Tag Archives: severely rent-burdened

Rental Housing Landscape

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A Row of Tenements, by Robert Spencer (1915)

NYU’s Furman Center released its 2017 National Rental Housing Landscape. My two takeaways are that, compared to the years before the financial crisis, (1) many tenants remain rent burdened and (2) higher income households are renting more. These takeaways have a lot of consequences for housing policymakers. We should keep these developments in mind as we debate tax reform proposals regarding the mortgage interest deduction and the deduction of property taxes. When it comes to housing, who should the tax code be helping more — homeowners or renters?

The Executive Summary of the report reads,

This study examines rental housing trends from 2006 to 2015 in the 53 metropolitan areas of the U.S. that had populations of over one million in 2015 (“metros”), with a particular focus on the economic recovery period beginning in 2012.

Median rents grew faster than inflation in virtually every metro between 2012 and 2015, especially in already high rent metros.

Despite rising rents, the share of renters spending more than 30 percent of their income on rent (defined as rent burdened households) fell slightly between 2012 and 2015, as did the share spending more than 50 percent (defined as severely rent burdened households). Still, these shares were higher in 2015 than in 2006, and far higher than in earlier decades.

The number and share of renters has increased considerably since 2006 and continued to rise in virtually every metro from 2012 to 2015. Within that period, the increase in renter share was relatively larger for high socioeconomic status households. That said, the typical renter household still has lower income and less educational attainment than the typical non-renter household.

Following years of decline during the Great Recession, the real median income of renters grew between 2012 and 2015, but this was primarily driven by the larger numbers of higher income households that are renting and the increasing incomes of renter households with at least one member holding a bachelor’s degree or higher. The real median income of renter households with members with just a high school degree or some college grew more modestly and remained below 2006 levels in 2015.

Thus, the recent decline in the share of rent burdened households should be cautiously interpreted. The income of the typical renter household increased as the economy recovered, but part of this increase came from a change in the composition of the renter population as more high socioeconomic status households chose to rent their homes.

For almost every metro, the median rent in 2015 for units that had been on the market within the previous year was higher than that for other units, suggesting that renters would likely face a rent hike if they moved. The share of recently available rental units that were affordable to households earning their metro’s median income fell between 2012 and 2015. And in 2015, only a small share of recently available rental units were affordable to households earning half of their metro’s median income. (3, footnote omitted)

Housing Affordability in NYC

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Jacob Riis, Lodgers in a Crowded Bayard Street Tenement

The Citizens Budget Commission has released Whose Burden Is It Anyway? Housing Affordability in New York City by Household Characteristics. The CBC produced some interesting and counterintuitive policy briefs last year, in which it

examined housing affordability across large U.S. cities to assess New York’s situation in a broader context. Using federal data sources, CBC found that while many New Yorkers face high rents, and the share of households who are “rent burdened” (paying more than 30 percent of income toward rent) grew between 2000 and 2012, the city ranks near the middle among 22 large cities in the share of rent-burdened households. A second analysis revealed New York has the lowest transportation costs among the 22 cities studied due to the large proportion of residents who commute via mass transit. When housing and transportation costs are combined, the city rises from 13th to 3rd place in affordability. The average New York household pays 32 percent of its income towards housing and transportation costs, well within the U.S. Department of Housing and Urban Development’s (HUD’s) affordability guideline of 45 percent. CBC also examined how some “typical” households (as defined by HUD) fared in terms of housing and transportation costs in the same group of cities. In this analysis, low income households in New York also ranked relatively well despite facing serious rent burdens. (1)

The current CBC report looks at NYC rent burdens in greater detail. Key findings include,

  • Forty-two percent of New York City’s renter households are “rent burdened;” that is, adjusting for actual rent paid by each household (“out-of-pocket contract rent” plus utility costs) and food stamp benefits, they pay more than 30 percent of income in rent. „
  • Half of rent burdened households are severely rent burdened, paying more than 50 percent of income in rent. Ninety-four percent of these severely rent-burdened households are low income. „
  • Low-income severely burdened households are disproportionately comprised of singles and seniors. They are also disproportionately households with children and located in the outer boroughs. (2)

CBC adjusts rent to take into account subsidies and familial support. Some will disagree with adjustments of this type, but I think it is a pretty reasonable approach. When combined with the adjustments it made for transportation costs, CBC has produced a textured portrait of the state of housing affordability in NYC.

Renting in America’s Largest Cities

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Following up on an earlier graphic they produced, the NYU Furman Center and Capital One have issued a report, Renting in America’s Largest Cities. The Executive Summary reads,

This study includes the central cities of the 11 largest metropolitan areas in the U.S. (by population) from 2006 to 2013: Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York City, Philadelphia, San Francisco, and Washington, DC.

The number and share of renters rose in all 11 cities.

The rental housing stock grew in all 11 cities from 2006 to 2013, while owner-occupied stock shrank in all but two cities.

In all 11 cities except Atlanta, the growth in supply of rental housing was not enough to keep up with rising renter population. Mismatches in supply and demand led to decreasing rental vacancy rates in all but two of the 11 cities in the study’s sample.

The median rent grew faster than inflation in almost all of the 11 cities in this study. In five cities, the median rent also grew substantially faster than the median renter income. In three cities, rents and incomes grew at about the same pace. In the remaining three cities, incomes grew substantially faster than rents.

In 2013, more than three out of every five low-income renters were severely rent burdened in all 11 cities. In most of the 11 cities, over a quarter of moderate-income renters were severely rent burdened in 2013 as well.

From 2006 to 2013, the percentage of low-income renters facing severe rent burdens increased in all 11 cities in this study’s sample, while the percentage of moderate-income renters facing severe rent burdens increased in six of those cities.

Even in the cities that had higher vacancy rates, low-income renters could afford only a tiny fraction of units available for rent within the last five years.

The typical renter could afford less than a third of recently available rental units in many of the central cities of the 11 largest U.S. metro areas.

Many lower- and middle-income renters living in this study’s sample of 11 cities could be stuck in their current units; in 2013, units occupied by long-term tenants were typically more affordable than units that had been on the rental market in the previous five years.

In six of the cities in this study, the median rent for recently available units in 2013 was over 20 percent higher than the median rent for other units in that year, indicating that many renters would likely face significant rent hikes if they had to move. (4)

While this report does an excellent job on its own terms, it does not address the issue of location affordability, which takes into account transportation costs when determining the affordability of a particular city. It would be very helpful if the authors supplemented this report with an evaluation of transportation costs in these 11 cities. This would give a more complete picture of how financially burdened residents of these cities are.

Nation of Renters

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NYU’s Furman Center and Capital One have produced an interesting graphic, Renting in America’s Largest Cities. The graphic highlights the growing trend of renting in urban communities, but also the increasing expense of doing so. The press release about this study provides some highlights:

  • In 2006, the majority of the population in just five of the largest 11 U.S. cities lived in rental housing; in 2013, that number increased to nine.
  • As demand for rental housing grew faster than available supply, rental vacancy rates declined in all but two of the 11 cities, making it harder to find units for rent.
  • Rents outpaced inflation in almost all of the 11 cities. Rents Increased most in DC, with a 21 percent increase in inflation-adjusted median gross rent, and least in Houston, where rents were stable.
  • In all 11 cities, an overwhelming majority of low-income renters were severely rent-burdened, facing rents and utility costs equal to at least half of their income.
  • Even In the most affordable cities in the study, low-income renters could afford no more than 11 percent of recently available units.
  • In five major cities, including New York, Los Angeles, San Francisco, Boston and Miami, moderate-Income renters could afford less than a third of recently available units in 2013.

Rental housing clearly has an important role to play in providing stable homes for American households, particularly in big cities. While rental housing has been the stepchild of federal housing policy for far too long, it is good that it is finally get some attention and resources.

I look forward to the Furman Center’s follow-up report, which will provide more detail than the graphic does. I am particularly curious about whether the researchers have addressed the difference between housing affordability and location affordability in the longer study. I would guess that the relative affordability of the cities in this study is greatly impacted by households’ transportation costs.

Is NYC Rent Too Damn High?!?

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Husock and Armlovich of the Manhattan Institute for Policy Research have posted an Issue Brief, New York’s Rent Burdened Households: Recalculating the Total, Finding a Better Solution. The brief makes some important points, but they are almost lost because of its histrionic tone.

First, the good points. The authors write this brief in reaction to the de Blasio administration’s plan to build or preserve 200,000 units of affordable housing. They believe, however, that the administration has exaggerated the need. They write: “the housing needs of low-income New Yorkers must be acknowledged and addressed. Still, they should not be exaggerated by numbers that fail to reflect the income and in-kind assistance that benefit poor households.” (6)

They argue that the administration’s claim that more than 600,000 households are “severely rent-burdened” is flawed, resulting in an overestimate of the need for affordable housing. While I am not in a position to evaluate the underlying work, they make a reasonable case that the administration did not properly account for the impact of Section 8 housing subsidies and a variety of other programs that offer financial assistance to low-income households in arriving at their number.

They also argue that the administration’s proposed solution, permanent affordability, is flawed because some households that may be income-eligible at the commencement of their tenure in an affordable unit may end up with a significantly higher income down the line. Indeed, this has been a long-time issue with the Mitchell-Lama program.

These are some serious issues for the de Blasio administration to chew over. Clearly, we should be working from the best data we can about the extent to which households are severely burdened by housing costs. (Indeed, another recent study also indicates that the administration is working from too high of an number.) And just as clearly, the solution chosen by the administration should work as effectively as possible to reduce the rent burden for low- and moderate-income households.

But the brief’s tone, unfortunately, masks these insights. First, the brief opens by questioning the basis for the mayor’s affordable housing plan — that many New Yorker’s are severely rent burdened. But the authors acknowledge that at least 300,000 households are severely burdened, even after they make their adjustments to the administration’s numbers. That hardly undercuts the policy rationale for the Mayor’s affordable housing initiative.

Moreover, some of the adjustments made by the authors are themselves suspect. For instance, the authors exclude households “that report severe rent burdens while paying more than the 90th percentile citywide of per-capita” out-of-pocket rent. (5) They state that “Logic dictates that such households have significant existing savings or assets themselves, or they receive assistance from family or other sources.” (5) That seems like an extraordinary “logical” leap to me. While it may describe some households at the 90th percentile, I would think that it is also logical that it includes some people who barely have enough money to buy food.

As to the solution of permanent affordability, the authors write,

a household member could win the lottery, or sign a multimillion-dollar major league baseball contract, and an affordable unit’s rent would remain unchanged. Affordable units would be “permanently” affordable, creating what economists term a “lock-in effect,” limiting the likelihood that such units will be vacated. This is problematic for a city housing policy that seeks to decrease the overall number of severely rent-burdened households. (6)

This is just silly. Very few people have such windfalls. And very few of those who do have such windfalls live in small apartments afterwards. The more common problem is that young, educated people get affordable units when their earnings are low and then become middle-class or upper-middle class over the years. This is a serious program design issue and it means that the administration should think through what permanent affordability should mean over the lifetime of a typical household.

As I noted, this brief raises some serious issues amongst all of its heated rhetoric. One hopes that the administration can get through the hot air to the parts that are informed by cool reason.