JCHS Compares Rental Supply and Demand at Various Income Levels
A recent analysis by the Harvard Joint Center for Housing Studies (JCHS) compared changes in the rental supply at various rent levels with changes in the number of renter households at various income levels. The analysis found that a growing number of low-income renters are competing for a shrinking number of low-rent units. The analysis also found that the rapid growth in high-income renters over the last 10 years has outnumbered growth in high-rent units, and that similar trends are shared by nearly every metro area in the U.S.
JCHS points out that between 2006 and 2016 there were notable changes at both the low and the high ends of the market. Supply and demand at the low end of the market are going in different directions. On the one hand, the number of renter households with annual incomes under $26,000 per year (in constant 2016 dollars) grew by 1.8 million between 2006 and 2016. But the number of rental units that would be affordable to these households at 30 percent of income dropped by 500,000. New supply is clearly not coming online at these low rent levels. Moreover, not enough existing units are filtering down to counter those lost to abandonment, higher rent levels, or conversion to higher-end condominiums. This increasingly tight low-end rental market is driving up cost-burden rates for the growing numbers of low-income renter households who are forced to pay more than 30 percent of their income in rent.
The analysis also says that household growth is outpacing stock growth at the high end of the rental market. Unlike for low-end units, where supply shrank, the number of units renting for $2,000 or more grew by 1.65 million between 2006 and 2016. According to JCHS, while significant, this growth was well short of the 2.9 million increase in high-income renter households able to afford those units without paying more than 30 percent of their incomes in rent. Without stock to match growth in numbers, both high- and low-income renters absorbed units in the middle rent categories–a less burdensome proposition for high-end renters than low-end renters. This dynamic put pressure on the middle of the market despite the apparent surplus in additional supply relative to renters at the middle levels, and helped drive demand for additional high-end rental construction, says JCHS.