buying up single-family properties
for rentals, testing new business models for owning and
managing portfolios of individual homes that may further
expand rental housing options.
RENTAL MARKET REVIVAL
The collapse of the housing market was a key factor in
the genesis of the Great Recession, and its painfully slow
rebound is one of the major impediments to the broader
economic recovery. Even so, the rental sector bounced back
relatively quickly both because demand has been so strong
and because it was less caught up in the lending excesses
that fueled the housing bubble. By a variety of measures, the
rental sector has been strengthening for several years, starting with the downturn in vacancy rates in 2010 (Figure 4). Rents
picked up in 2011 as markets tightened. With these gains, the
financial performance of rental properties also improved,
with net operating income and property values making up
much of the ground lost during the downturn.
FIGURE 3
The Rental Stock Provides a Broad Array of Housing Choices
Renter-Occupied Housing
Owner-Occupied Housing
4%
2%
28%
30%
1%
2% 7%
5%
7%
82%
82%
12%
19%
I Single-Family Detached I Single-Family Attached I Mobile Home I 2–4 Unit Multifamily I 5–9 Unit Multifamily I 10 or More Unit Multifamily
Note: Includes vacant for-sale and for-rent units.
Source: JCHS tabulations of US Department of Housing and Urban Development, 2011 American Housing Survey.
4
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
7. FIGURE 4
The Rental Housing Market Rebound Is Well Under Way
2009
2010
2011
2012
2013 ytd
10.6
10.2
9.5
8.7
8.5
7.9
6.6
5.6
4.9
4.9
Vacancy Rates (Percent)
All Rentals
Professionally
FIGURE 4
Managed Apartments
TheRents (Percent change) Market Rebound Is Well Under Way
Rental Housing
All Rentals
2.3
Professionally
Managed Apartments
0.2
1.7
2.7
2.8
-4.1
2.4
4.8
3.0
3.1
206
311
337
Multifamily Construction (Thousands of units)
Permits
142
157
Note: Data for 2013 are through the second quarter.
Starts
109
116
178
245
299
Sources: US Census Bureau, New Residential Construction; MPF Research; National Council of Real
Estate Investment Fiduciaries (NCREIF); and Moody’s/RCA Commercial Property Price
Completions
274
155
138
166
181
Index—Apartments.
Financial Indicators (Percent change)
Net Operating Income
-2.4
9.2
10.4
6.1
4.9
-27.8
Property Values
Most important for the economy, construction activity also
accelerated in 2011 as multifamily starts—the vast majority
intended for the rental market—jumped 54 percent. Midway
through 2013, starts were on pace to total 294,000 for the
year, still below the 340,000 annual rate averaged in the early
2000s before the housing bust. Because of the lengthy construction process for large properties, however, completions
are still far below levels a decade ago.
-3.7
19.2
14.2
14.0
Note: Data for 2013 are through the second quarter.
Sources: US Census Bureau, New Residential Construction; MPF Research; National Council of Real
Estate Investment Fiduciaries (NCREIF); and Moody’s/RCA Commercial Property Price
Index—Apartments.
FIGURE 5
Renter Cost Burdens Spread at an Unprecedented
Pace in the 2000s
The rental housing recovery is widespread, with lower vacancies, higher rents, and higher construction levels evident in a
large majority of markets. Indeed, multifamily permitting has
accelerated in two-thirds of the 100 largest metropolitan areas,
exceeded averages during the 2000s in a third of those markets,
and even surpassed previous peaks in a few metros. The rapid
expansion of production has raised alarms about potential
overbuilding, particularly since long development periods may
mask the total volume of new multifamily housing coming on
the market. So far, though, there are no signs of large increases
in vacancies or decreases in rents that would indicate an oversupply of units. Still, vacancy rates do appear to be bottoming
out and rent increases are slowing in many markets, suggesting
that supply and demand are moving into balance.
One aspect of the rental market that does bear watching,
however, is multifamily finance. During the downturn, most
credit sources dried up as property performance deteriorated and the risk of delinquencies mounted. Much as in the
owner-occupied market, though, lending activity continued
through government-backed channels, with Fannie Mae,
Freddie Mac, and the Federal Housing Administration (FHA)
playing an important countercyclical role.
But as the health of the multifamily market improved, private lending revived. According to the Mortgage Bankers
Association, banks and thrifts greatly expanded their multifamily lending in 2012, nearly matching the volume for
Fannie and Freddie. Given fundamentally sound market
conditions, multifamily lending activity should continue
to increase. The experience of the last several years, however, clearly testifies to the importance of a government
presence in a market that provides homes for millions of
Americans, particularly during periods of economic stress.
Shares of Cost-Burdened Renter Households (Percent)
60
50
40
30
20
10
0
1960
1970
1980
1990
2000
2010
I Severe I Moderate
Notes: 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 to be severely burdened, while renters
not paying cash rent are assumed to be unburdened.
Sources: JCHS tabulations of US Census Bureau, Decennial Census and American Community Surveys.
THE SPREAD OF COST BURDENS
Against the backdrop of the rental market recovery, declining
renter incomes continue to add to longstanding affordability
pressures. Already up sharply before the recession began,
the share of cost-burdened renters took a turn for the worse
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
5
21
8. after 2007. As a result, the share of renters paying more than
30 percent of income for housing, the traditional measure
of affordability, rose 12 percentage points over the decade,
reaching 50 percent in 2010 (Figure 5). Much of the increase
was among renters facing severe burdens (paying more
than half of income for rent), boosting their share nearly 8
percentage points to 27 percent. These levels were unimaginable just a decade ago, when the fact that the severely costburdened share was nearly 20 percent was already cause for
serious concern.
In 2011, the last year for which detailed information is available, both the overall share of renters with cost burdens and
the share with severe burdens moved up by about half a percentage point. These increases expanded the ranks of costburdened renters to 20.6 million, including 11.3 million that
pay more than half their incomes for housing. Initial estimates for 2012 indicate the number of cost-burdened households again increased to a record 21.1 million. Although the
share of cost-burdened renters receded slightly, this modest
improvement occurred only because the number of higherincome renters rose sharply.
Housing cost burdens are nearly ubiquitous among lowestincome renters. An astounding 83 percent of renters with
incomes of less than $15,000 were housing cost burdened in
2011, including a dismal 71 percent with severe burdens. But
the largest increases in shares in 2001–11 were for moderateincome renters, up 11 percentage points among those with
incomes of $30,000–44,999 and 9 percentage points among
those with incomes of $45,000–74,999.
Rising unemployment clearly contributed to deteriorating
affordability. In 2011, three-quarters of renters with household heads that were unable to find work in the previous
year had housing cost burdens. The number of such households nearly quadrupled between 2007 and 2011, adding
830,000 to the ranks of cost-burdened renters. But high
unemployment rates are not the main culprit because the
spread of burdens has been even greater among households
with full-time workers. The cost-burdened share of renters
who worked throughout the preceding year rose by nearly
10 percentage points between 2001 and 2011, boosting their
numbers by more than 2.5 million over the decade.
For families and individuals unable to find affordable housing, the consequences are dire. Among households with
less than $15,000 a year in expenditures (a proxy for low
income), severe cost burdens mean paying about $500 more
for housing than their counterparts living in units they
6
can afford. With little else in their already tight budgets to
cut, these renters spend about $130 less on food—a reduction of nearly 40 percent relative to those without burdens.
Severely burdened households with expenditures between
$15,000–30,000 (one to two times full-time federal minimum
wage work) cut back on food by a similar amount. Housing
affordability is thus clearly linked to the problem of hunger
in America. Both lower-income groups with severe housing
cost burdens also spend significantly less on health care and
retirement savings, with direct implications for their current
and future well-being. But even those lower-income households that manage to secure affordable housing face difficult
tradeoffs, often living in inadequate conditions or spending
more on transportation.
THE CHALLENGE OF SUPPLYING LOW-COST HOUSING
While the steady erosion of household incomes has helped
lift the ranks of cost-burdened renters, the affordability problem fundamentally reflects the simple fact that the
cost of providing decent housing exceeds what low-income
renters can afford to pay. Consider the case of renters with
$15,000 in annual income. To meet the 30-percent-of-income
affordability standard, they would have to find housing that
costs no more than $375 a month. By comparison, the 2011
median monthly cost for housing built within the previous
four years was more than $1,000. Less than 34 percent of
these new units rented for less than $800, and only 5 percent
for less than $400.
Given this mismatch, it is no surprise that the gap between
the number of lower-income renters and the supply of
affordable units continues to grow. In 2011, 11.8 million renters with extremely low incomes (less than 30 percent of area
median income, or about $19,000 nationally) competed for
just 6.9 million rentals affordable at that income cutoff—a
shortfall of 4.9 million units. The supply gap worsened substantially in 2001–11 as the number of extremely low-income
renters climbed by 3.0 million while the number of affordable rentals was unchanged. Making matters worse, 2.6
million of these affordable rentals were occupied by higherincome households.
Housing affordable to lowest-income renters tends to be
older. Nearly half of unassisted rentals available for $400
a month or less in 2011 were built more than 50 years ago.
These low-rent units are also more likely to be in poor condition, with 13.7 percent failing to meet the criteria for adequacy defined by the American Housing Survey, compared
with 9.8 percent of all rentals. As a result, these homes are
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
9. FIGURE 6
As the Number of Very Low-Income Renters Has Grown, the Likelihood of Assistance Has Diminished
VLI Renters (Millions)
Assisted Share (Percent)
16
29
14
28
12
27
10
26
8
25
6
24
4
23
2
22
0
2003
I Assisted I Worst Case Needs I Other
2005
I
2007
2009
2011
21
Share Assisted
Notes: Very low-income (VLI) renters have incomes below 50% of area median. Worst case needs are defined as having no government housing assistance and paying more than 50% of income for rent or living in
severely inadequate housing, or both.
Source: US Department of Housing and Urban Development, Worst Case Housing Needs Reports to Congress.
most at risk of being demolished or otherwise permanently
lost from the housing stock. Over the 10 years ending in 2011,
5.6 percent of all units available for rent were removed from
the inventory. The rate for those renting for less than $400,
however, was more than twice as high at 12.8 percent. While
filtering of higher-cost units into the lower-cost segment offsets some losses, the net result is that the number of affordable units has stagnated for the past decade.
To make progress on the nation’s legislative goal of affordable homes for all requires a multi-pronged approach. Part
of the solution is to persist in efforts to reduce regulatory
barriers to construction of rental housing in general, because
expanding the supply helps to reduce rent inflation for all
households. But efforts to develop low-cost rentals deserve
particular attention. A growing number of jurisdictions have
in fact put some form of requirements or incentives in place
to include more affordable housing in larger developments.
State and local governments are also under growing pressure to provide greater allowances for the construction of
smaller units, higher-density developments, and rentals with
fewer amenities. For example, building accessory dwelling
units (ADUs) within established neighborhoods is a promising means of adding modest rentals in convenient locations.
Development of very small apartments, or micro units, may
also help increase the affordable supply in high-density,
high-cost areas.
At the same time, there must be greater incentives to invest
in existing affordable housing. These might entail more
generous tax breaks for maintenance and improvements or
exemption from certain local building code requirements,
allowing the rehabilitation of properties in cost-effective
ways that fully protect residents’ safety but not necessarily
to the standards of new construction. And for households
with incomes too low to cover the costs of operating even
lower-quality units in less desirable markets, public subsidies are essential.
POLICY DIRECTIONS
Rental subsidies are generally targeted at households with
very low incomes, defined as not exceeding 50 percent
of area median income. Between the onset of the Great
Recession in 2007 and the latest count in 2011, the number of
such renters soared by 3.3 million while the number able to
obtain housing assistance expanded by just 225,000 (Figure 6).
As a result, the share of income-eligible households receiving assistance shrank from an already modest 27.4 percent
to 23.8 percent. Meanwhile, the number of unassisted very
low-income renters with worst case needs (paying more than
half of income for housing or living in severely inadequate
homes) jumped by 2.6 million to 8.5 million. Continued
economic recovery will ultimately boost renter incomes and
thereby alleviate these conditions, but even in the best of
times, the scale of need for assistance far outstrips available
resources. And over the coming decade, rapid growth in the
senior population will bring another surge in demand for
assisted housing, straining the already limited capacity of
programs specifically aimed at older Americans.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
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10. The limited growth in rental housing assistance reflects a
range of challenges facing the programs delivering support.
While funding for Housing Choice Vouchers—the main vehicle
for expanded assistance—increased over the past decade,
rising rents and falling incomes combined to raise the pertenant costs of aid, limiting the program’s ability to reach
more households. Public housing, the nation’s oldest assisted
units, requires an estimated $26 billion in capital investments
that remain unfunded. Many privately owned subsidized
developments were also built more than 30 years ago and are
now at risk of loss from the assisted stock due to aging and/or
expiration of contracts. Mandatory funding cuts under federal
budget sequestration have added to these pressures and could
lead to a reduction of 125,000 vouchers this year.
So far, the Low Income Housing Tax Credit (LIHTC) program
has been spared from sequestration because it operates
through the tax code and therefore does not require annual
appropriations. Since its inception in 1986, the LIHTC program
has provided a critical piece of the financing used to support
construction or preservation of some 2.2 million affordable
housing units, filling a void left by the termination of most
other assisted housing production programs several decades
ago. The program has been highly successful in part because
it puts private investors at risk of loss if developments fail.
By itself, however, the LIHTC does not provide deep enough
subsidies to make units affordable for extremely low-income
tenants, so it is often combined with other forms of assistance. The LIHTC program will come under scrutiny when
debate about tax reform begins in earnest. In considering
which tax expenditures to rein in, it will be important to
recognize the LIHTC program’s exceptional track record and
its unique role in adding to the affordable housing supply. It
is also essential to look holistically at reforms of the LIHTC
program and other assisted housing efforts to ensure that
these resources work together effectively to meet the needs
of the nation’s lowest-income renters.
With Fannie Mae, Freddie Mac, and FHA providing the lion’s
share of longer-term, fixed-rate multifamily rental loans,
8
impending reform of the housing finance system will also
have profound implications for the cost and availability of
multifamily credit. Although some have called for winding
down Fannie’s and Freddie’s multifamily activities and putting an end to federal backstops beyond FHA, most propose
replacing the implicit guarantees of Fannie Mae and Freddie
Mac with explicit guarantees for which the federal government would charge a fee. Proposals for a federal backstop
differ, however, in whether they require a cap on the average
per unit loan size or include an affordability requirement
to ensure that credit is available to multifamily properties
with lower rents or subsidies. While the details are clearly
significant, what is most important is that reform efforts
do not lose sight of the critical federal role in ensuring the
availability of multifamily financing to help maintain rental
affordability, as well as in supporting the market more broadly during economic downturns.
A variety of proposals for rental housing assistance reform
are on the table that are intended to make more efficient use
of existing resources, tailor interventions to serve as a springboard for individual opportunity, revitalize distressed neighborhoods, and expand the scope of assistance. In particular,
the US Department of Housing and Urban Development
(HUD) has proposed a number of improvements to existing
programs, including major changes to public housing. The
Bipartisan Policy Center Housing Commission has attempted
to jumpstart an even broader policy debate by laying out a
framework of guiding principles and identifying a series of
specific proposals that support those principles. The Housing
Partnership Network has also created a detailed blueprint
for reforms, while the Center on Budget and Policy Priorities
has designed a new mechanism for delivering rental subsidies through the tax system, similar to the support provided
by housing vouchers. Meanwhile, many organizations are
calling for finally funding the National Housing Trust Fund,
which was created in 2008 to support production of housing
affordable to households with extremely low incomes. The
question now is whether Congress will recognize the vital
importance of this assistance to millions of Americans and
take action on these promising new directions.
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
11. RENTAL HOUSING DEMAND
Renting provides a flexible and financially
THE BENEFITS OF RENTING
suitable housing option for many Americans.
While the likelihood of renting declines
with age, many households switch between
owning and renting at various points over
their lives as their housing needs change.
Although it is difficult to predict whether the
recent shift toward renting will persist, the
aging of the baby boomers and growth in the
minority population alone will keep rental
demand strong over the next decade.
The recent turmoil in for-sale housing markets and the
broader economy has highlighted the many advantages of
renting. Since the onset of the Great Recession, unemployment has remained stubbornly high and incomes have fallen, straining household budgets. In this environment, renting offers a flexible housing choice that enables households
to adapt to changing financial circumstances—including the
need to relocate quickly, whether to find a more affordable
home or to take a job elsewhere in the country.
The recent plunge in house prices also underscored the
financial risks of homeownership. Falling home values are
especially devastating to low- and moderate-income households, who often invest a substantial share of their resources
in this single asset. And if forced to move when they owe
more on their mortgages than their homes are worth, owners must cover the gap between the sales proceeds and the
mortgage debt, or walk away from their loans and face the
consequences of impaired credit for years to come.
For most households, renting is less of a financial stretch
than buying a home. Even in the best of times, homeowners
must come up with a substantial amount of cash to cover
the downpayment and closing costs, as well as the expense
of any immediate repairs. While renters typically have to pay
a security deposit plus the last month’s rent, the total outlay
is usually more modest than the upfront costs of buying.
Equally important, renters who want to move do not incur
the steep costs associated with selling a home.
Renting also brings greater certainty to household budgeting
because tenants do not have to cover the costs of unexpected but necessary home repairs. Owning a home, however,
requires money, time, and skill to manage its upkeep. Renting
transfers responsibility for maintenance to a landlord,
reducing risk and worry for those who are either ill-suited to
such tasks or who simply prefer to avoid these obligations.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
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12. A 2012 Fannie Mae survey reveals many of the reasons some
households favor renting over owning. More than half of the
renter respondents considered renting a better choice for living within a budget and having less stress (Figure 7). The other
common reasons cited for preferring to rent are that it is the
best decision in the current economic climate, allows one to
live in a more convenient location, and provides more flex-
FIGURE 7
Renting’s Appeal Lies in Affordability,
Reduced Stress, and Flexibility
Percent of Renters Stating that Renting Is a Better Way to:
Live within
your budget
Make best decision
given the current
economic climate
Have flexibility in
future decisions
Live in a convenient
location
0
10
20
30
40
50
60
Source: Fannie Mae National Housing Survey, Q3 2012 Data Summary.
FIGURE 8
Households of All Ages Often Shift Between Renting
and Owning Over the Course of a Decade
Share of 2001 Households Renting Sometime in 2001–11 (Percent)
100
80
60
40
20
0
Under 30
30–39
40–49
50–59
Age of Household Head
I
I
I
I
Shift from Renting to Owning
Multiple Shifts Between Owning and Renting
Shift from Owning to Renting
Always Rent
Source: JCHS tabulations of the 2001–11 Panel Study of Income Dynamics.
10
Perhaps not surprisingly, attitudes toward renting have
shifted somewhat as a result of the Great Recession. For
example, slightly more than half (54 percent) of the households surveyed by Hart Research Associates in early 2013
stated that renting had become more appealing given the
country’s economic situation. Consistent with a variety of
other sources, however, the same survey also found that
a solid majority of renters (72 percent) still aspire to own
homes in the future.
RENTING OVER THE LIFECYCLE
Have less stress
All
ibility in future decisions. At the same time, current homeowners overwhelmingly held the view that owning a home
is a better way to achieve these goals, although 28 percent
agreed that renting is less stressful.
60–69
70 and Over
Young adults are the most likely age group to rent. For
those first leaving their family homes, the lower transaction costs and flexibility of renting makes it a natural
choice during a stage in life marked by frequent changes
in jobs, periods as a student, and shifts in personal relationships. As a result, nearly four out of five individuals
under age 25 who live independently choose to rent. As
people age and become more settled, the share that rent
declines until late in life when the likelihood of renting
increases slightly. Nevertheless, nearly two-thirds of 25–29
year-olds and more than half of households in their early
30s rent their homes.
While a majority of US households own homes at some point
in their lives, many return to renting in response to changing
fortunes and housing needs. For example, the Panel Study of
Income Dynamics reports that 44 percent of families rented
for some period between 2001 and 2011, but the renter share
of households never exceeded 34 percent during the decade.
Indeed, 16 percent of all households rented for the entire
period, 13 percent started out as renters but made the transition to owning, 7 percent started out as owners but switched
to renting, and 9 percent shifted between owning and renting
multiple times (Figure 8).
Tenure transitions are most common among younger households, but increase again among the oldest households. In
particular, the share that move from owning to renting rises
first among those in their 60s and then more sharply as
they reach age 70. According to the 2011 American Housing
Survey, households that had recently shifted from owning to
renting typically made the move to accommodate a change
in employment or in marital status. Slightly more than half
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
13. of these households also stated that their housing costs
declined as a result of the change.
Preferences for location and type of housing depend on renter
household type. Non-family households, including roommate
situations that are more common among the young, are more
likely to live in multifamily housing in central cities (Table A-2).
As they move into the childrearing phase of life, renters tend to
prefer single-family homes in suburban or rural locations. In
fact, married couples with children choose single-family rentals more than any other housing type. Single persons, many of
which are seniors, are more likely to live in central cities and
the most likely of all renters to live in multifamily structures.
Reflecting differences in housing costs, demographic characteristics, and the nature of the housing stock, renter
shares also vary across metropolitan areas. Renting is
somewhat more common in markets with higher house
values, larger shares of young households, fewer senior
households, and smaller shares of single-family homes. In
the 20 largest metropolitan areas in the country, rentership rates thus range from 52 percent in Los Angeles to 30
percent in St. Louis (Figure 9). Most of the markets that have
larger shares of renters are coastal metros with high home
prices, including New York and San Diego. Renter shares are
smaller in markets with lower house values, such as Detroit
and Tampa.
GEOGRAPHIC VARIATIONS IN RENTING
HOMES FOR A DIVERSE POPULATION
Renting is much more prevalent in central cities, where land
prices are high and low-income households are concentrated. In general, rentership rates are highest in cities of the
Northeast, where more than 60 percent of households rent
compared with 45–50 percent in other regions. About a quarter of households rent in suburban and non-metropolitan
areas in most parts of the country, although rentership rates
in these areas exceed 30 percent in the West.
According to the Current Population Survey, 43.0 million US
households rented their homes in 2013. Given the appeal of
renting for young adults, 39 percent of these renters were
under age 35—almost twice their share in the overall population (Figure 10). But nearly as many renters were between the
ages of 35 and 54 (36 percent). Households aged 55 and over
currently make up a small share of renters (25 percent) relative to their share of all households.
FIGURE 9
Rentership Rates Vary Widely Across Metro Areas, Reflecting Differences in Housing Costs and Demographic Profiles
Percentage Point Difference from US Rentership Rate of 36 Percent
Los Angeles
New York
San Diego
Dallas
Phoenix
Miami
Washington, DC
Atlanta
US
Tampa
Chicago
Baltimore
Philadelphia
Detroit
Minneapolis
St. Louis
-10
-5
0
5
10
15
20
Source: JCHS tabulations of US Census Bureau, 2012 American Community Survey.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
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14. With their need for less living space and their lower incomes,
single persons are the most common renter household. Even
so, nearly as many renters are households with children.
Fully 32 percent of renters are married couples with children
and single-parent families. Married couples without children
are the most underrepresented household type among renters relative to their share of all households.
While households of all incomes rent their homes, it is
nonetheless true that a disproportionate share of renters
have low incomes. Nearly half (46 percent) of renters have
incomes below $30,000, including 22 percent with annual
incomes below $15,000 (roughly equivalent to working
year-round at the minimum wage) and 24 percent earning between $15,000 and $30,000. By comparison, only 30
percent of all households have incomes this low. However,
the renter share of moderate-income households (with
$30,000–74,999 in annual income) is 37 percent—just above
their share of total households. Higher-income households
make up only about one in six renters, compared with
about a third of all households.
Many lowest-income renters are among the country’s more
vulnerable households. Roughly four out of ten renters with
incomes under $15,000 are out of the workforce because they
are disabled or retired. Of the remainder, half are employed
but earn only modest amounts, while another sixth are
unemployed and looking for work. Among renters earning
$15,000–29,999, nearly a quarter are disabled or retired and
fully 80 percent of the rest are employed.
Since the mid-2000s, rentership rates have risen across
all household types, income categories, and age groups
except the oldest. While the sharpest increases have been
among young adults, fewer individuals in this age group
have been striking out on their own. As a result, adults
under age 35 as a share of all renters actually fell between
2005 and 2013. And while the overall number of households aged 35–54 dropped by over 1.2 million during this
time, higher rentership rates meant the number of renters within this age group actually rose by over 3 million.
The aging of the baby-boom generation also meant that
seniors accounted for a large share of renter household
growth over this period.
With their overall numbers climbing, low-income (under
$15,000) and Hispanic households also contributed a large
share of the recent increase in renters. Indeed, while each
group currently represents approximately 13 percent of
all households, low-income households were responsible
for 26 percent of renter growth in 2005–13 while Hispanic
households accounted for 29 percent.
FIGURE 10
Renters Reflect the Diversity of US Households
Share of Households (Percent)
100
100
100
90
90
90
80
80
80
70
70
70
60
60
60
50
50
50
40
40
40
30
30
30
20
20
20
10
10
10
0
0
Renters
0
Renters
All
Households
Age of Household Head
Household Type
I 65 and Over
I 55–64
I 45–54
I Other Family/Non-Family
I Single Person
I Single Parent
All
Households
I 35–44
I 25–34
I 15–24
All
Households
Household Income
I Married With Children
I Married Without Children
Source: JCHS tabulations of US Census Bureau, 2013 Current Population Survey.
12
Renters
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
I $75,000 and Over I $15,000–29,999
I $45,000–74,999
I Less than $15,000
I $30,000–44,999
15. FIGURE 11
Lower-Income Renters Are Much Less Likely than Owners
to Hold Various Financial Investments
Share of Lower-Middle Income Quartile Households Holding Asset (Percent)
50
40
30
20
10
0
Retirement
Accounts
Cash Value
Life Insurance
Stocks
Certificates
of Deposit
Savings
Bonds
who held a broader range of investments, dropped nearly 50
percent as the recession drove down the values of a full range
of financial assets as well as housing.
Again, even after accounting for differences in income, renters
are less likely than owners to own assets such as retirement
accounts, cash-value life insurance policies, stocks, certificates of deposit, or savings bonds (Figure 11). The gap in retirement savings is especially large, and may be due to differences
in the nature of owners’ and renters’ employment as well as
the types of benefits they receive. But what is perhaps most
troubling is that holdings of these and other financial assets
are low for owners as well as renters, underscoring the urgent
public policy need to promote saving outside of employment
and by means other than homeownership.
Type of Asset
DEMOGRAPHIC DRIVERS OF FUTURE DEMAND
■ Owners ■ Renters
Note: Income quartiles are equal fourths of all households by income.
Source: JCHS tabulations of Federal Reserve Board, 2010 Survey of Consumer Finances.
WEALTH ACCUMULATION AMONG RENTERS
Savings and other forms of wealth provide economic security
in times of job loss, poor health, or unexpected expenses.
They also support life-changing investments in education
and business opportunities, and lay a solid foundation for
retirement. Even after controlling for their lower average
incomes, though, renters accumulate much less wealth than
homeowners. For example, among households in the uppermiddle income quartile, the median net worth of homeowners in 2010 was nearly nine times that of renters. The median
for all owners was 34 times that of renters.
Home equity accounts for a significant share of the difference,
but by no means all. Excluding housing wealth, homeowners
still had a median net worth of $72,520 in 2010—more than
14 times that of renters. And even accounting for differences
in the ages as well as the incomes of owners and renters, the
disparities remain wide. Among households aged 35–44 in the
upper-middle income quartile, for example, median net wealth
in 2010 was just $13,300 for renters but $69,700 for owners.
With the housing market crash, the median net wealth of
homeowners plunged 30 percent between 2007 and 2010.
Renters’ median wealth fell only 5 percent. This modest
decline largely reflects the fact that what little wealth they
had was mostly in lower-risk, lower-yielding accounts. Even so,
the median wealth of renters in the highest income quartile,
Two key factors will drive rental housing demand over the
next decade: changes in the number and characteristics of
households, and changes in the tendency of different groups
to own their homes. Of these, changes in the distribution of
households is somewhat easier to project because the age
structure of the adult population is already known with
some certainty and the rate at which they form different
types of households changes relatively slowly.
In contrast, homeownership rates can fluctuate significantly over a several-year span as economic conditions change.
Consider trends in rental demand between 2005 and 2012. If
homeownership rates had held constant, overall household
growth would have lifted the number of renter households
by 2.0 million. Instead, plummeting homeownership rates
boosted the number of renters by some 6.6 million over
this period.
Homeownership rates are determined in large part by household incomes, housing prices, and the cost and availability
of mortgage financing—all of which are highly uncertain.
Preferences for owning or renting also play a role, but are
similarly hard to gauge. Joint Center estimates of renter
household growth therefore assume that homeownership
rates by age, race/ethnicity, and household type remain at
their 2012–13 averages. If current trends continue and homeownership rates decline further over the next decade, growth
in the number of renters will be stronger than projected. At
the same time, however, homeownership may well rebound,
given that current rates for 25–54 year-olds are at their lowest point since annual recordkeeping began in the 1970s. In
that case, the projections will overstate renter growth.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
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21
16. Given constant homeownership rates and using the Census
Bureau’s high and low population projections, the Joint
Center estimates that the number of renter households
will increase between 4.0 million and 4.7 million in 2013–
23. Immigration rates are the major source of difference
between the two scenarios. While a slowdown from its recent
pace, growth in the number of renters would be comparable
to increases in the 1980s—that is, somewhat slower than in
the 1970s when the baby boomers entered the rental market,
and in the 2000s when homeownership rates plunged.
The changing age structure of the population and the growing
racial/ethnic diversity of Americans will alter the face of rental demand over the next decade. With the aging of the baby
boomers, the number of renters over age 65 will increase by
2.2 million and account for roughly half of renter household
growth (Figure 12). The echo boomers will provide the impetus
for much of the rest of growth, replacing the smaller babybust generation in the 25–44 age group and adding between
1.9 million and 2.4 million renter households. The number of
renters under age 25 will dip somewhat over the next 10 years
as the echo boomers move out of this age group.
The aging of the population means that the numbers of renter
households that are either single or married couples without children will rise. These two groups are each projected
to account for 1.2–1.3 million additional renter households
over the decade, or roughly 30 percent of overall growth. The
number of renter households with children is also expected
to climb as the echo-boom generation moves into the 25–34
and 35–44 year-old age groups. In combination, the number of
married couples with children and single-parent families that
rent housing is projected to increase by 1.1–1.5 million.
The growing diversity of American households will be evident
in the sizable increase in the number of Hispanic renters.
While currently making up about 20 percent of renter households, Hispanics are projected to account for more than half
of renter household growth in 2013–23, with increases in the
2.2–2.4 million range. African-Americans, Asians, and other
minorities will drive the rest of renter household growth over
the decade as the net number of white renters holds steady.
THE OUTLOOK
Projected changes in the age and race/ethnicity of US households have important implications for housing markets and
for policymakers. The burgeoning number of seniors points
to increasing demand for housing that meets the needs of
aging renters. While many of these households may be able
to stay in their current homes, others may have to move to
housing with better access to services and social networks
when they can no longer drive. In addition, the growing
number of seniors on fixed incomes is likely to outstrip the
limited supply of affordable rentals. With the number of
families with children also on the rise, demand for larger
rental units will increase as well, particularly in communities with access to good schools and employment centers.
FIGURE 12
Broad Changes in the Age and Racial Composition of Households Will Drive Future Rental Demand
Projected Renter Household Growth 2013–23 (Millions)
2.5
2.0
1.5
1.0
0.5
0.0
Under
35
35–64
65 and
Over
Age of Household Head
Families
With
Children
Couples
Without
Children
Single
Person
Other
Household Type
White
Black
Hispanic
Race of Household Head
Notes: Families with children may be headed by married or partnered couples or single parents, and only include children of the household head that are under age 18. Other family households
include children under age 18 that are not those of the household head, such as grandchildren. White, black, and other household heads are non-Hispanic. Hispanics may be of any race.
Source: JCHS 2013 household projections, middle series.
14
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
Other
17. RENTAL HOUSING SUPPLY
The rental stock provides a broad range
PROFILE OF THE STOCK
of housing options for the growing numbers
of US households seeking to rent. To meet the
rising tide of demand, construction activity has
picked up pace in many markets across the
country. The millions of homes switched from
owner-occupied to rental in the aftermath of
the housing crash have also helped to expand
supply. The persistent challenge, however,
is that the costs of adding new rentals
or adequately maintaining existing units
far exceed the ability of low-income
renters to pay.
Contrary to popular perceptions, most rental units are not
located in large apartment buildings. According to American
Housing Survey estimates for 2011, about 35 percent of occupied rentals are in fact single-family homes and another 19
percent are in buildings with two to four units. Indeed, only
29 percent are in buildings with 10 or more units. It is important to note, however, that these estimates likely overstate
the share of rentals in smaller properties, given that these
structures may be part of large apartment complexes—a
critical distinction when considering the ownership and
financing of this housing. For example, the 2001 Residential
Finance Survey reported that 43 percent of rentals were in
properties with 10 or more units, while the AHS for that year
also indicated that 29 percent were in buildings of this size.
The rental housing stock is somewhat older than the
owner-occupied inventory. In 2011, the median-aged rental
home was built in the early 1970s, or about five years earlier
than the typical owner-occupied unit. During the 1960s and
1970s, multifamily construction took off in part to accommodate the first wave of baby boomers as they began to
live on their own. Multifamily construction was strong
again in the early 1980s, spurred by generous tax provisions
intended to stimulate the economy after the 1981 recession. Building activity then slowed to a moderate pace for
much of the next two decades. Overall, about a third of the
nation’s rental supply was built before 1960, another third
in the two decades between 1960 and 1979, and the final
third in the years since 1980.
The oldest rentals are primarily single-family detached
homes or in two- to four-unit buildings, 44 percent of which
were built before 1960 (Figure 13). The older age of singlefamily rentals reflects the tendency for growing shares
of owner-occupied homes to switch to rentals over time.
Meanwhile, construction of apartment buildings with two to
four units has become less common over the years, with only
22 percent built since 1980. Apartments in buildings with 10
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
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21
18. FIGURE 13
Smaller Rental Buildings Are Apt to Be Much Older
than Larger Structures
Rental Units (Millions)
14
12
10
8
6
4
2
0
Single-Family
Multifamily with
2–4 Units
Multifamily with
5–9 Units
Multifamily with
10 or More Units
Structure Type
Year Built:
or more units are newest on average, with large shares built
during the 1960s and 1970s construction booms, as well as
after 1980.
Rental housing is in generally good condition, with only 3.1
percent categorized as severely inadequate and 6.7 percent as moderately inadequate. These shares are, however,
nearly twice those for all housing units. Given that older
housing is more likely to be inadequate, more than 13
percent of rentals built before 1960 have some structural
deficiencies. Still, a large majority of renters are satisfied
with their living conditions. A 2012 Fannie Mae survey
found that more than three-quarters of respondents were
satisfied with the ongoing maintenance of their rentals,
including 43 percent who were very satisfied. In keeping
with the AHS estimate of housing adequacy, only 8 percent
of respondents to that survey were very dissatisfied with
the maintenance of their homes.
I Pre-1940 I 1940–59 I 1960–79 I 1980–99 I 2000 and Later
Note: Data exclude mobile homes and vacant units.
Source: JCHS tabulations of US Department of Housing and Urban Development, 2011 American
Housing Survey.
FIGURE 14
Large Multifamily Buildings Predominate
in Central Cities, While Single-Family Homes
Are Most Common in Rural Areas
Share of Rental Units in Each Location (Percent)
50
45
GEOGRAPHIC DISTRIBUTION
While available in communities across the country, rental
housing is more concentrated in the central cities of metropolitan areas. Indeed, about 43 percent of all occupied
rentals are located in central cities, compared with 29
percent of all households. The share of rentals in suburbs
is nearly as large (40 percent), although lower than the
share of households (49 percent) residing in those areas.
The remaining 17 percent of rental homes are in non-metro
areas, also below the 22 percent share of households living
in those locations.
40
35
30
25
20
15
10
5
0
Central Cities
I Single-Family
I Multifamily with 10 or More Units
Suburbs
Non-Metro Areas
I Multifamily with 2–9 Units
I Mobile Home
Note: Data exclude vacant units.
Source: JCHS tabulations of US Department of Housing and Urban Development,
2011 American Housing Survey.
Rental housing is particularly common in lower-income
neighborhoods. Across the 100 largest metropolitan areas,
45 percent of occupied rental units in 2011 were located in
low-income neighborhoods, compared with 28 percent of
households. At the other end of the spectrum, 20 percent
of rentals were in high-income neighborhoods, compared
with 36 percent of households. In moderate-income areas,
the shares are similar. The concentration of rental housing
in low-income communities reflects in part the simple fact
that more low-income households rent. But the limited
supply of rental housing in higher-income neighborhoods
may also constrain renters’ ability to find affordable housing in areas offering access to better schools and suburban
employment centers.
The prevalence of particular structure types is a function of
land costs, zoning regulations, and historical development
patterns. In central cities, where land costs are high and more
16
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
19. land is zoned for multifamily buildings, the majority of the
rental stock is in fact made up of multifamily buildings, with
larger structures dominating. Rentals in buildings with 10 or
more units constitute fully 37 percent of the rental stock in
central cities, compared with only 27 percent in suburban
areas (Figure 14). This pattern is also due to the heavy volume
of multifamily construction in the 1960s and 1970s, much of
it built with federal support and concentrated primarily in
urban areas. Even so, single-family rentals still represent a
significant share of the central city stock (27 percent), albeit
substantially less than in the suburbs (39 percent).
Renters in rural locations typically live in single-family or
mobile homes, which account for six out of 10 rentals. In
contrast, rentals in buildings with 10 or more units are relatively rare in these communities. The one constant across
geographies, however, is the relative importance of small
multifamily rentals, with the shares of buildings with two to
nine units varying only between 35 percent in central cities
and 28 percent in non-metro areas.
ADDITIONS THROUGH NEW CONSTRUCTION
Most additions to the rental housing inventory through
new construction are in multifamily buildings, although
not all multifamily units are built as rentals. At the height
of the homeownership boom, more than four out of 10
new multifamily units were built for sale. But with the
recent rental market recovery, the share of multifamily
units intended for renter occupancy rebounded to more
than nine out of 10. A small though important share of
single-family construction is also targeted to the rental
market. Indeed, while just 6 percent of new single-family
homes were built as rentals in 2012, these additions represented more than 30,000 units.
On average, 260,000 new rental housing units were completed each year between 2000 and 2009, including 41,000
single-family homes. But at the depth of the downturn in
2010, completions of homes intended for rent totaled a mere
151,000. Although rebounding to 186,000 in 2012, rental
completions remain well below average annual levels in the
ten years leading up to the recession despite the strength of
renter household growth.
While the overall rental housing stock is concentrated in
central cities and lower-income neighborhoods, the location of newer rentals closely matches the distribution of all
existing housing (Figure 15). In contrast, new owner-occupied
units are nearly twice as likely to be located in high-income
FIGURE 15
Newer Rental Housing Is More Evenly Distributed Across Metro Areas
Share of Occupied Units in the 100 Largest Metros (Percent)
70
60
50
40
30
20
10
0
Low
Moderate
High
Core Cities
Median Household Income
Suburbs
Exurbs
Location
I All Housing Units I Rentals Built 2000 or Later I Owner-Occupied Homes Built 2000 or Later
Notes: Low-/moderate-/high-income neighborhoods are census tracts with median income that is under 80%/80–120%/at least 120% of the metropolitan median. Core cities have populations above 100,000.
Suburbs are urbanized areas in metros that are outside of core cities. Exurbs are all other areas.
Source: JCHS tabulations of US Census Bureau, 2007–11 Five-Year American Community Survey.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
17
21
20. from the owner-occupied to the rental stock. Another 1.1
million units had been converted on net to rentals between
2007 and 2009, bringing the inflow to more than 3.0 million
homes over the four-year period. With signs that this trend
continued after 2011, total additions are likely to be even
higher today.
FIGURE 16
Millions of Single-Family Homes Have Become
Rentals Since the Recession
Net Owner-to-Renter Conversions (Millions)
1.75
1.50
1.25
1.00
0.75
0.50
0.25
0.00
-0.25
2003–05
2005–07
2007–09
2009–11
■ Single-Family ■ Multifamily
Source: JCHS tabulations of US Department of Housing and Urban Development,
American Housing Surveys.
neighborhoods. Newer rental housing is also fairly evenly
distributed across cities, suburbs, and exurbs, expanding the
available housing options without contributing to sprawl.
New owner-occupied housing, however, remains heavily concentrated in exurban areas.
It is also noteworthy that increasing shares of new rentals are
in large buildings. From the 1970s through much of the 1990s,
multifamily buildings with two to nine apartments were the
most common rental structure. But a trend toward larger buildings emerged in the late 1990s. In both 2009 and 2010, nearly
four out of five new rentals were in structures with at least
20 units, and nine out of 10 were in buildings with at least 10
units. In fact, some 43 percent of new apartments in 2010 were
in buildings with 50 or more units. Although the housing market downturn reduced its share of new construction, the large
building segment of the market still accounted for more than
two-thirds of rental completions in 2012. Buildings with two to
nine units accounted for less than 11 percent.
INFLUX OF OWNER-OCCUPIED HOUSING
While new construction and a reduction in vacant for-rent
housing helped to meet the recent surge in rental demand,
much of the increase in the rental inventory came from the
flood of formerly owner-occupied homes into the market.
In 2009–11 alone, about 1.9 million homes switched on net
18
Most of the homes converted to rentals are single-family residences (Figure 16), lifting the single-family share of the rental
housing stock to a new high of 35 percent in 2011. While the
share of single-family homes that are rentals also ticked up
from 14 percent to 16 percent over this period, this increase
only brought the share back in line with its long-run average.
Much of the growth in single-family rentals may thus reflect
the fact that these homes have become a larger share of the
overall housing stock since the late 1990s.
Although small-scale investors have traditionally owned the
vast majority of single-family rentals, large investment pools
began to buy up foreclosed homes after the housing crash to
manage the properties as rentals. The largest of the groups
amassed portfolios of 10,000–20,000 homes, many of them concentrated in a few select markets. While systematic information
is hard to come by, CoreLogic found that institutional investors
(defined as those acquiring at least five foreclosed properties or
using a corporate identity) were most active in 2012 in Miami,
where they bought 30 percent of foreclosed properties, followed
by Phoenix (23 percent), Charlotte (21 percent), Las Vegas (19
percent), and Orlando (18 percent). These shares of corporately
owned single-family rentals are in fact close to historical levels.
At the same time, though, the scale of operation of the largest
institutional investors is unprecedented.
These new, large-scale ventures may have importance not
only in reviving moribund housing markets, but also in developing new models for financing and managing single-family
homes as rental properties. Until now, institutional investors
have shown little interest in this arena, presumably because
of the high cost of managing geographically dispersed properties as well as the challenges of financing and titling individual units. If these business models can be profitable, they could
help to expand the rental options in both the market-rate
and affordable housing sectors. Some investors have recently
sought to securitize the cash flow from these portfolios, while
others have formed real estate investment trusts (REITs) as a
way to sell off a portion of their interest. However, it remains
to be seen whether large-scale investment in single-family
rentals will become a permanent part of the landscape or fade
as house prices recover and demand from owner-occupants
picks up, reducing the financial returns to investors.
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
21. THE SUPPLY OF LOW-RENT HOUSING
According to AHS data, the median contract rent (excluding tenant-paid utilities) was $725 in 2011. When factoring
in typical monthly utility costs, the median gross rent was
$843. At the 30-percent-of-income standard, households
would have to earn at least $33,700 a year—several thousand dollars more than the median renter income—to afford
this home. And for the nearly one-quarter of renters with
incomes of $15,000 or less, rents plus utilities would have to
total well under $400 a month to be affordable. Only 8 percent of units have such low costs, although another 14 percent receive some form of public subsidy that helps to close
the gap between the demand for affordable housing and the
private supply (Figure 17).
Affordable private market rentals are likely to be singlefamily or mobile homes, which together account for
56 percent of residences renting for less than $400.
Moderately priced units (with rents between $400 and
$800) are more likely to be in multifamily buildings with
two to nine apartments. Meanwhile, 32 percent of units
renting for at least $800 are located in larger multifamily
buildings—almost double the share (17 percent) of units
renting for less than $400 in such buildings. A large percentage of single-family rentals also has high rents, given
that these homes are often more spacious and located in
higher-income areas.
FIGURE 17
Very Few Rental Homes Are Affordable
for Lowest-Income Renters
Government Assisted
14%
Under $400
8%
$800 and Over
39%
$400–599
19%
Much of the lowest-cost rental stock is at least 50 years
old. Nearly half (46 percent) of all unassisted housing with
rents under $400 were built before 1960, compared with
just a third of all units. In addition, many of the homes
renting in the $400–599 range were built between 1960 and
1979. Newer housing is much more likely to have higher
rents, with 52 percent of unassisted cash rentals built in
1980 or later leasing for at least $800 a month and just 6
percent renting for less than $400.
ONGOING LOSSES OF THE LOW-END STOCK
With little revenue to cover operating and maintenance
costs, the low-rent housing stock is especially vulnerable
to removal. Of the 34.8 million rentals that existed in 2001,
some 1.9 million were demolished by 2011—a loss rate of
5.6 percent. Losses of units renting for less than $400, however, were nearly twice as high at 12.8 percent (Figure 18).
Although making up only a small share of the overall rental
supply, homes renting for less than $400 thus accounted
for more than a third (650,000) of total removals. Removal
rates for units with rents between $400 and $600 were also
relatively high at 6.7 percent. Loss rates decline as rents
increase, falling to just 3.0 percent for units with rents of
$800 or more.
Age is a key factor in the high loss rates for low-cost rentals, with removals of homes built before 1960 at roughly 8
percent. Removal rates for single-family homes and twoto four-unit apartment buildings are also comparatively
high. Fully 8.1 percent of rental units in non-metro areas
were lost from the stock over the decade, compared with
5.7 percent in central cities and 4.7 percent in suburbs.
High losses in rural areas reflect the greater presence of
mobile homes, particularly in the South and West where
they account for more than 10 percent of rentals. Mobile
homes have by far the highest loss rates of any structure
type, with more than one in five removed from the stock
between 2001 and 2011.
SUPPLYING LOW-COST HOUSING
$600–799
20%
Notes: Excludes units without cash rent or with rent paid other than monthly. Affordable rents are
defined as no more than 30% of household income. Monthly rents of $400 are roughly 30% of income
for a household earning $15,000 per year, which is also roughly equivalent to full-time work at the
federal minimum wage.
Source: JCHS tabulations of US Department of Housing and Urban Development, 2011 American
Housing Survey.
While losses of existing rentals are concentrated among lowrent units, new construction typically adds residences at the
upper end of the rent distribution. The 2011 AHS reports that
the median monthly gross rent for units built in the preceding
four years was $1,052—affordable only for households earning
at least $42,200 a year. Only 34 percent of new units had rents
below $800, or roughly at costs affordable for the median renter.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
19
21
22. FIGURE 18
Low-Cost and Older Rentals Are Especially at Risk of Loss
Share of Units Permanently Removed from Stock 2001–11 (Percent)
All Rentals
Rent Level
Under $400
$400–599
$600–799
$800 and Over
Year Built
Pre-1940
1940–1959
1960–1979
1980–1999
2000 and Later
Structure Type
Single-Family Detached
Single-Family Attached
Multifamily with 2–4 Units
Multifamily with 5–9 Units
Multifamily with 10 or More Units
Location
Central Cities
Suburbs
Non-Metro
0
2
4
6
8
10
12
14
Note: The removal rate for all rentals includes mobile homes.
Source: JCHS tabulations of US Department of Housing and Urban Development, 2001–11 American Housing Surveys.
One possible approach to lowering the costs of new construction would be to reduce the regulatory constraints on certain
types of housing—for example, by allowing higher-density construction to economize on land costs, permitting smaller unit
sizes, and relaxing requirements for parking or other amenities.
In addition, requiring that rehabilitation of existing rental properties meet the same building standards as new construction
can make preservation efforts extremely costly. Allowing more
flexibility in meeting these goals, but without requiring specific
building materials or techniques, could help relieve some of
these costs. Any relaxation of land use regulations and building
codes must of course ensure the safety of residents and limit
the costs imposed on surrounding communities.
Accessory dwelling units (ADUs) also offer a promising
way to add more affordable rentals in higher-cost locations
20
without subsidies. ADUs are generally modest units located
inside of or attached to a single-family home, or in a structure on the same property, providing homeowners a rental
income stream or a place to house relatives or caregivers. But
they also increase the housing options for people otherwise
unable to afford to live in the communities where they work,
help satisfy demand for smaller residences (including from
owners who may want to downsize and rent out their primary residences), and add housing without the loss of open
space or the need for new infrastructure.
Yet local regulations enacted to preserve a community’s
character often pose barriers to the creation of ADUs. If
allowed at all, ADUs may be subject to minimum lot or house
sizes, minimum and maximum unit sizes, and requirements
for landscaping and design, off-street parking, and having an
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
23. owner-occupant on site. A number of communities around
the country, however, have now created or liberalized ADU
regulations and offer technical assistance, low- or no-interest loans to modify or create units, or amnesty programs to
bring illegal housing into compliance.
Like accessory units, micro-units are a potential housing
alternative for those seeking affordable urban living. Given
that these apartments are typically just a few hundred
square feet, development of micro-units frequently requires
changes to zoning laws related to minimum unit size or
maximum number of dwellings per parcel. Off-street parking requirements pose another barrier, though some cities
provide waivers in areas well served by transit. Despite growing demand for smaller, centrally located rentals, concerns
about increased density and the untested nature of new
developments of this type have led some communities to
establish initial limits on micro-units and to require evaluation of their impacts on neighborhoods and affordability to
inform future changes to regulations.
THE OUTLOOK
The recent housing boom and bust highlighted the dynamic nature of the nation’s rental supply. Although new construction slowed sharply following the Great Recession,
surging demand was met by the conversion of some 3
million owner-occupied units into rentals, pushing the
single-family share of the rental stock to a new high. But
while the market has proven highly responsive to changing conditions, supplying housing for very low-income
renters continues to be a challenge because of the fundamental gap between the cost of development and what
these households can afford to pay.
The deterioration and loss of low-cost rental housing are
grave concerns. To some extent, the loss of older rentals may be inevitable as time takes its toll, particularly
when maintenance is deferred. Older housing may also
be less efficient to operate and have outdated designs.
While renovation and improvements might address some
of these deficiencies, the costs of upgrading older properties to current building codes are often prohibitive. Still,
rehabilitation of older buildings would provide the kind of
modest but secure housing that is difficult to add through
new construction. To encourage these investments, one
strategy would be to offer tax incentives for upgrades to
existing rentals that meet affordability standards. At the
local level, it may be important to exempt renovated housing from some current building code requirements where
doing so would help maintain affordability without compromising residents’ safety.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
21
21
24. RENTAL MARKET CONDITIONS
By most measures, the rental housing
market has recovered from the Great
Recession. Now that vacancy rate declines
and rent increases are moderating, markets
may be approaching balance. A clear sign of
renewed health is the strong return
of most private sources of mortgage
financing. Going forward, though, a large
unknown is how impending reform of the
government role in the mortgage market will
affect the cost and availability of credit for
rental properties.
MOVING INTO BALANCE
While the owner-occupied market only began to show clear
signs of recovery in 2012, rental markets have steadily
improved for several years. From a record high of 10.6 percent in 2009, the vacancy rate turned down in 2010 and has
continued to slide, averaging 8.4 percent in the first three
quarters of 2013. After four consecutive years of downward
momentum, the US rental vacancy rate is now well below its
average in the 2000s and approaching levels last seen during
the 1990s (Figure 19). Whether vacancy rates have further to
fall is difficult to judge because there is no clear benchmark
for what represents market balance, given the upward drift
in vacancy rates over the last few decades.
While vacancies for larger rental buildings posted both
the sharpest rise before and the sharpest drop after their
recessionary peak in 2009, rates for all structure types have
eased. Over the past three years, the vacancy rate for apartment buildings with 10 or more units declined by 3.1 percentage points and that for buildings with five to nine units
by 2.8 percentage points. The overall rate for buildings with
at least five units—accounting for 42 percent of the rental
housing stock—stands at about 9.1 percent. Remarkably,
soaring demand was more than enough to absorb the 2.7
million single-family homes that flooded into the rental
market after 2007. Indeed, vacancy rates for single-family
rentals barely increased during the recession and have
fallen 1.8 percentage points since 2009 to just 8.1 percent.
Vacancy rates in small multifamily buildings with two to
four units have followed a similar path.
Throughout the downturn and recovery, vacancy rates for
professionally managed apartments—favored by large institutional investors—started out and remained much lower
than in the broader rental market. Still, MPF Research data
indicate that vacancy rates in this segment spiked by more
than 4.1 percentage points from 3.9 percent in mid-2006 to
8.0 percent at the end of 2009, before retreating to 4.7 percent in the second quarter of 2013. Meanwhile, the cycle in
22
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
25. FIGURE 19
After Stair-Stepping Upward for Decades, Rental Vacancy Rates Are on the Decline
Rental Vacancy Rate (Percent)
11
10
9
8
7
6
5
4
1970
1975
1980
1985
1990
1995
2000
2005
2010
I 1970s Average I 1980s Average I 1990s Average I 2000s Average
Note: The vacancy rate for 2013 is the quarterly average through the third quarter.
Source: US Census Bureau, Housing Vacancy Surveys via Moody’s Economy.com.
vacancy rates for all multifamily rentals was similar in timing but slightly more subdued.
RENTS ON THE RISE
The consumer price index (CPI) for contract rents—which
excludes tenant-paid utilities and covers all rental housing in
the country—is a key indicator of national trends. By this measure, the increase in nominal rents began to slow in late 2008
as the recession took hold and then bottomed out in mid-2010
(Figure 20). Rent growth then accelerated steadily through 2011
before stabilizing at about a 2.8 percent annual rate through
September 2013, outpacing the rise in overall prices.
Data from MPF Research for professionally managed properties, however, show much more volatility in rents over
the past few years. The disparity between the two sources
reflects both differences in management of the properties
and how each survey measures changes in rents. The MPF
data show a much steeper falloff at the start of the recession,
with nominal rent declines reaching fully 4.8 percent yearover-year in the third quarter of 2009. Like the CPI, though,
this measure indicates that rents turned up in mid-2010 and
continued to gain momentum into late 2011, reaching 4.8
percent by year end. The MPF measure also suggests that
rental market tightening began to moderate in 2012, with
rent increases slowing to a 3.1 percent annual rate by mid2013—roughly matching the change in the CPI rent index
but still exceeding general price inflation by more than a full
percentage point.
Nearly every major metropolitan area has shared in the rental
recovery. As of the second quarter of 2013, 90 of the 93 metro
areas tracked by MPF Research reported annual rent increases,
about the same number as at the end of 2012. Of this group, 20
metros posted gains of 3.5 percent or more, outstripping overall
inflation by more than 2.0 percentage points. In 27 other metros, rents rose somewhat more slowly but were still up by at
least 2.5 percent, or 1.0–2.0 percentage points above inflation.
The metropolitan areas where rents have risen the most
tend to have the strongest employment growth. For example,
metros with rent increases exceeding 3.5 percent saw job
gains of 2.4 percent in 2012. Most of these areas—including
Austin, Corpus Christi, Houston, San Francisco, San Jose, and
Santa Rosa—are concentrated in the West and South. In contrast, job growth in metros with the smallest rent increases
or actual declines averaged just 1.4 percent in 2012.
However, some loss of momentum was also evident in 2012,
with rent increases and occupancy growth moderating in
most major metropolitan areas. Only a few metros—again
primarily in the South and West—posted annual gains surpassing the previous year’s change. Data through the first
half of 2013 suggest that occupancy rates and rent increases
in most areas were roughly similar to those in 2012.
MULTIFAMILY CONSTRUCTION OUT IN FRONT
After hitting an all-time low in 2009, multifamily construction ticked up in 2010 and then surged in 2011 even as single-
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
23
21
26. FIGURE 20
Rent Increases Have Picked Up Pace and Now Exceed Overall Inflation
Annual Change (Percent)
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
2005
2006
2007
2008
2009
2010
2011
2012
2013
I Prices for All Consumer Items I Rents for Professionally Managed Apartments I CPI-U Rent Index
Notes: Prices for All Consumer Items is the CPI-U for All Items. Rents for professionally managed apartment communities are from MPF Research. The CPI-U Rent Index is for primary residence.
Sources: US Bureau of Labor Statistics; MPF Research.
FIGURE 21
Multifamily Construction Has Rebounded Much More Strongly than Single-Family Activity
Thousands of Units
Single-Family Starts
Multifamily Starts
2,000
500
1,600
400
1,200
300
800
200
400
100
0
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
I Single-Family I Multifamily I Multifamily, For-Rent Only
Note: The 2013 estimate is based on the average monthly seasonally adjusted annual rate through August.
Source: JCHS tabulations of US Census Bureau, New Residential Construction.
family starts found a new bottom (Figure 21). The momentum
continued in 2012, with multifamily starts up another 38
percent. Overall housing starts rose by 194,000 units between
2010 and 2012, with multifamily construction accounting
for two-thirds of the increase. Multifamily starts climbed
another 31 percent through the first eight months of 2013 to
a seasonally adjusted annual rate of 294,000 units—still well
below the 340,000 annual average prevailing in the decade
before the downturn. While single-family construction has
24
recently regained steam, the multifamily sector is still
responsible for an outsized share of construction activity,
accounting for one in three new units as of mid-2013 compared with just one in five in the 1990s and 2000s.
The rebound in multifamily construction is evident across
the country. Over two-thirds of the 100 largest metros issued
more multifamily permits in 2012 than 2011, while fully
one-third issued more in 2012 than in the 2000s on average.
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
27. Through August 2013, the number of multifamily permits in
these metros was up by more than 20 percent from a year
earlier. However, there are some notable differences across
markets. At one extreme, the pace of permitting in Portland
(OR) and Orlando more than doubled, while activity in Miami,
Atlanta, and Phoenix jumped by 70 percent or more. At the
other extreme, Dallas, Houston, Charlotte, and Washington,
DC, posted year-over-year declines after several years of
strong growth.
The surge in multifamily construction has raised some concerns about potential overbuilding in certain markets. While
activity in some metros has indeed surpassed peak rates in
the 2000s, growth in renter households has also been much
stronger than in that decade. Rather than past construction
volumes, rent levels and rental vacancy rates are more reliable indicators of whether supply is outstripping demand.
By those measures, there is no evidence of overbuilding
yet in areas with the most construction activity in recent
years. Nevertheless, the lags between multifamily starts and
completions mean that units begun in 2011 only began to
come on line in 2012. In fact, the number of newly completed
units rose to only 166,200 in 2012, representing a 20 percent
increase over 2011 and the first year-over-year gain since
2007–08. Indeed, in all three markets where multifamily permits exceeded their 2000s peaks in 2012 (Austin, Raleigh, and
Washington, DC), the pace of permitting slowed markedly
through the first half of 2013 while vacancy rates held below
5.0 percent. Rent increases in Washington, DC, also slowed
noticeably, which may signal that additions to supply have
caught up with demand.
PROPERTY OWNERS PROSPERING
With vacancy rates falling and rents rising, the financial performance of investment-grade properties improved markedly
over the past three years. According to the National Council
of Real Estate Investment Fiduciaries (NCREIF), the net operating income (NOI) for institutionally owned apartments was
up by at least 4.9 percent annually over the past 12 quarters.
The rebound in apartment property prices is even more
impressive. Since bottoming out in the fourth quarter of
2009, Moody’s Commercial Property Price Index for apartment buildings climbed by 62 percent to a new high in
mid-2013. NCREIF’s transaction-based price index shows a
more moderate but still substantial increase of 53 percent.
By contrast, the S&P/Case-Shiller® US National Home Price
Index indicates that single-family house prices rose only 6.0
percent over this period. With these increases in NOI and
appraised property values, the annual return on investment
for apartment owners has remained above 10 percent since
late 2010 (Figure 22).
Declines in delinquency rates for multifamily loans mirror the
strength of the apartment property market. Through the early
and mid-2000s, the share of multifamily loans held by FDIC-
FIGURE 22
Rental Properties Have Generated Solid Returns for the Past Three Years
Annual Rate (Percent)
25
20
15
10
5
0
-5
-10
-15
-20
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
-25
I Return on Investment I Net Operating Income
Notes: Data are for apartments. Net operating income is defined as gross rental income plus any other income less operating expenses. Annual rates are calculated across four quarters.
Source: JCHS tabulations of National Council of Real Estate Investment Fiduciaries (NCREIF) data.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
25
21
28. FIGURE 23
Federal Sources of Lending Have Backstopped the
Rental Market Throughout the Downturn and Recovery
Change in Outstanding Loan Volume (Billions of dollars)
120
100
This performance indicates that, unlike on the single-family
side, the GSEs did not participate in the “race to the bottom”
by relaxing screening and underwriting standards. On the
contrary, the low delinquency rates on their loans indicate
that Fannie and Freddie remained more disciplined than
other market players through risk sharing arrangements and
careful oversight of lenders.
80
60
MULTIFAMILY LENDING IN RECOVERY
40
20
0
-20
-40
1998–2003
2003–07
2007–10
2010–13
I GSEs and FHA I Depository Institutions I CMBS I Other
Notes: Data for 2013 are through the second quarter. CMBS are commercial mortgage backed
securities issued by private firms. Other includes state and local governments, life insurance
companies, pension funds, REITs, finance companies, and businesses.
Source: Mortgage Bankers Association calculations based on Federal Reserve Board, Flow of Funds,
and FDIC data.
insured institutions that were at least 90 days past due or in
nonaccrual status hovered below 1.0 percent. But by the third
quarter of 2010, that share had shot up to 5.4 percent. Since
then, though, the share of noncurrent multifamily loans held
by FDIC-insured institutions fell for 10 consecutive quarters,
retreating to 1.5 percent in the first half of 2013. By comparison, the recovery in the owner-occupied market has been
much slower, with the noncurrent share of loans on one- to
four-unit properties hitting 11.4 percent in the first quarter of
2010 before moderating to a still high 9.5 percent in mid-2013.
Delinquencies on multifamily loans held in commercial
mortgage backed securities (CMBS) have been slower to
recede. According to Moody’s Delinquency Tracker, the share
of CMBS loans that were 60 or more days past due, in foreclosure, or in possession of the lender—a much broader measure of troubled loans than reported by the FDIC—peaked
at 15.9 percent in early 2011 and then eased to 10.5 percent
by mid-2013. While this market segment is finally on a path
to improved performance, at this rate it will be a long time
before delinquencies return to those prevailing before the
housing market crash.
Meanwhile, the share of multifamily loans held or backed by
Fannie Mae and Freddie Mac (government sponsored enterprises or GSEs) that are 60 or more days delinquent remained
under 1.0 percent throughout the housing market downturn.
26
Over the past two decades, multifamily lending activity
has fluctuated with the financial fortunes of rental properties. The dollar volume of multifamily loans outstanding
increased steadily in the late 1990s as the market recovered
from weak conditions at the start of the decade. Multifamily
lending picked up even more in 2003–07 as the housing
market boomed. But when the Great Recession took hold,
both net operating incomes and property values plunged
while loan delinquencies soared, bringing lending growth to
a halt. Increases in outstanding loan volumes dropped off
sharply in 2008 and remained weak through 2010, but then
rebounded in 2011 as low interest rates and a burgeoning
recovery in the broader rental market created a favorable
environment for both borrowers and lenders.
In the decade leading up to the Great Recession, the GSEs
fueled a substantial share of the growth in outstanding loans—
outdistancing depository institutions that had once been
the single largest source of multifamily lending—and greatly
expanded their market shares (Figure 23). Much of the growth
in federally backed lending occurred before the market heated
up after 2003. Private asset-backed securities then emerged as
an increasingly important source of funding, accounting for
more than a quarter (27 percent) of net loan growth in 2003–07.
A combination of state and local governments, life insurance
companies, and other financial institutions also expanded
their lending during those years, sourcing another 22 percent.
The strong flow of credit for multifamily properties during this
period helped to propel a sharp rise in property values, mirroring trends in the owner-occupied market.
Once the recession hit, however, loans backed by the GSEs
and FHA accounted for the lion’s share of multifamily lending, supporting the market between 2007 and 2010 when
private capital was scarce. During this period, depository
institutions and other lenders substantially reduced loan
originations as market conditions deteriorated. New issuances of private asset-backed securities also ceased amid
the overall weakness of the market and the very high default
rates for such loans.
AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS
29. The GSEs and FHA have continued to play a prominent
role in the multifamily market since the recovery in private
lending began in 2010. The Mortgage Bankers Association
(MBA) estimates that annual originations backed by the
GSEs nearly doubled between 2009 and 2012, while loans
insured by FHA were up five-fold. The MBA data also indicate that private lending is reviving, attesting to lenders’
confidence in the multifamily recovery. Originations by
depositories exceeded their pre-recession levels in 2012,
and those by life insurance companies approached their
previous peak. In contrast, lending through the privatelabel securities market, state and local governments, and
other sources remained moribund.
However, lending activity varies considerably by market segment. According to data reported under the Home Mortgage
Disclosure Act (which excludes many of the largest commercial lenders that are not involved in the single-family market), the volume of small-balance loans fell off much more
sharply between 2006 and 2011 than that of large-balance
loans. Multifamily loans of less than $1 million dropped by 42
percent over this period, while loans of $1.0–2.5 million were
down by 16 percent. These declines are several times larger
than the 3 percent dip in loans between $2.5 million and $25
million, which account for about half the market. Indeed, the
volume of loans over $25 million actually increased by 19 percent even as the rest of the market had yet to recover.
Since depository institutions had been the principal source
of financing for smaller properties (and hence small-balance
loans), it is no surprise that the lending decline was more
severe in this part of the market. But given that smaller multifamily properties account for an outsized share of affordable
rental units, it will be important to monitor whether the lending recovery extends to this segment.
Lending activity in low-income and minority neighborhoods
also plunged in 2006–11, reflecting in part the greater reliance on small-balance loans in these areas as well as widespread neighborhood distress. Over this period, multifamily
loan volumes were down 15 percent in low-income areas and
22 percent in minority communities, although up 8 percent
in high-income neighborhoods and 12 percent in predominantly white areas.
To foster further increases in private participation, the
Federal Housing Finance Agency (FHFA—the regulator and
conservator of the GSEs) has signaled its intent to set a ceiling on the amount of multifamily lending that the GSEs can
back in 2013. While the caps are fairly high—$30 billion for
Fannie Mae and $26 billion for Freddie Mac—FHFA intends
to further reduce GSE lending volumes over the next several
years either by lowering these limits or by such actions as
restricting loan products, requiring stricter underwriting, or
increasing loan pricing. With lending by depository institutions and life insurance companies increasing, the market
may well be able to adjust to these restrictions. The bigger
question, however, is how the financial reforms now under
debate will redefine the government’s role in backstopping
the multifamily market. Recent experience clearly demonstrates the importance of federal support for multifamily
lending when financial crises drive private lenders out of
the market.
THE OUTLOOK
By virtually all rental market indicators, the recovery from
the Great Recession has been strong. The most telling sign
is the occasional alarms raised by some analysts that new
rental construction may be overshooting the mark. But with
vacancies still falling, rents rising, and the number of renter
households increasing rapidly, there seems little reason for
immediate concern. Given the lengthy lags in multifamily
completions, though, overbuilding could occur in select markets. The more important issue for the multifamily rental
market is how proposed reforms will affect the availability of
financing for a range of rental properties—and particularly
the traditionally underserved small property segment that
makes up a significant share of the privately owned affordable rental stock.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
27
21
30. RENTAL HOUSING AFFORDABILITY
After a decade of falling incomes and rising
rents, unprecedented shares of renters
in markets across the country pay more
than half their incomes for housing. While
lowest-income renters have the greatest
challenge finding affordable housing, nearly
half of moderate-income renters also pay
more than 30 percent of their incomes. The
lack of low-cost housing options undermines
quality of life for these families, forcing
difficult tradeoffs in both housing quality and
spending on other vital needs.
COST-BURDENED HOUSEHOLDS AT HISTORIC HIGHS
According to initial estimates from the American Community
Survey, the number of renters paying more than 30 percent of
income for housing (the traditional measure of affordability)
reached another high in 2012. Excessive housing costs strained
the budgets of more than half of all renters, or 21.1 million
households—a slight increase from the year before. The only
glimmer of good news is that the share of cost-burdened renters declined slightly for the first time since the recession began
in 2007, to 50 percent. But this modest improvement came
about only because the number of higher-income renters
increased sharply, reducing the overall cost-burdened share.
The recent deterioration in rental affordability comes after
a decade of lost ground. The share of cost-burdened renters
increased by a stunning 12 percentage points between 2000
and 2010, the largest jump in any decade dating back at least
to 1960. The cumulative increase in the incidence of housing
cost burdens is astounding. In 1960, about one in four renters paid more than 30 percent of income for housing. Today,
one in two are cost burdened. Even in 1980, following two
decades of worsening affordability, the cost-burdened share
of renters was just above a third.
The spread of severe cost burdens during the Great Recession
and its aftermath is particularly alarming, accounting for
roughly two-thirds of the total increase in the number of
cost-burdened renters during the 2000s. By 2011, 28 percent
of renters paid more than half their incomes for housing,
bringing the number with severe cost burdens up by 2.5 million in just four years, to 11.3 million.
These increases are largely driven by the growing disparity between renter incomes and housing costs. Throughout the
1980s and 1990s, real renter incomes moved up and down with
economic cycles, while real rents, though less volatile, also went
through periods of gains and losses. Affordability thus waxed
and waned over the two decades as incomes and rents drifted
apart and converged again. Since 2000, however, the two mea-
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AMERICA’S RENTAL HOUSING—EVOLVING MARKETS AND NEEDS