The Joint Center for Housing Studies at Harvard University (JCHS) recently released its biennial rental housing study. The report finds that unprecedented growth in the rental housing market is slowing amid persistent affordability challenges for low- and moderate-income renter households. Fewer new renter households are being formed, rental vacancy rates have risen, and rent increases have slowed. However, at the same time, renter demographics are changing and rental affordability challenges remain prevalent.

Rental Housing Cost Burdens

According to JCHS, the number of cost-burdened renter households, defined as those spending more than 30 percent of income on housing, dropped from 21.3 million in 2014 to 20.8 million in 2016. The number of severely cost-burdened renters, those spending more than 50 percent of income on housing, declined from 11.4 million to 11.0 million over the same period.

Despite the drop in the number of cost-burdened renter households, the report shows that at the average annual pace of decline between 2014 and 2016, it would take another 24 years to return to the 2001 level of 14.8 million households. The report highlights that the share of renter households with cost burdens remains high at 47 percent, and the rental housing affordability gap remains wide. While median monthly rental costs rose by 15 percent in real terms between 2000 and 2016 to $980, median renter household income fell sharply from $38,000 in 2000 to $32,000 in 2011, before gradually recovering to $37,300 in 2016.

According to JCHS, this rebound can be partially explained by the rise in the share of higher-income renters in the housing market. For example, the number of renters earning at least $75,000 rose by 40 percent to 9.1 million between 2011 and 2016, the fastest growth in renter households in any income group. The report notes that a high share of low-income households has housing cost burdens. In 2016, 50 percent of renter households earning between $30,000 and $45,000 were cost-burdened.

The report suggests that the prevalence of cost burdens among lower-income renters can be largely explained by the shortage of affordable housing in the private housing market, and addressing the gap between income and housing costs will require solutions that would increase low-income households’ access to rental assistance, expand the affordable housing stock and preserve existing affordable housing.

Shortage in Rental Assistance

The study also notes that between 2001 and 2015, the number of very low-income households, those making less than 50 percent of area median income, rose by 29 percent to 19.2 million; however, the number of very low-income households receiving rental assistance rose only 14 percent over the same period. As a result, the share of very low-income households who receive rental assistance dropped by 3 percent to 25 percent between 2001 and 2015. The report notes that the growing gap between need and rental assistance is evident in the closed or long waiting lists for rental assistance in most cities. The report also highlights that while the number of Housing Choice Vouchers issued increased from 2.0 million in 2006 to 2.3 million in 2016, the number of public housing units dropped from 1.1 million to 1.0 million, and the number of privately owned units with project-based subsidies fell from 1.4 million to 1.3 million over the same period.

Affordable Rental Housing at Risk of Loss

According to JCHS, much of the subsidized rental housing stock is at risk of loss due to under-maintenance or expiring affordability periods. The report notes that nearly 500,000 LIHTC units will come to the end of their required affordability periods by 2020, as the oldest units built under the program reach the 30-year affordability mark. According to the study, it will require extensive preservation efforts to keep LIHTC units with expiring affordability restrictions in the subsidized housing stock.

In addition, the report notes that residential segregation by income has increased steadily in recent years, especially among households with the highest and lowest incomes. In 2015, the average renter household earning under $20,000 lived in a neighborhood where 28 percent of residents had comparably low incomes and only 15 percent had incomes above $100,000. JCHS recommends a set of actions to address this challenge, including incentivizing LIHTC developer applicants to propose projects in a broader range of neighborhoods, reforming the Housing Choice Voucher program to increase the options available to low-income households, adopting protections against source-of-income discrimination, and providing mobility counseling.

The JCHS study notes the importance of preserving the LIHTC in federal tax reform and strengthening it to expand the supply of affordable rental homes, highlighting the Cantwell-Hatch Affordable Housing Credit Improvement Act (S. 548), a bipartisan legislation that would expand and improve the program’s ability to serve low-income households across the nation.