Written by Elie Rieder
Rental housing markets across the United States have experienced unprecedented demand over the last decade, outpacing supply, according to the Joint Center for Housing Studies of Harvard University (JCHS). Today, there are more than 43 million renter households across the country — representing about 37% of all households — a figure that has grown at a rate of nearly one million per year since 2010.
With most of today’s newly built luxury apartment stock targeting upper-income households, the supply of moderate- and lower-cost units is shrinking, leaving almost half of today’s middle-income renter households cost burdened. As a result, demand for high-quality workforce housing at an affordable price point is growing.
The so-called rentership society is expected to add more than 7 million people through 2025. "Renters by necessity," folks earning less than $75,000, make up 80% of the renter demand and the workforce housing segment.
According to the JCHS report, in 2013 11.2 million households below the area median income (AMI) competed for 7.3 million units. The new supply that has come online in the years since has been predominantly geared toward the luxury market. There has also been a 27% median rent increase (2011-2016) across the U.S., despite wages rising at a slower pace.
While developers prefer to focus on the luxury housing market, local policymakers are more likely to focus on severely cost-burdened Americans who are paying more than 50% of their incomes for housing. Across the country, municipalities are enforcing an inclusionary zoning program, which requires that a certain number of units in new construction be set aside for families with low to moderate incomes; the units have set prices that are affordable for such families.