Study: Renters spending greater share of income on monthly expenses

The study offers the latest in a series of grim statistics about the scarcity of rental housing, especially for the working poor. Housing supply has not kept up with demand in part because of a shortage of apartments, a key source of new rentals. Developers cut back on such projects when the economy deteriorated in 2009, which drove down vacancies and boosted rents. 

Rental markets are tightening while monthly costs climb putting the largest burden on the nation’s poorest workers, the bottom fifth of household income distribution.

In the past 10 years, a growing number of lower-middle-income renters (56 percent, up from 38 percent) and more middle-income renters (23 percent, up from 10 percent) — affecting about 1 million people — are paying between 30-50 percent of income on rent and utilities, according to the report. Renters should aim to spend about 30 percent of their income on housing, according to the study. 

As the economy begins to gain traction, rental housing is likely to lead the housing recovery as the troubled homeowner market and demographic trends push up the number of people renting. While that’s good news for the housing industry, it could further erode rental housing affordability.

“In the last decade, rental housing affordability problems went through the roof,” Belsky said. “And these affordability problems are marching up the income scale. In real terms, it means more people have less money to spend on household necessities such as food, healthcare, and savings.”

The growing problem also presents challenges for policymakers at all levels of government to support efforts to meet the nation’s fundamental needs for affordable, good-quality rental housing, the report said. 

“While the need for affordable rental housing is growing, the squeeze on government budgets is putting these much-needed programs in jeopardy,” said Chris Herbert, director of research at the Harvard Joint Center for Housing Studies and a study co-author. “Investments to preserve existing assisted housing may be cost-effective. But the public sector can’t tackle this problem on its own. Policy makers must look for ways to support efforts by the private sector to invest in both existing and new rental housing, while keeping prices affordable.”

Analysts say they expect rents to keep climbing as developers try to ramp up new projects and catch up with demand as a means of making up for shrinking supply, according to the report. 

In many areas, the demand is driven by families who lost their homes to foreclosure and moved into rentals. 

Since the mid 1990s, more than 700,000 rentals with federal subsidies tied to them were lost from the subsidized housing stock (either through demolition, or owner decision to abandon subsidies and turn the units into market-rate rentals). 

Meanwhile, nearly 12 percent of low-cost market-rate rentals existing in 1999 were demolished or otherwise permanently lost from the housing stock by 2009. With a median age of 38 years, the rental housing stock is older on average than it has ever been, raising concerns about continued high losses of this valuable resource.

Beyond providing decent homes, the report also finds that rental housing can play a role in addressing some of the nation’s other most pressing needs. 

“Rental housing policies can also be an important component of broader anti-poverty efforts and can help to revitalize communities hit hard by the foreclosure crisis,” Belsky said. “The current budget reality adds even greater pressure to do more with less to address these needs.”