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Housing Perspectives: Key Insights on Rental Housing in America

CEO Tinh Phung
The state of rental housing in the US is a topic of great concern and interest. As we delve into the latest report, "America's Rental Housing 2024," you'll uncover crucial findings that shed light on...

The state of rental housing in the US is a topic of great concern and interest. As we delve into the latest report, "America's Rental Housing 2024," you'll uncover crucial findings that shed light on the critical challenges facing the nation's rental markets. From affordability issues to housing instability, the report highlights the key trends shaping the rental landscape.

Rental Markets: Softening but Still Challenging

One notable finding is that rental markets are finally showing signs of cooling after a period of overheating. Apartment rent growth, which reached a record-breaking 15 percent annually in 2022, has now decelerated significantly. By the third quarter of 2023, rents grew by just 0.4 percent year over year. Rising vacancy rates have contributed to this slowdown, with the apartment vacancy rate climbing to 5.5 percent from a record low of 2.5 percent.

The line chart shows the year-over-year growth in asking rents for units in professionally managed apartment buildings Figure 1: Apartment Rent Growth Has Stalled

Affordability Woes: A Growing Crisis

Despite this cooling trend, affordability remains a pressing issue. Asking rents continue to surpass pre-pandemic levels, making affordability conditions the worst on record. The number of cost-burdened renter households, those spending an excessive portion of their income on rent, reached a staggering 22.4 million in 2022, a 2 million increase since 2019. This surge pushed the share of cost-burdened renter households to 50 percent, a jump of 3.5 percentage points in just three years.

This stacked bar chart shows the number of severely and moderately cost-burdened renter households Figure 2: The Number of Cost Burdened Renters Hit an All-Time High

Escalating Housing Instability

The report also highlights the rise in housing instability, with eviction rates nearing pre-pandemic levels and homelessness reaching an all-time high. By the middle of 2023, approximately 12 percent of renter households reported being behind on rent. The number of people experiencing homelessness jumped by nearly 71,000 from January 2022 to January 2023, the largest single-year increase on record, reaching a staggering 653,100 people.

The number of people staying in places not intended for human habitation hit an unprecedented 256,610 people Figure 4: Homelessness Is Rising Across the Country

Insufficient Rental Assistance

While housing affordability and stability continue to deteriorate, rental assistance programs have failed to keep up with the growing need. The number of very low-income renter households has increased significantly, but the number of assisted households in this income range has lagged behind. This has left 14 million income-eligible households without support in an increasingly unaffordable market.

The number of households that make no more than 50 percent of their area’s median income Figure 5: The Rental Assistance Shortage Continues to Worsen

Urgent Investments for Rental Housing

The report emphasizes the pressing need for investment in the rental housing stock. The median age of rental properties has reached an all-time high of 44 years, with nearly 4 million renter households living in substandard conditions. Furthermore, improving energy efficiency and resilience to environmental hazards is crucial. Additional federal resources are required to address these challenges and ensure the preservation of affordable housing.

The figure is a map showing the number of housing units in areas with at least moderate expected annual losses from climate-related hazards Figure 6: More Than 18 Million Rental Units Are Under Threat from Environmental Hazards

The Impact of High Interest Rates

Lastly, the report highlights the impact of high interest rates on rental market activity. The cost of debt to acquire and build multifamily properties has increased, resulting in fewer profitable deals and a slowdown in multifamily construction. Although multifamily starts reached a peak in late 2022, they have since dropped, potentially leading to future supply challenges.

This line chart shows the seasonally adjusted annual number of multifamily starts each month from 2000 through October 2023 Figure 7: New Multifamily Construction Has Quickly Declined

In conclusion, the rental housing landscape in America faces significant challenges in terms of affordability, stability, and investment needs. As rent growth decelerates, addressing affordability and offering adequate rental assistance are of utmost importance. Additionally, targeted investments and resilient strategies are essential to tackle climate-related hazards and ensure the availability of quality and affordable rental housing.

The full report, "America's Rental Housing 2024," provides a comprehensive analysis of these key findings and offers valuable insights into the critical policy issues affecting the rental market.