Rental markets are cooling down with an unprecedented influx of new supply hitting decades-high levels, surpassing current demand. However, more than a third of renters in every state in the country are cost-burdened, meaning they spend more than 30% of their total household income on housing, per a report.
The new study on rental housing by Harvard’s Joint Center for Housing Studies (JCHS) says a record number of people are also experiencing homelessness.
Per JCHS, median rents have risen steadily since 2001 in inflation-adjusted terms and were 21% higher in 2022. During this time, a renter’s income has risen just 2%.
“Without affordable, available housing options and higher incomes, more than 10 million of America’s lowest-income households, disproportionately people of color, pay at least half their income on rent and utilities.”
Diane yentl
More than 12 million cost-burdened households had housing costs that crossed over half their income, an all-time high. Despite these conditions, however, strong demand from Gen Z, millennials, and baby boomers suggests that the rental market slowdown is temporary.
“The economy is the main challenge. With inflation, people are paying more just for food, gas, and basic living expenses,” Dr. Courtney Johnson Rose, the president of the National Association of Real Estate Brokers (NAREB) told the Defender last year.
We get it, rents are high. But how did we get here?
Although rent growth slowed down recently, we are already dealing with high numbers. Rents rose during the pandemic, with the median monthly cost of rent alone increasing 12%, from $909 in 2019 to $1,015 in 2021, according to data from the Census Bureau’s 2021 American Housing Survey (AHS). The overall inflation during this time was about 6%. Therefore, renters were already cost-burdened.
In 2022, around 22.4 million renter households spent more than 30% of their income on rent and utilities — a record high. This number signifies an increase of two million households in a span of three years.
During the pandemic, resources were provided to support housing needs temporarily. Despite this assistance, there is still a significant demand for rental assistance, which is higher than before, the report says.
Existing rental properties also need investments to address structural inadequacies, inaccessibility, and climate risks, given the inflation and high-interest rates.
How renters of color are affected
The JCHS study says Black and Latino renters are disproportionately impacted by high rental costs and are exposed to substandard housing conditions. Black people make up 37% of all unhoused people in the United States and only 13% of the population. Latinos comprise 28% of unhoused people and less than 20% of the country’s population.
Black and Hispanic households are also more likely to inhabit inadequate housing, owing to discriminatory practices that have steered them toward neighborhoods with such housing. The report quantifies this — in 2021, 10% of Black and Hispanic renter households lived in inadequate housing, compared to 7% of white households and 6% of Asian households, after accounting for income differences.
“Without affordable, available housing options and higher incomes, more than 10 million of America’s lowest-income households, disproportionately people of color, pay at least half their income on rent and utilities,” said Diane Yentl, president and CEO of the National Low Income Housing Coalition, in a statement.
The report says that while overall cost-burden rates are high, some demographics face a higher rate than others. Households led by Black, Hispanic, or multiracial persons face disproportionately high cost-burden rates because of discrimination in housing, employment, and education, per the report.
Because of these reasons, a household led by a Black individual in the U.S. is more likely to have a lower income than households of other ethnicities. They also represent a major share of lower-income renter households.
Around 42% of Black households earn less than $30,000 annually, compared to 30% of white households with similarly low incomes. While Black households form a fifth of all renter households, they comprise a quarter of lower-income households, according to the JCHS report.
In 2022, more than half (57%) of Black, 54% Hispanic, and 50% of multiracial households were cost-burdened, compared to 45% of white, 44% Asian, and 44% of Native American households.
“The rental market is very unsettling not just in Houston but throughout the country,” David A. Northern Sr., the president and CEO of the Houston Housing Authority, told the Defender. “To individuals with lower income, some of the community’s most vulnerable makes that effect even more troubling. With the insurance increasing and property owners having to pay higher insurance rates, they send that cost right over to the rental rates. That’s part of the increase.”
How incomes play into this
From 2019 to 2022, all income groups experienced increasing cost-burden rates, but middle-income renters making $45,000 to $74,999 saw the fastest rise with a 5.4 percentage point increase to 41%.
Moreover, the report says 8 million cost-burdened households were headed by people with full-time jobs.
The 14.6 million renter households that comprise the “working poor” or those households with an income of $30,000 or less each year, could save a median of $300 and had a total net wealth of $3,200. These households are also most likely to live in substandard housing with various issues.
“With so much money going to keep a roof over their heads, renters with the lowest incomes are forced to live precariously, always one unexpected expense – for a broken-down car or unreimbursed medical bill – away from housing instability, eviction, and, in the worst cases, homelessness,” Yentl said. “Yet Congress only provides housing assistance to one in four eligible households.”
Federal programs like The United States Department of Housing and Urban Development’s (HUD) Housing Voucher Program, or Section 8, were implemented to provide housing for low and middle-income families. In 2022, HUD’s Housing Choice Vouchers helped 2.3 million households, which covered the difference between 30% of a household’s income and the area’s fair market rent.
However, using these vouchers depends on private-market landlords and whether they accept these vouchers. The Harvard study found that the program guidelines and timelines discourage some landlords from participating. Around 40% of those who receive vouchers cannot find a signed lease within the desired timeframe.
However, in 2022, only 7.2 million units had contract rents under $600, the maximum amount that was affordable to 26% of renters with an annual income of under $24,000. It signified the loss of 2.1 million units since 2012 (with inflation adjustments). The rent hikes during the endemic enhanced this trend, with more than half a million low-rent units lost between 2019 and 2022.
The report also states that states and cities nationwide generate $3 billion annually through housing trust funds to meet local housing needs.
“All of these efforts are crucial but fall short of the growing need,” the report added. “The instability caused by a lack of affordable housing bleeds over to other public spending, threatening the well-being of millions of people… With housing challenges growing ever more severe, now is the time to make a fuller commitment to ensuring that all people in the US have a decent, safe, and affordable place to call home.”
Evictions have returned to pre-pandemic levels
Eviction filings have returned to pre-pandemic levels in 2023 as relief measures and the eviction moratorium expired.
According to the Eviction Lab, eviction filings dropped 58% since the beginning of the COVID-19 pandemic until the end of 2021, owing to federal, state, and local eviction moratoriums and the $46.55 billion Emergency Rental Assistance (ERA) program.
The JCHS report says that by mid-2023, most of these states “had nearly depleted their ERA funds,” which caused eviction filings to return to pre-pandemic levels.
In the 10 states and 34 cities the organization tracks, landlords filed for over a million over the last year and around 69,000 evictions over the last month.
As evictions and housing costs rose, so did homelessness. A record of 653,100 people were unhoused on a given night in January 2023, increasing from 71,000 people in a year.
What’s up with the Houston rental market?
Around 58% of Houstonians and 45% of Harris County residents rent their homes, per a 2021 census data report. Black people make up the bulk of that number.
The Houston rental market, which was quite heated in 2023, ended on a cooler note in December as demand from potential homebuyers slowed due to high mortgage interest rates. These rates drove people to rent. The association says inventory and pricing have created a positive buying landscape this year.
According to the Houston Association of Realtors (HAR’s), rentals of single-family homes fell 1.2% year-over-year, with the average lease price climbing 2.4% to $2,207. Around 2,986 leases were signed compared to 3,023 in December 2022.
New listings of single-family rentals rose 12.1% in December.
“Lease properties had an incredible 2023 as they provided a critical alternative to buyers that were concerned about prices and mortgage rates but still needed housing,” said HAR Chair Thomas Mouton in a statement, who predicted an uptick in activity in 2024.
