The Joint Center for Housing Studies of Harvard University has released their annual rental housing report and it shows a cooling rental market with many new apartments becoming available but at the high end of rents which is not helping cost-burdened renters.
“What we are building is at the high end, because of the increased cost of construction and because we have a lot of demand from higher-income renters,” Whitney Airgood-Obrycki, a senior research associate with the center and the report’s lead author, told NPR. Most new apartments over the last decade have gone for $1,400 a month or higher, “and that’s not affordable to the majority of renters.”
“More renter households are cost burdened than ever before, and a record number of people are experiencing homelessness. Pandemic resources temporarily shored up the housing safety net, but the need for rental assistance remains greater than ever,” the report says.
Older apartments which in many cases are more affordable “require significant investment to address structural inadequacies, inaccessibility, and climate risks.
“Making these investments is challenging, given the current market environment of increasing operating expenses and high interest rates. Despite today’s difficult conditions, strong demand from the Gen Z, millennial, and baby boom generations should ensure that the rental market slowdown is short lived,” the report says.
A record number of people are also homeless
About 653,000 people reported experiencing homelessness in January of 2023, up roughly 12% from the same time a year prior and 48% from 2015.
“That marks the largest single-year increase in the country’s unhoused population on record,” Harvard researchers said.
Rent increases outpace income gains
Harvard says the dwindling supply of low-rent apartment units is only worsening cost burdens.
“In 2022, just 7.2 million units had contract rents under $600—the maximum amount affordable to the 26 percent of renters with annual incomes under $24,000. This marks a loss of 2.1 million units since 2012 when adjusting for inflation. The spike in asking rents during the pandemic accelerated the trend, with more than half a million low-rent units lost just between 2019 and 2022,” the study says.
“Median rents have risen nearly continuously since 2001 in inflation-adjusted terms and are 21 percent higher as of 2022. Meanwhile, renters’ incomes have risen just 2 percent during the same period.”
Aging Rental Stock Will Require Reinvestment
The report says the stock of rental housing available is older than it has ever been.
“The median age was 44 years in 2021, up from 34 years two decades ago. Although building construction standards and repairs to existing units have helped to minimize the problem of structural inadequacy, a large number of rental units still fall short of baseline habitability and safety,” the report says.
A new generation is driving rental demand
The report says “millennials will remain a large source of rental demand in coming years, they are no longer fueling the growth in renter households. Rather, they are aging into prime homeownership years, a transition that markets are already witnessing.
“Instead, members of the slightly smaller but still large Gen Z, individuals born between 1995 and 2009, are driving rental demand\,” the report says.