The share of rental households jumped by about 1 million last year and this group is likely to expand further if foreclosure trends continue, Harvard University’s Joint Center for Housing Studies reports today, while the monthly rental rate reached a record high last year.
"Now that large numbers of former owners are flooding back into rental markets, expanding the available supply of affordable rentals is critical," the report urges.
Foreclosures will convert some homeowners to renters and will also displace renters who are living in foreclosure properties and may compound affordability problems in the rental market in the short term, according to the report, "America’s Rental Housing: The Key to a Balanced National Policy."
Nicolas P. Retsinas, director of the Harvard center, said in a statement that "the fallout from foreclosure is hitting the same neighborhoods where many of the nation’s most economically vulnerable renters live."
Investor-owned multifamily rental properties with one to four units have accounted for about 20 percent of all foreclosures, Retsinas stated.
Annual growth in the share of renter households averaged 0.7 percent from 2003-06 before the 2.8 percent gain last year.
"The growing numbers of renters must now compete for the limited supply of affordable housing, adding to the longstanding pressures in markets across the country," according to the report, which cites statistics from the National Low Income Housing Coalition (see related Inman News article) stating that no single minimum-wage earner who works full-time throughout the year can afford the cost of a modest rental unit in any market across the country.
The debt burden of low-income renters has been growing, and the population of lowest-income renters in debt grew by 20 percent from 1995 to 2004, to 7.6 million, the Harvard center reported. Average outstanding debt for members of this lowest-income group rose 62 percent in inflation-adjusted terms, from $3,200 to $5,200.
Affordability may ease in the long term, as "the flood of foreclosed properties onto the rental market could ease some of the affordability pressures, but only to the extent that for-sale units converted to rentals meet the needs of households in the market. Indeed, lowest-income renters may be unable to afford even the highly discounted asking rents on foreclosed homes," the report states.
There are threats to the supply of affordable rental housing, as the U.S. Government Accountability Office estimates that mortgage restrictions and rental assistance contracts on about 1 million subsidized units are set to expire by 2013, and "limited funding … hampers any widespread or permanent solution" to preserve this supply.
"Since developing new affordable rental housing remains difficult without steep subsidy, preserving whatever low-cost units remain should be an urgent priority," and the report also suggests that such efforts rely on Congress to ensure adequate money is available for low-cost rental units.
The report also recommends continuing efforts to eliminate land-use policies that limit affordable, higher-density rental housing in suburban areas, and that housing assistance programs also improve access to health and human services, child care, transportation and other workforce initiatives to promote higher-income employment.
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