Really?! Ten Surprising Findings from the America's Rental Housing Report

From Harvard Joint Center for Housing Studies: Following the release of our America's Rental Housing report last month, one of the most common questions has been: "Which findings are new or surprising to you?" This is never an easy question to answer, and different readers are likely to find different aspects of the report surprising. Nevertheless, the list below contains the 10 findings that were, in some way, new or surprising to me. Some reflect new trends, some are the result of new analyses and/or data sources, and some are longstanding findings that I continue to find astonishing. 1. The rental stock grew, and all growth has been among units renting for over $850/month. While the total number of rental units in the US increased by 7.2 million between 2006 and 2016, in constant dollars, there was nearly no increase in the number of units renting for less than $850 per month, and the number of units renting for less than $650 fell by 475,000 units. In contrast, units renting for $850 or more accounted for the entirety of the growth, with 53 percent coming from units renting for over $1,500 per month. As our interactive tool shows, the lack of growth in low-cost units occurred in a wide variety of metro areas. 2. New rental starts slowed in 2017. Construction starts of new multifamily units are down 9 percent year-over-year through October 2017 on a seasonally-adjusted basis. The slowdown was first evident in 2016 when permitting fell in nearly half of the nation’s 50 largest markets. While this slowdown suggests that the recent rental construction boom is softening, new rental starts nonetheless remain at a healthy level. 3. The rental market is softening, particularly for high-cost units. After declining for years, the national vacancy rate rose from 6.9 percent in the third quarter of 2016 to 7.2 percent in the third quarter of 2017. The softening is concentrated among high-cost units. RealPage data shows that the vacancy rate for Class A properties increased by 1.5 percentage points year over year through the third quarter of 2017, whereas the vacancy rate for Class C units ticked up only slightly and remains near its post-recession low. 4. Conversions of single-family homes to rentals have slowed. The number of single-family rental homes increased by 4 million between 2001 and 2016, driven by conversions of formerly owner-occupied properties during the foreclosure crisis. However, this trend moderated in recent years. According to the American Community Survey, 2015 was the first year since 2006 when the number of single-family rentals declined. While growth turned positive again in 2016, it remained well below levels of the prior decade. 5. The number of renter households jumped by nearly a third between 2004 and 2016. The number of renter households increased from 33 million in 2004 to 43 million in 2016—an increase of 10 million renter households in just over a decade! This isn’t a new finding, per se, but it amazes me every time I see it. And several aspects of this growth are new… 6. Renter households with incomes over $100,000 account for 30 percent of growth over the past decade. While renters with incomes of $100,000 or more made up just 9 percent of all renters in 2006, they accounted for 30 percent of renter household growth through 2016. As another one of our interactive tools shows, this trend is particularly pronounced in high-cost metros. Renters with incomes over $100,000 accounted for 93 percent of renter household growth in San Francisco and 65 percent in New York City during this period. 7. Households over 50 accounted for more than half of renter household growth over the past decade. While renters age 50 and over made up 30 percent of all renter households in 2006, they accounted for 52 percent of renter household growth through 2016. In contrast, households under age 35 made up 42 percent of renter households in 2006 but accounted for just 24 percent of renter household growth through 2016. 8. Older renters are almost twice as likely to live in large multi-family buildings than in single-family homes. Among renter households age 75 and over, 48 percent lived in large multi-family properties (those with 20+ units) and just 26 percent lived in single-family homes. For comparison, across all rental units, just 21 percent of units are in large multi-family properties and 39 percent are single-family homes. Older adults’ preference for large multi-family buildings may in part reflect the improved accessibility features in these buildings such as no-step entry, single-floor living, and extra wide hallways and doors to accommodate a wheelchair. 9. Almost 40 percent of rural renters are cost burdened. In rural areas—defined as areas with less than 10,000 in population that are outside the Census-defined metropolitan and micropolitan areas—39.5 percent of all renter households are cost burdened, paying more than 30 percent of their income for housing costs. While this figure is below the 51 percent cost burden share observed in the nation’s nine largest metropolitan areas, it is striking because rural areas are likely to have the fewest obstacles to adding new units that would tend to keep housing costs down. As our online map shows, rural areas with relatively high cost burdens can be found throughout much of the country. 10. Low-income renters have seen their residual income decline by 18 percent since 2001. Renters with incomes in the bottom quartile of all U.S. incomes had, on average, just $600 left over per month in 2001 after paying for housing costs. By 2016, this figure fell to below $500, an 18 percent decline. In contrast, among renters with above-median incomes, income growth has outpaced the rising cost of rental housing, leaving them with more to spend after paying for housing than similar renters in 2001.