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1、2024AMERICAS RENTAL HOUSING JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY AMERICAS RENTAL HOUSING 2024 Joint Center for Housing Studies of Harvard UniversityHarvard Graduate School of Design|Harvard Kennedy SchoolTABLE OF CONTENTS1.Executive Summary.12.Renter Households.93.Rental Housing St
2、ock.174.Rental Markets.265.Rental Affordability.346.Rental Housing Challenges.427.Additional Resources.51ONLINE TABLES AND EXHIBITS www.jchs.harvard.edu/americas-rental-housingPrincipal funding for this report was provided by Wells Fargo.2024 by the President and Fellows of Harvard College.The opini
3、ons expressed in Americas Rental Housing 2024 do not necessarily represent the views of Harvard University or Wells Fargo.EXECUTIVE SUMMARYRental markets are finally cooling as a decades-high volume of new supply has come online,outpacing demand.Nevertheless,more renter households are cost burdened
4、than ever before,and a record number of people are experiencing homelessness.Pandemic resources temporarily shored up the housing safety net,but the need for rental assistance remains greater than ever.Additionally,the aging rental stock requires significant investment to address structural inadequa
5、cies,inaccessibility,and climate risks.Making these investments is challenging,given the current market environment of increasing operating expenses and high interest rates.Despite todays difficult conditions,strong demand from the Gen Z,millennial,and baby boom generations should ensure that the re
6、ntal market slowdown is short lived.Rental Markets Are SofteningRental markets are rapidly cooling after a period of significant overheating.Rent growth has almost completely stopped,following historically high rent increases in both 2021 and 2022.In the third quarter of 2023,rent growth plummeted f
7、or professionally managed apartments to just 0.4 percent,down from 15.3 percent in early 2022,according to RealPage(Figure 1).While rents slowly rose across property classes,the pace of growth was under 1 percent in the third quarter of 2023 for lower-and higher-quality apartments alike.This abrupt
8、deceleration was geographically wide-spread,with rents even falling in some markets.In the third quarter of 2023,rents for professionally managed apartments dropped year over year in 32 percent of the 150 markets tracked by RealPage,including many in the West.Just 1 percent of markets posted rent gr
9、owth of at least 10 percent in the third quarter of 2023,a sharp turnaround from the previous year when rents in half of the markets increased at that rate.While the slowdown is a welcome change for renters,asking rents still remain well above pre-pandemic levels.-505101520All ApartmentsClass AClass
10、 BClass C200212023Notes:Asking rents are for professionally managed apartments in buildings with five or more units.Class A(Class C)apartments are relatively higher(lower)quality.Source:RealPage.Figure 1Apartment Rent Growth Has StalledAnnual Change in Asking Rents(Percent)01 JOINT CENTER
11、 FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20241Some of the deceleration may be explained by the large number of new units that have come online and pushed up vacancy rates.After hitting a pandemic low of 5.6 percent in late 2021,the rental vacancy rate was 6.6 percent in the
12、third quarter of 2023,according to the Housing Vacancy Survey.The rise in vacancies has been even more pronounced in the professionally managed apartment sector.In the third quarter of 2023,5.5 percent of these units were vacant,above pre-pandemic averages and more than double the all-time low of 2.
13、5 percent set in early 2022.Vacancy rates in this sector rose fastest in the South,reaching 6.3 percent in the first quarter of 2022.Slowing demand has also helped rental markets stabi-lize after a tumultuous 18 months.Renter household growth surged in the second year of the pandemic,then tumbled be
14、fore returning closer to pre-pandemic levels(Figure 2).In the professionally managed apart-ment market,growth in demand peaked in the first quarter of 2022 with the net addition of more than 700,000 households year over year before plunging to a net loss in the fourth quarter.Following modest quar-t
15、erly increases in demand through the first half of 2023,an additional 91,000 new renter households formed in the third quarter,nearing pre-pandemic increases.Unaffordability Has Hit an All-Time HighThough rent growth has recently slowed substan-tially,the extended period of rising rents during the p
16、andemic propelled cost burdens to new heights.At last measure in 2022,a record-high 22.4 million renter households spent more than 30 percent of their income on rent and utilities.This is an increase of 2 million households over three years and entirely offsets the modest improvements in cost-burden
17、 rates recorded between 2014 and 2019(Figure 3).Among cost-burdened households,12.1 million had housing costs that consumed more than half of their income,an all-time high for severe burdens.As a result,the share of cost-burdened renters rose to 50 percent,up 3.2 percentage points from 2019.The fina
18、ncial strain has been felt across the income spec-trum.Since 2019,cost-burden shares have risen the most for middle-income renter households earning$30,000 to$44,999 annually(up 2.6 percentage points)or$45,000 to$74,999 annually(up 5.4 percentage points).Higher-income households also saw their burde
19、n rate increase by 2.2 percentage points.House-holds earning less than$30,000 annually,a popula-tion already grappling with persistently high burdens,recorded a 1.5 percentage point increase.The dwindling supply of low-rent units is only wors-ening cost burdens.In 2022,just 7.2 million units had con
20、tract rents under$600the maximum amount affordable to the 26 percent of renters with annual incomes under$24,000.This marks a loss of 2.1 million units since 2012 when adjusting for inflation.The spike in asking rents during the pandemic accelerated the trend,with more than half a million low-rent u
21、nits lost just between 2019 and 2022.These losses have contributed to a decades-long challenge for renters:rent increases are outpacing income gains.Median rents have risen nearly continu-ously since 2001 in inflation-adjusted terms and are 21 percent higher as of 2022.Meanwhile,renters incomes have
22、 risen just 2 percent during the same period.Annual Net Change-3004005006007008002001920212023Note:Annual net change is the four-quarter rolling total for professionally managed apartment buildings with five or more units.Source:RealPage.Figure 2Apartment Demand Has Started
23、to ReboundChange in Apartment Households(Thousands)JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20242000500120022003 2004 2005 2006 2007 2008 2009 200132014 2001820192020 20212022Severely Cost BurdenedModerately Cost Burden
24、edShare with Cost Burdens(Right Scale)Notes:Moderately(severely)cost-burdened households spend 3050%(more than 50%)of income on rent and utilities.Households with zero or negative income are assumed to have burdens,and households that are not required to pay rent are assumed to be unburdened.Estimat
25、es for 2020 are omitted because of data collection issues experienced during the pandemic.Source:JCHS tabulations of US Census Bureau,American Community Survey 1-Year Estimates.Figure 3The Number of Cost-Burdened Renters Hit an All-Time HighNumber of Renter Households(Millions)Share with Cost Burden
26、s(Percent)Consequently,residual incomesthe amount of money available after paying for rent and utilities to cover other needshave dropped significantly.Those with lower incomes are especially squeezed.Renter households earning less than$30,000 annually had an all-time low median residual income of j
27、ust$310 per month in 2022,down 47 percent from 2001 after adjusting for inflation.Further,the vast majority of these renters are cost burdened.For this substan-tial subset,the median monthly residual income was just$170.According to the Economic Policy Institute,a single-person household in the most
28、 affordable counties needs about$2,000 each month to cover nonhousing needs.Such tight budgets force financially vulnerable renters to make dreadful choices.Center tabulations of the 2022 Consumer Expenditure Survey indicate that severely cost-burdened renter households in the lowest expenditure qua
29、rtile spent 39 percent less on food and 42 percent less on healthcare than their unburdened counterparts.Others may end up living in overcrowded or structurally inadequate conditions,threatening their health and well-being.A Record Number of People Are Experiencing HomelessnessThough pandemic-era pr
30、otections and financial supports temporarily reduced eviction filings,these resources are largely expired or winding down,and housing instability is once again on the rise.The Eviction Lab estimated that eviction filings dropped 58 percent from the start of the pandemic through the end of 2021,aided
31、 in part by federal,state,and local eviction moratoriums and the$46.55 billion Emergency Rental Assistance(ERA)program.However,by mid-2023,many states had nearly depleted their ERA funds,and eviction filings had returned to pre-pandemic levels.Still,the pandemic raised awareness of the importance of
32、 stable housing,and many state and local govern-ments are building on that momentum.About half of the ERA administrators surveyed by the National Low Income Housing Coalition indicated that they plan to continue operating their programs after exhausting their federal allocations.And since 2021,three
33、 states and 12 local governments have enacted right-to-counsel programs to connect eligible renters at risk JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20243of eviction with legal representation.While these efforts are helpful,they do not function at the same scale
34、as federal policies and funding sources.Like evictions,homelessness has grown as housing costs have increased,hitting an all-time high of 653,100 people in January 2023(Figure 4).In the first years of the pandemic,renter protections,income supports,and housing assistance helped stave off a consid-er
35、able rise in homelessness.However,many of these protections ended in 2022,at a time when rents were rising rapidly and increasing numbers of migrants were prohibited from working.As a result,the number of people experiencing homelessness jumped by nearly 71,000 in just one year.Included in this incr
36、ease were an additional 22,780 people staying in places not intended for human habitation,including on the streets,in cars,or in abandoned buildings.In 2023,the total number of people experiencing homelessness in unsheltered locations reached 256,610,the highest on record.Rising unsheltered homeless
37、ness is a longer-term and geographically widespread trend.The number of unhoused people staying outside shelters increased by more than 83,000 people(48 percent)between 2015 and 2023.This population grew quickly in expen-sive states like California,Washington,and Oregon,where shelter resources were
38、already strained,but more affordable states also recorded increases.Arizona,Ohio,Tennessee,and Texas were among the states with the largest growth in the number of people unsheltered as housing costs have risen.The current administration has made additional federal resources available to reduce home
39、less-ness and expand support systems.This includes an unprecedented$3.1 billion through the US Department of Housing and Urban Developments(HUDs)existing Continuum of Care program.Significant monies have likewise been allocated via the 2021 American Rescue Plan(ARP)Act,including the$5 billion HOME-A
40、RP program for services,shelters,and housing,plus 70,000 Emergency Housing Vouchers.State and local governments have also invested more than$3.8 billion of their fiscal recovery funds in homelessness services and housing.Even so,considerably more affordable housing and rent subsidies will be needed
41、to prevent further increases in homelessness,to help rehouse people at scale,and to reduce the costs of the home-lessness response system.TotalShelteredUnsheltered050060070020072009200023Notes:Because of the pandemic,complete unsheltered counts were unavailable in Ja
42、nuary 2021 and sheltered counts were artificially low,likely because of reduced shelter capacity.Data for 2021 are based on 2020 and 2022 values.Source:US Department of Housing and Urban Development,Annual Homeless Assessment Report Point-in-Time Estimates.Figure 4After a Swift Uptick in 2023,a Reco
43、rd Number of People Are UnhousedPeople Experiencing Homelessness(Thousands)Holes Are Widening in the Housing Safety NetRapidly rising rents,combined with wage losses in the early stages of the pandemic,have underscored the inadequacy of the existing housing safety net,especially in times of crisis.B
44、ecause rental assistance programs are not an entitlement,they only serve one in four income-eligible households.Their reach has been further constrained by insufficient budget outlays in the face of growing need.Though the number of very low-income renter households grew by 4.4 million between 2001
45、and 2021,the number of assisted house-holds in this income range increased by just 910,000.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20244Consequently,60 percent of very low-income house-holds(8.5 million)who were eligible for but did not receive rental assistance
46、 spent more than half of their income on housing or lived in severely inadequate housing conditionssometimes both.This was a substantial increase from the 47 percent of unassisted households(5.0 million)with worst case housing needs in 2001(Figure 5).The subsidized stock and rental assistance progra
47、ms that do exist have vulnerabilities,too.The dwindling public housing supply,home to 835,000 households in 2022,has a maintenance backlog estimated at$90 billion.To address the huge need for repairs in an environment of insufficient capital funding,the Rental Assistance Demonstration program lets p
48、ublic housing authorities convert their units to longer-term,stable Section 8 contracts.More than 225,000 public housing units have been converted to date,enabling housing providers to leverage other funding sources for improvements and redevelopment.Still,many more resources are required to suffici
49、ently address the scope of the needed repairs and improvements and preserve this critical stock.0246812021AssistedModerate or No ProblemsSevere ProblemsUnassisted:Notes:Severe problems include spending more than 50%of income on rent and utilities or living in severely inadequate housing.M
50、oderate problems include spending 3050%of income on rent and utilities or living in moderately inadequate housing.Source:JCHS tabulations of US Department of Housing and Urban Development,Worst Case Housing Needs Reports to Congress.Figure 5The Rental Assistance Shortage Continues to WorsenVery Low-
51、Income Households(Millions)The subsidized supply also faces expiring affordability periods and maturation.The Low-Income Housing Tax Credit(LIHTC)has supported more than 3.6 million units since its creation in 1986.These units have a minimum 30-year affordability requirement(with longer timelines in
52、 some states),after which they can flip to market-rate rents.Recent estimates suggest that affordability periods for more than 325,000 units are set to expire between 2024 and 2029.Another 7,000 units are lost prematurely each year when owners use the tax codes qualified contract option to opt out a
53、fter an initial 15-year period.Likewise,the entire stock of Section 515 units managed by the US Department of Agriculture(USDA),home to 378,000 renter house-holds in rural areas,is facing mortgage maturities that threaten continued affordability.Housing Choice Vouchers are another crucial housing su
54、bsidy facing challenges.Vouchers assisted 2.3 million households in 2022,covering the difference between 30 percent of a households income and their areas fair market rent.The subsidy relies on participa-tion by private-market landlords,who are not required to accept the vouchers in most places.Furt
55、her,the unit inspection and approval processes add time and complexity that may deter some landlords from partic-ipating,especially in hot markets where the incentive to participate can be lower.Voucher holders also struggle with the program.They may not be able to find a landlord who accepts vouche
56、rs or a suitable apartment that meets the programs guidelines.About 40 percent of people who receive a voucher are unable to use the subsidy in the short amount of time allotted by the program to sign a lease.While there have been proposals to expand the national housing safety net and preserve affo
57、rdable units,shortfalls in federal rental assistance programs and worsening cost burdens have prompted state and local governments to act to the extent that they can.States and localities are leveraging other federal resources,such as state and local fiscal recovery funds,to support affordable housi
58、ng.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20245A number of states,counties,and cities issued a record$17.2 billion of multifamily bonds in 2020 to supplement LIHTC allocations.Nationwide,states and cities also generate about$3 billion annually through housing t
59、rust funds to meet local housing needs.All of these efforts are crucial but fall short of the growing need.Aging Rental Stock Will Require ReinvestmentThe rental stock is older than it has ever been.The median age was 44 years in 2021,up from 34 years two decades ago.Although building construction s
60、tandards and repairs to existing units have helped to minimize the problem of structural inadequacy,a large number of rental units still fall short of baseline habitability and safety.Nearly 4 million renter house-holds live in physically inadequate units with problems such as structural deficiencie
61、s,a lack of upkeep,or inconsistent provision of basic features like electricity,hot and cold running water,or heat.Even among units that meet the criteria for physical adequacy,many still have significant unmet repair needs.The Federal Reserve Bank of Philadelphia estimated in 2023 that it would cos
62、t$51.5 billion to address the physical defi-ciencies of the occupied rental stock.Much of the rental stock does not meet householders accessibility needs.The rapidly growing population of older adults will increase demand for accessibility features,given that the occurrence of disabilities rises wit
63、h age.According to a 2023 survey conducted by Freddie Mac,nearly half of renters with disabilities say their homes are minimally or not at all accessible.Respondents most often reported needing bathroom mobility aids,home security systems,no-step entries,and accessible electrical outlets.The rental
64、stock also needs significant energy effi-ciency and electrification modifications to reduce greenhouse gas emissions and the high energy costs squeezing lower-income renters.Rental homesespecially those in small multifamily buildingsuse more energy per square foot than owner-occupied homes,according
65、 to the Residential Energy Consump-tion Survey.Older homes also use more energy than newer homes and have significant efficiency and electrification needs.A one-time infusion of$3.5 billion for the Weatheriza-tion Assistance Program through the 2021 Infrastruc-ture Investment and Jobs Act is helping
66、 some renters and rental property owners with home retrofits.Simi-larly,the 2022 Inflation Reduction Act provided$8.8 billion in efficiency and electrification improvement rebates for market-rate housing,including rental units,and$1 billion for efficiency upgrades to HUD-subsidized properties.Howeve
67、r,more incentives are needed to meet the challenges of retrofitting the existing rental stock and ensure that new rental units are constructed with high energy performance in mind.Another growing threat to the quality of the nations stock of rental housing comes from the increasing frequency and sev
68、erity of weather-and climate-related hazards like wildfires,flooding,earthquakes,and hurricanes.More than 18 million occupied rental units(41 percent)are located in areas with substantial expected losses from such events.Simultaneously,a growing number of insurers are declining coverage in high-risk
69、 housing markets,making it increasingly difficult and expensive for property owners and renters to obtain and afford the insurance needed to cover potential losses.To protect households and commu-nities,states and localities will need to push for hazard mitigation and climate adaptation measures for
70、 indi-vidual properties and across regions.High Interest Rates Have Depressed Market ActivityWith interest rates rising into 2023,the cost of debt to acquire and build multifamily properties has risen.At the same time,high treasury yields have increased the cost of equity,as apartments must provide
71、greater returns to investors to compete with Treasury notes.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20246Against this backdrop,borrowing and transac-tion activity has declined.More than half the banks surveyed by the Federal Reserve reported that demand for mult
72、ifamily loans has decreased.Further,nearly two-thirds of multifamily lenders tightened their underwriting criteria in response to uncertain prop-erty performance and interest rate hikes.Multifamily mortgage borrowing was down 48 percent year over year in the second quarter of 2023.As the cost of cap
73、ital has risen,property prices have dropped.The beginning of 2023 marked the first time that apartment prices fell year over year in more than a decade.By the third quarter,prices were down 13 percent,a remarkable turnaround from the peak 23 percent growth rate posted at the beginning of 2022.Fallin
74、g property prices reflect rising capitalization ratesan indicator of returns used to compare invest-ments.According to Moodys Analytics,cap rates fell through 2022 before rising by 0.9 percentage points over the first three quarters of 2023 to 5.8 percent.In the current environment,higher-risk multi
75、family invest-ment can be less attractive than lower-risk Treasuries.For those who already own rental properties,net operating incomes are rising at a slower pace as rent growth moderates and expenses increase.According to Yardi Matrix,the cost of operating multifamily prop-erties grew 9 percent yea
76、r over year in June 2023.In response,net operating income growth slowed to 3 percent in the third quarter of 2023,from the recent high of 25 percent posted in 2021.While slowing returns could spark delinquencies,most property owners should be protected by the signifi-cant equity accrued before the p
77、andemic.Moreover,most loans were underwritten with enough cushion to cover debt service.Plus,longer-term loans constitute the largest share of all multifamily debt and have fewer near-term maturities that will not require refi-nancing in the current high interest rate environment.To date,delinquenci
78、es have only inched up from their ultra-low levels.New Multifamily Construction Has SlowedAfter a major boom,multifamily construction has started to cool.As late as the spring,starts remained elevated even as interest rates rose,with a season-ally adjusted annual rate of 571,000 units posted in May
79、2023(Figure 6).But with markets slackening and 00500600700Monthly StartsAverage Starts(3-Month Trailing)20002002200420062008200022Note:Data are for buildings with at least two units and are through October 2023.Source:JCHS tabulations of US Census Bureau,New Resident
80、ial Construction data.Figure 6New Multifamily Construction Has Quickly DeclinedAnnualized Multifamily Units(Thousands,Seasonally Adjusted)JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20247high financing costs making it increasingly difficult to underwrite new deals,s
81、tarts have fallen sharply in recent months.In October 2023,starts receded to 402,000 units,a 30 percent decrease year over year.Nevertheless,units that were already under way continue to come online in large numbers.A total of 436,000 multifamily units were completed in the third quarter of 2023 on
82、a seasonally adjusted annu-alized basis,the highest reading since 1988 and up about a third from pre-pandemic levels.Likewise,the number of multifamily units currently under construc-tion reached the highest level on record in July 2023,maintaining that fast pace at a seasonally adjusted annual rate
83、 of 1.0 million units in October.While the pipeline of units under construction should help provide new supply in the near term,declining starts could worsen the existing supply shortage.Addi-tionally,local regulations and zoning laws constrain multifamily construction in many neighborhoods.National
84、ly,an estimated 75 percent of the land in major cities is zoned exclusively for single-family homes.Several states have preempted local zoning laws to allow a range of housing options.In 2023,Montana,Vermont,and Washington passed legisla-tion that allows modest-sized multifamily buildings on lots pr
85、eviously zoned only for single-family homes,following the lead of California,Maine,and Oregon.Zoning reforms do not guarantee the construc-tion of new multifamily housing,but they remove a significant barrier.The OutlookOver the coming year,the softening of the rental market will likely continue as
86、the pipeline of units under construction boosts supply beyond already high levels and continues to slow rent growth.This will be good news for renters,providing relief for households with higher and middle incomes.But respite will likely be short-lived in the face of strong demand from the large Gen
87、 Z,millennial,and baby boom generations.Affordability remains a critical concern.Lower-income renters face the worst affordability conditions on record.Rental subsidies have not kept pace with the growing need,leaving those without assistance to fend for themselves in one of the costliest housing ma
88、rkets in history.And homelessness is at an all-time high.Increasing the supply of market-rate units will help to address the affordability crisis but cannot wholly resolve it.Rather,significantly expanding assistanceespecially the programs that help the lowest-income renterswill also be a crucial pa
89、rt of the solution.In the short term,rising operating costs and high interest rates will present a formidable challenge for property owners.The slowing growth in operating incomes will make it more difficult for property owners to invest in repair and maintenance,accessibility features,and climate c
90、hange mitigants and adap-tations.Yet,the massive pre-pandemic accumulation of equity,coupled with the pandemics unprecedented rent increases,should prevent widespread distress among property owners.During the pandemic,the increased resources for renters,housing providers,and state and local govern-m
91、ents demonstrated that financial assistance and supports keep tenants stably housed and landlords solvent.But as these resources have expired or been spent down,the housing safety net is once again over-whelmed and underfunded,as has been the case for many decades.While states and localities have ac
92、ted to fill some of the gaps,a larger commitment from the federal government is required to expand housing supports and preserve and improve the existing affordable stock.Only then will the nation finally make a meaningful dent in the housing affordability crisis making life so difficult for million
93、s of people.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20248RENTER HOUSEHOLDSDemand for rental housing is stabilizing after the erratic highs and lows of the pandemic.The number of smaller renter households with lower incomes has grown in recent years and remains a
94、n important source of rental demand.Nevertheless,longer-term demand has come from the growing number of renter households with higher incomes,and has reshaped rental markets over the last decade.The large Gen Z,millennial,and baby boom generations have also supported rising numbers of renter househo
95、lds.While overall renter mobility rates are falling,migration is helping to sustain demand in some states.Rental Demand Is Returning Following the pandemic rollercoaster,demand for rental housing is finally stabilizing.After an initial slow-down during the first year of the pandemic,rental demand su
96、rged in 2021.A flood of new households fueled a quick rise in rents and historically low vacancy rates.In recent quarters,renter household growth has returned to the more typical pace witnessed in the years preceding the pandemic,buoyed in part by the high cost of homeownership,an influx of new supp
97、ly helping to moderate rents,and a strong job market(Figure 7).25283 3637383940401 2002 2003 2004 2005 2006 2007 2008 2009 2000019 202020212022 2023Renter HouseholdsRentership Rate(Right Scale)Notes:Values for 2023 are year-to-date averages for
98、the first three quarters.Values for 2020 are omitted because data collection was disrupted during the pandemic.Source:JCHS tabulations of US Census Bureau,Housing Vacancy Surveys.Figure 7The Number of Renter Households Is Trending Upward Despite Declining Rentership RatesRenter Households(Millions)R
99、entership Rate(Percent)The professionally managed apartment marketa sector that typically houses renters with higher incomes and constitutes more than a quarter of US rental unitshas been particularly prone to these dramatic fluctuations in household growth.After hitting a record-breaking 706,000 ye
100、ar-over-year net 02JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20249increase at the beginning of 2022,growth in renter households plummeted quickly to an annual net loss of 192,000 by the first quarter of 2023,according to data from RealPage.However,following three
101、quar-ters of decline,the quarter-over-quarter change in the number of occupied apartments turned slightly positive at the start of 2023,followed by a modest second-quarter reading.Rental demand accelerated in the third quarter with 91,000 new renter households,putting household growth nearly on par
102、with readings before the pandemic.The overall rental market also saw swift increases in household formations in 2021 followed by a return to pre-pandemic levels of growth in 2023.According to Center tabulations of the Housing Vacancy Survey,the number of renter households reached 44.3 million in the
103、 third quarter of 202334.1 percent of US house-holds.Of the 927,000 renter households that entered the market since the start of the pandemic,about 317,000 did so within the last year.This growth signals a return to the pace posted before the pandemic.In 2019,299,000 renter households entered the ma
104、rket.Renter Household Growth Is Shifting Much of the short-term growth in renters has come from smaller households and those with lower and more moderate incomes.In the years leading up to the pandemic,rental demand increased among house-holds earning at least$75,000 annually.Between 2016 and 2019,t
105、he rental market added 1.3 million higher-in-come households while losing 1.0 million households with annual incomes under$75,000,according to data from the American Community Survey(Figure 8).This trend reversed during the pandemic.Between 2019 and 2022,most renter growth came from the 1.1 million
106、additional households with incomes under$75,000.Over this same period,the number of renter house-holds with higher incomes rose by just 16,000.This recent slowdown in renter household growth among those with incomes of$75,000 or more was at least partially attributable to increasing rates of homebuy
107、ing by renters with even higher incomes who took advantage of the low interest rates available in the early part of the pandemic.The modest loss of 123 or MoreNumber of People in Household-1.0-0.50.00.51.01.5Under$30,000$30,000-$74,999$75,000 and OverHousehold Income-2022Note:Household
108、incomes are adjusted for inflation using the CPI-U for All Items.Source:JCHS tabulations of US Census Bureau,American Community Survey 1-Year Estimates.Figure 8Less Affluent,Smaller Households Boosted Pandemic-Era Renter GrowthChange in Renter Households(Millions)JOINT CENTER FOR HOUSING STUDIES OF
109、HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202410renter households earning at least$150,000 was more than offset by the uptick in homeowners in this income bracket.Additionally,some of the decrease was likely among renter households with higher incomes that capitalized on rent deals in the early mont
110、hs of the pandemic to split into smaller households with lower incomes.The largest increases in renter households between 2019 and 2022 came from single-and two-person households with incomes below$75,000.In fact,single-person renter households grew most across all income brackets during the pandemi
111、c,increasing by 1.2 million between 2019 and 2022,eclipsing the 722,000 households of that type added between 2016 and 2019.Rental demand also bene-fited from roommate(416,000)and extended family(223,000)arrangements,with most of this growth coming from two-person households.Further contrib-uting to
112、 the growth in smaller renter households was a decrease in the number of married couples with children and single parents,possibly explained by transitions to homeownership or by the splitting of these households into new ones.A New Generation Is Driving Demand Renting plays an important role in hou
113、sing people throughout the life course.For younger people,renting provides an opportunity to live independently while entering adulthood.Delayed marriage and parent-hood have also increased the attractiveness and the necessity of renting further into adulthood.For people at older ages,rental homes c
114、an support indepen-dent living through better accessibility and reduced maintenance.At all ages,renting is a flexible option that makes it easier for people to adjust their housing according to their personal circumstances.Over the past decade,the bulk of the growth in renter households has come fro
115、m younger generations.The millennial generation,those born between 1980 and 1994,drove much of the renter growth until 2016.This generation is not only the largest,but also more likely to rent than prior ones at the same ages.Having come of age during the Great Recession with fewer job prospects,low
116、er wages,high student loan debt,and tightened mortgage lending,many have delayed homeownership.As a result,the number of millenni-al-headed renter households grew by an enormous 6.2 million between 2009 and 2019 to a peak of 16.2 million(Figure 9).0246800720082009200
117、00022Gen Z(Born 19952009)Millennial(Born 1980-1994)Gen X(Born 1965-1979)Baby Boom(Born 1946-1964)Pre-Boom(Born 1945 or Earlier)Note:Data for 2020 are based on 2019 and 2021 values because of pandemic data disruptions.Source:JCHS tabulations of US Census Bureau,American Communit
118、y Survey 1-Year Estimates.Figure 9New Rental Demand Has Shifted from Millennials to Gen ZRenter Households(Millions)JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202411While millennials will remain a large source of rental demand in coming years,they are no longer fue
119、ling the growth in renter households.Rather,they are aging into prime homeownership years,a transition that markets are already witnessing.The number of renter house-holds headed by a millennial fell by 797,000 between 2019 and 2022 as their homeownership rate increased by 9 percentage points during
120、 the same period.Instead,members of the slightly smaller but still large Gen Z,individuals born between 1995 and 2009,are driving rental demand.Already,these individuals headed 7.9 million renter households in 2022.Going forward,overall growth in renter households will depend upon whether the rise i
121、n the number of Gen Z renters will be sufficient to overcome the eventual decline in older renters.This was true for millennials during the 2000s and 2010s.However,Gen Z may follow a different trajectory,given that this generation already has higher homeownership rates than millennials did at the sa
122、me age.Baby boomers also continue to help sustain longer-term rental demand.Even though the number of renter households headed by a baby boomer is decreasing,the generation is so much bigger than any before it that the number of older renters is still growing.In the last five years alone,renter hous
123、eholds headed by someone age 65 and over increased by more than 1 million.With the oldest baby boomers turning 80 in 2026an age when more people turn to rentinga wider range of affordable rental options for older adults will be required to accommodate their changing needs.Renting will be an especial
124、ly attractive option for older adults who want to age in their community,reduce their maintenance responsibilities,and access the shared spaces for social interaction and accessi-bility features more common in multifamily buildings.Higher-Income Households Are Exerting More InfluenceWhile households
125、 with lower incomes led growth during the pandemic,higher-income households have increasingly driven rental demand over the longer term.The number of renter households with incomes of$75,000 or more has risen 43 percent since 2010,to 13.5 million as of 2022(Figure 10).Likewise,the share of renters e
126、arning at least$75,000 annually has risen by more than 6 percentage points to 30 percent during this same period.Much of the growth has come from 0Under$15,000$15,000-$29,999$30,000-$44,999$45,000-$74,999Household Income20468101214$75,000 and OverNote:Household incomes are adjusted for in
127、flation using the CPI-U for All Items.Source:JCHS tabulations of US Census Bureau,American Community Survey 1-Year Estimates.Figure 10Households with Higher Incomes Have Fueled Long-Term DemandRenter Households(Millions)JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 20
128、2412renters who are married and have college educations,a demographic that fits previous generations profile of first-time homebuyers.Higher-income renters have characteristics that set them apart from the typical renter household.For starters,they are younger.Fully 42 percent of them are aged 3554,
129、as compared to 34 percent of all renters.They are also more likely to be married,with 40 percent wedded versus 24 percent of all renter households.Given these demographic trends,it is perhaps unsur-prising that higher-income renters are slightly more likely to have children and larger households tha
130、n the general population of renters.And because income correlates with education,these renters have higher levels of education,with more than half possessing at least a bachelors degree,including 20 percent with a graduate or professional degree.Finally,renters with higher incomes are dispropor-tion
131、ately white(53 percent)or Asian(9 percent)as compared to all renters(50 percent and 5 percent,respectively).Meanwhile,Black householders are underrepresented in this market segment,consti-tuting just 13 percent of these renters(compared to 19 percent of all renters).Households headed by Hispanic(20
132、percent),multiracial(4 percent),and Native Amer-ican(0.4 percent)renters are evenly represented.Renter households with incomes of at least$75,000 are most common in metros with high rentership rates,median household incomes,and housing costs.In these areas,renting is more the norm,and homeown-ership
133、 options may be prohibitively expensive,even for households with higher incomes.For example,in both San Jose and San Francisco,households with higher incomes make up more than half of all renters.In these two metros,the rentership rate among higher-income households is more than 35 percent,as compar
134、ed to 22 percent nationally.Conversely,households with higher incomes make up smaller shares of renters in markets where housing costs are more affordable and incomes tend to be lower.Most of these metros are located in the South or Midwest,including Cleveland,Columbia,El Paso,and Jackson,where rent
135、ership rates among households with annual incomes at or above$75,000 are under 18 percent.The elevated rentership rate among higher-income households in expensive markets suggests that obstacles to homeownership are formidable,even for households with above-average earnings.Industry surveys have fou
136、nd that many renters hope to own a home someday but consider their goal out of reach.A quarter of millennial households surveyed by Apart-ment List,for example,reported that they will always rent,citing affordability as the biggest barrier to home-ownership.Rising rents have challenged renters abili
137、ty to save for a downpayment.At the same time,the low volume of for-sale inventory and escalating home prices make it difficult for even higher-income renters to become homeowners.Still,attractive rental optionssuch as single-family homes and apartments with amenitiesin desirable locations have enco
138、uraged some households with higher incomes to continue to rent.In 2022,about 8.5 million renter households made at least$100,000 per year,incomes that put the nations median-priced home within reach.Of these households,39 percent lived in single-family rental homes.An additional 19 percent lived in
139、apartments in large multifamily build-ings with at least 50 units,properties that tend to be in urban areas and rich with amenities.A third of house-holds with incomes of$100,000 or more lived in new rental units built after 2000.The existing range of rental options may enable these more affluent ho
140、useholds to live in the type of housing they want,in a location that suits them,and in a high-quality home while still enjoying the flexi-bility and convenience of renting.These advantages may make renting a more attractive option than homebuying,even for households that could afford to become homeo
141、wners.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202413Many Renters Are Economically VulnerableWhereas renting may be a choice for some house-holds with higher incomes,it may be the only option for those who earn less.The median renter house-hold income in 2022 was
142、 about$47,000,and a signif-icant share of renters have much lower incomes.Thirty-two percent of renters(14.6 million)had house-hold incomes below$30,000 in 2022.According to the most recent Survey of Consumer Finances in 2022,these renters had a median cash savings of just$300 and total net wealthin
143、cluding retirement accounts and other investment fundsof just$3,200.These financially precarious households face a greater risk of housing instability and cost burdens but remain an important source of rental demand.The characteristics of lower-income renter households can add to their economic vuln
144、erability.As compared to both the full renter population and the higher-income households that have driven demand over the last decade,households with lower incomes are more likely to be headed by an older adult and consist of a single person(Figure 11).Over a quarter(28 percent)of renter households
145、 with lower incomes are headed by someone at least 65 years old,a full 11 percentage points more than that of all renter households.An additional 16 percent are headed by someone between the ages of 55 and 64.The older age distribution contributes to the high share of lower-income households that co
146、nsist of a single person(59 percent)and the low share that have children(21 percent).Further,lower-income households may be espe-cially financially fragile because of their lower levels of educational attainment and higher prevalence of disability,both of which can limit job prospects.More than half
147、 of lower-income renter households(53 percent)are headed by someone without a college degree,compared to 38 percent of all renters,and just 16 percent have at least a bachelors degree.Disabili-ties can make it difficult for households to secure and retain employment,depressing household earnings.A f
148、ull 34 percent of all lower-income renter house-holds are headed by a person with a disability,the majority of whom are under age 65.Lower-IncomeRentersHigher-IncomeRentersAll RentersSingle PersonMarriedOther FamilyRoommatesHousehold Type00708090100Lower-IncomeRentersHigher-IncomeRentersA
149、ll RentersAgeUnder 3535-4445-5455-6465 and OverNotes:Lower-income households earn less than$30,000.Higher-income households earn at least$75,000.Age is for the household head.Other family households include single parents.Source:JCHS tabulations of US Census Bureau,2022 American Community Survey 1-Y
150、ear Estimates.Figure 11Lower-Income Renters Are More Likely to Be Older and Live AloneShare of Households(Percent)JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202414And because racial discrimination in education and labor markets restricts opportunities and wages,hou
151、seholds headed by a Black person are more likely to have lower incomes than households of other races and ethnicities.Consequently,they constitute an outsized share of lower-income renter households.A full 42 percent of households headed by a Black person earn less than$30,000 annually,compared to 3
152、0 percent of those headed by a white person with similarly low incomes.As a result,households headed by a Black person make up a quarter of lower-in-come households despite being just under a fifth of all renter households.Likewise,households headed by a Native American person face economic chal-len
153、ges and discrimination that make them more likely to face financial precarity.Indeed,42 percent of households headed by a Native American person are lower income.Households with lower incomes constitute a larger share of renters in less expensive markets where homeownership is more attainable and re
154、nts are more affordable.Among the 100 most populous metros,lower-income households make up more than 40 percent of renters in more affordable Southern cities as well as in deindustrialized Rust Belt cities like Buffalo,Toledo,and Cleveland.Additionally,renters with lower incomes disproportionately l
155、ive in counties in smaller metropolitan areas and rural communities,and are slightly more likely to live in counties with persistent poverty.Renting Benefits Mobile PopulationsOne benefit of renting compared to owning a home is the relative ease of moving.The lower transaction costs involved in relo
156、cating into or out of a rental unit make renting preferable for younger households as well as those who are relatively mobile or looking for shorter-term living arrangements.Reflecting these benefits,the renter mobility ratethe yearly share of renters who change residencesis much higher than that of
157、 homeowners.About 16 percent of renters report having moved in the past year,compared to just 4 percent of homeowners.Nearly a third of renters had household incomes under$30,000 in 2022.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202415Even so,mobility rates among
158、renters have continued trending downward over the last decade.According to the Current Population Survey,25 percent of renters moved during the previous year in 2013,but the rate gradually dropped to 20 percent by 2019.It then fell even further to 16 percent in 2021 as the pandemic prompted record-h
159、igh lease renewals.The mobility rate has held steady at 16 percent through 2023,reflecting tightening housing markets and continued high apartment retention rates.In the event renters did choose to relocate,they often opted to remain local.In 2023,61 percent of renter moves were within the same coun
160、ty,and an additional 17 percent stayed in state.The remaining moves were either from another state(15 percent)or from abroad(7 percent).While overall mobility rates have declined,interstate movers have nonetheless continued to be an important source of rental demand.In 2022 alone,Texas,Florida,North
161、 Carolina,and Arizona each gained more than 18,000 households from domestic migration,while New York,California,and New Jersey each lost more than 20,000 households.Typically,renters move in pursuit of better housing,to form a new household,or to be closer to a new job or their family.Among those wh
162、o moved in 2023,the two most common reasons were for a new job or to relocate to a new or better home(14 percent each).The share who moved for a new or better home in 2023 was notably lower than in 2019,perhaps because people made these moves earlier in the pandemic in response to the increased need
163、 for more space.Another 11 percent of moves were for more afford-able housing,and 10 percent were due to new household formation.The OutlookAfter the pandemic-era highs and lows,rental demand appears to be stabilizing.The resumption of renter household growth in 2023 after a dip earlier in the pande
164、mic is a positive sign for rental property owners.Whether this level of growth will continue remains to be seen.Nevertheless,given the long-term increase in renter households,there is likely to be a relatively high number of renters for years to come.Likewise,the underlying age distribution of the U
165、S population also points to sustained rental demand going forward.A meaningful portion of the large millen-nial population is renting later in life than members of previous generations.Further,even as millennials turn to homeownership in greater numbers,Gen Z has already taken over as the primary dr
166、iver of rental demand growth.At the same time,the aging of the baby boomers into their 70s and 80s means that those who wish to remain in their communities without the responsibilities of homeownership may transition to renting.Providing affordable,accessible rental options for these older adults wi
167、ll help them to age with dignity and security.Renting is a preferable housing option for many indi-viduals.Units with amenities in desirable locations and single-family rentals are increasingly attractive to households with higher incomes.For some,these options may provide a stepping stone to homeow
168、n-ership.However,for others,renting is the only option.Households that lack the financial resources to become homeowners continue to rely on the rental market as their sole source of housing.These house-holds are an equally important component of demand.Ensuring that they have adequate,affordable ho
169、using is an ongoing policy challenge.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202416RENTAL HOUSING STOCK Strong multifamily housing production continues to shift rental stock composition toward larger buildings.At the same time,the volume of low-rent units is fal
170、ling,leaving financially vulnerable renters with fewer affordable options.Restrictions on development further limit the availability of rentals in many suburban communities and exclude renters from some neighborhoods.Nationwide,the aging rental stock needs significant investment to improve housing q
171、uality,accessibility,and resilience to climate-related hazards.Large Buildings Are a Growing Share of the Rental StockBetween 2010 and 2022,the total rental supply increased by 4.3 million units to 48.1 million units.This growth was driven primarily by the construction of large multifamily buildings
172、(Figure 12).During this period,the number of apartments in multifamily buildings with 20 or more units grew by 3.3 million,to 12.3 million units.The supply in midsize buildings with 519 units also increased,though by a modest 292,000 apartments,to 10.6 million units.Rentals in small multifamily buil
173、dings with 24 units,a property type that tends to be more affordable,increased by just 103,000,to 8.3 million units.Compared to 2010,the supply of single-family homes for rent has grown by 649,000 homes,to 14.9 million in 2022,although this is down from the peak of 16.1 million recorded in 2016.Many
174、 of these homes converted from owner-occupancy to rental during the first half of this period,especially in the aftermath of the foreclosure crisis.However,in the second half of this period,the trend reversed.Beginning in 2016,the supply of single-family rentals declined every year as homes converte
175、d to owner-occupancy or were otherwise lost to building demolitions and condemnations.Nevertheless,single-family homes represented nearly a third of the total stock in 2022.789101 00202022Single Family2-4 Units5-19 Units20 or More UnitsNotes:Rental units may be occup
176、ied,vacant for rent,or rented but unoccupied.Single-family homes include attached and detached units.Data for 2020 are based on 2019 and 2021 values because of pandemic data disruptions.Source:JCHS tabulations of US Census Bureau,American Community Survey 1-Year Estimates.Figure 12Larger Buildings A
177、ccount for Most of the Rental Stock GrowthNumber of Rental Units(Millions)03 JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202417The disproportionate increase in units in larger multi-family buildings relative to other rental types has changed the composition of the r
178、ental stock.Since 2010,the share of rentals in large multifamily build-ings has increased by 5 percentage points and are 25 percent of the rental stock as of 2022.Meanwhile,the single-family rental share dropped by 2 percentage points.Likewise,the shares of rental units in midsize and small multifam
179、ily buildings each dropped by 1 percentage point.Midsize buildings with 519 units accounted for 22 percent of the rental stock and smaller buildings with 24 units constituted 17 percent.The share of manufactured housing,which totaled just 2.0 million units in 2022,also declined by 1 percentage point
180、 over the previous 12 years,to just 4 percent of rental units.The shift in rental housing away from smaller prop-erties and toward apartments in larger buildings is due mainly to the composition of new construction.Between 2010 and 2022,annual completions of multi-family rentals grew from 125,000 to
181、 342,000 units,with 3.5 million units added in this period,according to the Census Bureau Survey of Construction.A full 2.9 million were apartments in buildings with at least 20 units,pushing up their share of multifamily rental completions from 79 percent to 90 percent between 2010 and 2022.While a
182、nnual completions of single-family rentals have accelerated rapidly in response to growing demand,single-family homes built as rentals remained a small share of new construction.Completions of single-family rentals rose from 26,000 to 67,000 units annually between 2010 and 2022.In total,518,000 new
183、single-family homes built as rentals were completed in this period,representing 13 percent of new rental units.Supply of Low-Rent Units Is Dwindling The supply of low-rent units continues to shrink.These units rent for less than$600 a monththe maximum amount affordable to a household earning$24,000
184、annually when applying the 30 percent of income standard.In the last decade,the number of low-rent units dropped by 2.1 million,including a loss of 230,000 from 2021 to 2022 alone.This left just 7.2 million units with rents below$600 as of 2022(Figure 13).Since 2012,the market also lost an astoundin
185、g 4.0 million units with rents between$600 and$999.In total,the market 024681012141618Under$600$2,000 and OverContract Rent20122022$600-$999$1,000-$1,399$1,400-$1,999Notes:Rents are adjusted for inflation using the CPI-U Less Shelter.Units that are occupied but do not receive payment are excluded.Co
186、ntract rents exclude utility costs.Source:JCHS tabulations of US Census Bureau,American Community Survey 1-Year Estimates.Figure 13The Stock of Low-Rent Units Is ShrinkingNumber of Rental Units(Millions)JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202418lost 6.1 mill
187、ion units renting for less than$1,000,the maximum amount affordable to a household earning$40,000 per year.Various market forces have contrib-uted to these losses,including rent increases among existing units,building condemnations and demoli-tions,and tenure conversions.During the same period,the s
188、upply of units renting for between$1,000 and$1,399 increased by 400,000.The market also gained 4.3 million units with rents between$1,400 and$1,999,and 4.1 million units renting for$2,000 or more.The declining supply of low-rent units,combined with a steady stream of new construction targeting the h
189、igh end of the market,has shifted the distribution of rents upward.In 2022,just 16 percent of units had contract rents below$600,down from 22 percent of the rental stock in 2012.Meanwhile,the share of units renting for$1,400 or more nearly doubled,from 21 percent to 38 percent of units.The loss of l
190、ow-rent units has been geographically widespread,with decreases recorded in 47 states and the District of Columbia.Fully 42 states lost more than 10 percent of their low-rent stock between 2012 and 2022,including 24 that lost more than 20 percent.Among the hardest hit states were those previously co
191、nsidered more affordable that have seen swiftly growing rental demand,including Texas,North Caro-lina,and Georgia.Several Midwestern states also expe-rienced significant losses despite recording relatively slow rental demand,including Ohio,Michigan,and Indiana.In more expensive states already short
192、on low-rent units,the net decline extended much farther up the rent spectrum,with 16 states losing units at all rent levels up to$1,400.Low-rent units are an essential source of affordable housing for households with lower and moderate incomes.In 2022,60 percent of renter households living in low-re
193、nt units earned less than$30,000 per year,including 36 percent with annual incomes below$15,000.For many renters at these income levels,$600 a month is a stretch.Using the standard The number of low-rent units has fallen by 2.1 million in the last decade.JOINT CENTER FOR HOUSING STUDIES OF HARVARD U
194、NIVERSITYAMERICAS RENTAL HOUSING 20241930 percent of income calculation,these households can afford a monthly rent of no more than$750 and$375,respectively.Additionally,low-rent units help house middle-income households that may also struggle to secure afford-able housing.In 2022,28 percent of units
195、 renting for less than$600 were occupied by middle-income house-holds earning between$30,000 and$75,000 annually.Increasing the availability of units with lower rents and preserving the existing supply of these units is critical to ensuring that financially vulnerable households are able to secure h
196、ousing they can afford.Supply Varies Across GeographiesThe composition of the rental stock varies widely by region.In 2021,a third of rentals in the Northeast were in large multifamily buildings,well above the West(26 percent),Midwest(22 percent),or South(21 percent).The Northeast also had the large
197、st propor-tion of rental units in small multifamily buildings,at 27 percent,compared to just 19 percent in the Midwest,15 percent in the West,and 14 percent in the South.Conversely,the Northeast had the smallest proportion of single-family rentals,at 19 percent,while single-family homes were about a
198、 third of the rental stock in all other regions.Rent levels likewise vary across regions,reflecting differences in the composition and age of the stock,household incomes,and housing demand.High-cost rentals are most common in the West and Northeast.In 2021,45 percent of units in the West had rents o
199、f at least$1,500,as did 34 percent of rentals in the North-east,well above the share in the South(19 percent)or the Midwest(10 percent).There are also notable differences in the rental stock among urban,suburban,and nonmetropolitan areas(Figure 14).In 2021,40 percent of occupied rentals were in urba
200、n areas,48 percent were in suburban areas,$600-$999$1,000-$1,249$1,250-$1,499$1,500 and OverUrbanSuburbanNonmetropolitanContract RentUrbanSuburbanNonmetropolitanStructure TypeUnder$600Manufactured2-4 Units5-19 Units20 or More UnitsSingle Family00708090100Notes:Only occupied rental units a
201、re depicted.Manufactured housing includes other structures such as boats and RVs.Contract rents exclude utility costs.Urban and suburban tracts fall within metropolitan statistical areas.Nonmetropolitan tracts fall outside of metropolitan areas.Source:JCHS tabulations of US Census Bureau,2021 Americ
202、an Community Survey 5-Year Estimates.Figure 14The Rental Stock Varies Widely Across Markets,with Low-Rent Units More Common in Nonmetropolitan AreasShare of Rental Stock(Percent)JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202420and 11 percent were in communities out
203、side metro-politan areas.In urban areas,over half(51 percent)of the housing stock was rented,significantly more than in suburban(30 percent)and nonmetropolitan areas(28 percent).Nearly three-quarters of rentals in urban neighborhoods were multifamily units,compared to 59 percent in suburban neighbor
204、hoods and 41 percent in neighborhoods outside metropolitan areas.Apart-ments in large multifamily buildings with 20 or more units were also far more common in urban communi-ties,accounting for 31 percent of the rental stock there,well above the shares in suburban(19 percent)and nonmetro(8 percent)ar
205、eas.In contrast,nonmetropolitan and suburban commu-nities have a much higher proportion of single-family and manufactured homes for rent.In 2021,about half of rental units outside metropolitan areas were single-family homes,compared to 36 percent in suburban areas and 26 percent in urban areas.Manuf
206、actured housing accounted for 13 percent of all rentals in nonmetropolitan communities but was much less common in suburban areas(5 percent)and virtually absent from urban areas(1 percent).In fact,while nonmetropolitan areas accounted for just 11 percent of all rental units,they contained a third of
207、 the nations manufactured housing supply.Rent levels also vary greatly across urban,suburban,and nonmetropolitan geographies.Urban and suburban areas have significantly higher shares of units renting for at least$1,500(25 percent and 26 percent,respectively),compared to just 4 percent of rentals in
208、communities outside metropolitan areas.Nonmetropolitan areas tended to be priced lower,with 53 percent of units renting for less than$600,compared to just 15 percent of rentals in suburban areas and 17 percent in urban areas.In total,commu-nities outside metropolitan areas contain just over a quarte
209、r of the nations stock of units that rent for less than$600.Location of Rental Stock Contributes to InequalitiesThe nations rental stock is unevenly distributed across neighborhoods,limiting where renters can live.In 34 percent of neighborhoods,less than 20 percent of the housing stock is available
210、to rent,resulting in commu-nities that are essentially rental deserts.Conversely,owner-occupied homes account for less than 20 percent of the stock in just 6 percent of neighborhoods.Rental deserts tend to be located in suburban areas where restrictive land use policies make it difficult to build mu
211、ltifamily housing,which is predominantly renter-occupied.In 2021,suburban neighborhoods constituted 55 percent of census tracts nationally,but 68 percent of neighborhoods where less than 20 percent of the stock is available to rent.Single-family homes,which tend to be owner-occu-pied,are much more c
212、ommon in these communi-ties.In neighborhoods where less than 20 percent of housing is rental,single-family homes accounted for 85 percent of all housing in 2021,compared to just 17 percent of the housing stock in neighborhoods that are more than 80 percent rentals.Large multifamily build-ings with 2
213、0 or more units accounted for just 2 percent of the housing stock in rental deserts,compared to 42 percent of the units in neighborhoods with abundant rental housing.The lack of rental options in many neighborhoods rein-forces inequities and contributes to socioeconomic segregation.Communities with
214、little rental housing have higher median incomes,reflecting renters typically lower annual incomes.In 2021,the median household income in rental desert neighborhoods was$92,000,almost twice that of the$49,000 median in areas with robust rental options.Further,the limited availability of rental housi
215、ng in some neighborhoods constrains housing options for many people of color.A long history of racially discriminatory government policies and real estate practices has JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202421restricted neighborhood choice and prevented ma
216、ny households of color from becoming homeowners.These actions,along with discrimination in education and labor markets,have contributed to higher rent-ership rates among Black and Hispanic households.The legacy of these inequities is evident in the low share of households of color in rental deserts.
217、In 2021,people of color headed just 24 percent of households in rental deserts,as compared to 66 percent of house-holds in neighborhoods where more than 80 percent of homes are rented.The share of households headed by a Hispanic person was three times higher in neigh-borhoods with abundant rental op
218、tions than in rental deserts(30 percent versus 10 percent),and the share headed by a Black person was nearly four times higher(22 percent versus just 6 percent).These patterns of residential segregation are difficult to undo in part because they are reinforced by various land use regulations.Single-
219、family zoning and other density limitations restrict the development of multi-family buildings,effectively making it more challenging to add rental housing.Several states and communities have recently enacted zoning changes to allow for more types of housing in areas previously zoned exclu-sively fo
220、r single-family homes.These zoning changes could increase rental options in neighborhoods where few exist,help expand the geographic options avail-able to renters,and better integrate communities.Housing Inadequacy PersistsThe rental stock is older than at any other recorded time.In 2021,the median
221、age of renter-occupied homes reached 44 years,up from 39 years a decade earlier and 34 years in 2001.Investment in the aging housing stock is vital,given the persistence of substandard housing.Despite improvements in building codes and construction standards,as well as upgrades and repairs to existi
222、ng units,3.9 million renter households lived in homes that did not meet basic standards for suitability and safety in 2021.This represents an overall increase of 350,000 households over the past two decades.The rental stock is older than its ever been at a median age of 44 years.JOINT CENTER FOR HOU
223、SING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202422According to data from the most recent American Housing Survey,in 2021,8.4 percent of renter house-holds lived in substandard housing with multiple prob-lems such as structural deficiencies,a lack of upkeep,or the inconsistent provision
224、 of basic features such as hot and cold running water,heat,and electricity.Physical inadequacy from disrepair and structural deterioration is much more common in older homes.Overall,13 percent of units built before 1940 were clas-sified as physically inadequate in 2021,more than twice the 6 percent
225、share of newer units built between 2000 and 2021.Given that substandard units tend to have low rents,households with lower incomes are more likely to occupy these homes(Figure 15).In 2021,12 percent of renter households earning less than$15,000 lived in inadequate housing,double the 6 percent of ren
226、ters with incomes of$75,000 or more.While most subsidized housing properties meet basic safety and suitability standards,severe underfunding of 024681012BlackHispanicWhiteAsianUnder$15,000$15,000-$29,999$30,000-$44,999$45,000-$74,999$75,000and OverAllHouseholdsRace/Ethnicity Household IncomeNotes:Ho
227、using inadequacy refers to a variety of structural deficiencies,such as large holes and leaks or the absence of basic features including plumbing,electricity,water,or heat.HUD classifies units as moderately or severely inadequate depending on the type and number of these physical problems.Black,Asia
228、n,and white householders are non-Hispanic.Hispanic householders may be of any race.Source:JCHS tabulations of US Department of Housing and Urban Development,2021 American Housing Survey.Figure 15Renters with Lower Incomes and Those of Color Disproportionately Live in Inadequate HousingShare of Rente
229、rs in Inadequate Housing(Percent)project-based assistance programs has left 1 in 10 renters living in public housing or HUD-assisted private multifamily housing with inadequate conditions.Despite inspection standards,11 percent of renters with Housing Choice Vouchers lived in inadequate conditions i
230、n 2021.Black and Hispanic households are more likely to live in inadequate housing,a product of long-standing discriminatory policies and practices that have often steered households of color to neighborhoods with older and less-adequate housing.In 2021,10 percent of Black and Hispanic renter househ
231、olds lived in inad-equate housing,well above the shares for white(7 percent)and Asian households(6 percent).These disparities persist even after accounting for differences in income.A HUD report also found that American Indian and Alaska Native households dispropor-tionately experience poor housing
232、quality,including units with structural problems,system deficiencies,and overcrowding.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202423Even among units that meet the criteria for phys-ical adequacy,many have significant problems that impact occupant health and safe
233、ty.A 2023 study by the Federal Reserve Bank of Philadelphia found that in 2022,37 percent of renter-occupied units had at least one critical home repair need,such as fixing a cracked foundation,replacing broken equipment,or remediating mold,and estimated the total cost of addressing these deficienci
234、es at$51.5 billion.Even the structurally adequate stock does not typi-cally meet the needs of people with disabilities.In 2019,4 percent of renter households reported diffi-culties entering or navigating their homes,including 18 percent of renters age 80 and over,as reported in the American Housing
235、Survey.And nearly half of renters with disabilities said their homes were minimally or not at all accessible,according to a 2023 Freddie Mac survey.Given the aging of both the rental stock and the nations population,there is an urgent and growing need to repair or modify existing units to ensure hab
236、it-ability,safety,and accessibility.Exposure to Disasters Threatens the Rental StockEnvironmental hazards such as wildfires,flooding,earthquakes,and hurricanes increasingly jeopar-dize the health and safety of renters and threaten to damage or destroy housing.About 41 percent of the nations occupied
237、 rental stock(18.2 million units)is located in areas exposed to substantial weather-and climate-related threats as measured by expected annual economic losses for multiple hazards,according to the Federal Emergency Management Agencys National Risk Index.These areas are geographically diverse,reflect
238、ing the variety of acute and chronic environmental hazards that impact every part of the country(Figure 16).Cali-fornia has the most rental units located in census tracts with at least moderate expected annual economic losses caused by hazards.There,4.6 million units77 percent of the states rental s
239、tockare at risk of damage or destruction,followed by Florida,with 2.4 million units(89 percent)at risk.Number of Rental Units in High-Risk CountiesUnder 2,0002,0009,99910,00019,99920,000 and Over(Up to 1.6 Million)Notes:High-risk areas have a relatively moderate,relatively high,or very high expected
240、 annual loss(EAL)score.EAL represents the average economic loss in dollars resulting from natural hazards each year.The number of units in high-risk counties is aggregated from the tract level.Source:JCHS tabulations of Federal Emergency Management Agency,July 2023 National Risk Index EAL data,and U
241、S Census Bureau,2021 American Community Survey 5-Year Estimates.Figure 16More Than 18 Million Rental Units Are Under Threat from Environmental HazardsJOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202424Nationally,more than a third of units in small,midsize,and large m
242、ultifamily buildings(3540 percent)are located in census tracts with substantial annual losses,as are 45 percent of single-family rentals and just over half of manufactured rentals.Because manufactured housing units are the most likely to be classified as physically inadequate,they may be especially
243、susceptible to damage or destruction from their hazard exposure.The already limited supply of low-rent and feder-ally subsidized units is also at risk.Indeed,3.2 million units with rents below$600(38 percent)are in at-risk areas.An additional 1.2 million Low-Income Housing Tax Credit units(40 percen
244、t)are at risk from envi-ronmental hazards,along with 34 percent of proj-ect-based HUD units.This includes 960,000 units that are public housing,Project-Based Section 8,affordable housing for older adults,and supportive housing for householders with disabilities.Also at risk are 200,000 units(52 perc
245、ent)subsidized by the US Department of Agricultures rural multifamily housing program.The growing exposure to hazards will only compound these units numerous preservation needs.Notably,newer rental units are much more likely to be vulnerable to weather-and climate-related hazards.Nearly half of rent
246、als built in 2000 or later are located in areas with substantial losses,double the 24 percent of rentals built before 1940.Still,those built before 1940 have the highest rate of physical inadequacy of any rental units,so they may be more vulnerable to damage caused by environmental hazards.As a grow
247、ing number of rental units are damaged by environmental hazards,the cost to repair and rebuild homes will increase,as will the insurance costs in high-risk areas.At the same time,the escalating frequency,severity,and diversity of disasters,coupled with the magnitude of their likely damages,will nece
248、ssitate greater investments in pre-disaster mitigation and climate adaptation strategies for both properties and regions.Otherwise,the increasing incidence of costly disasters will almost certainly render an increasing number of rental units uninhabitable,forcing resi-dents to relocate and threateni
249、ng to further reduce the supply of rental housing.The OutlookWith more supply coming online across the country,the rental stock is likely to expand,though with a changing composition.A growing share of the rental stock is more expensive units in larger buildings.New construc-tion is furthering this
250、trend by increasingly targeting the high end of the market.In contrast,the supply of units in small multifamily buildingswhich tend to have lower median rentsremains largely unchanged.The shifting composition,coupled with the high cost of new construction and the deep need at the lower end of the ma
251、rket,suggests that new market-rate supply alone will do little to bring immediate relief to those with lower incomes.For these households,the number of affordable options is declining as low-rent units are demolished,converted to owner-occupancy,or repriced at higher rents.Moreover,the lack of diver
252、se rental options in many suburban communities constrains where households can choose to live.Regulatory barriers restrict the amount of multifamily housing that can be built in neighborhoods with few rental opportunities.Additionally,the existing stock requires significant investment.The level of s
253、tructural inadequacy has not improved in decades,and critical repairs and replacements are imperative to ensure that the units are of decent quality.Further,steps must be taken to mitigate the impact of climate-related hazards on low-rent and subsidized units while reducing the loss of the stock and
254、 preserving its affordability.Finally,there is an urgent need to make accessibility modifications in response to the nations rapidly aging population.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202425RENTAL MARKETS A steady stream of new supply and stabilizing deman
255、d have cooled rental markets from their pandemic-induced frenzy.As vacancy rates have risen from historic lows,rent growth has plummeted from its record-breaking pace.While multifamily housing completions remain near historic highs,construction starts are slowing as interest rates rise.The increasin
256、g costs of debt and equity have dampened multifamily performance and raised expenses for apartment operators.Nevertheless,the relatively strong performance of multifamily properties over the longer term has attracted new investors to the rental market.Rent Growth Cools as Vacancies Rise Robust new s
257、upply and stabilizing demand have brought rent growth to a near standstill.Rents for professionally managed apartments grew just 0.4 percent annually in mid-2023.This is a dramatic turn-around from the prior year when apartment rents increased by a record-breaking 15.3 percent year over year.The cur
258、rent pace is more than 3 percentage points below the 3.6 percent pace averaged in the five years leading up to the pandemic.Rent growth slowed across property classes.For higher-quality Class A units,rent growth decelerated from a record-breaking 18.5 percent annual pace in early 2022 to just 0.8 pe
259、rcent in the third quarter of 2023.Similarly,rents for Class B and Class C apartments grew annu-ally by just 0.1 percent and 0.7 percent,respectively,in the third quarter of 2023down from 16.1 percent and 8.5 percent at the beginning of 2022.Rents for single-family units also slowed,according to the
260、 CoreLogic Single-Family Rent Index.In this market segment,rents grew just 2.9 percent year over year in August 2023,significantly below the record-high growth of more than 14 percent in 2022 and similar to the pre-pandemic annual growth rate.Further,the Consumer Price Index for rent of primary resi
261、dence,which covers the entire rental stock and is slow to register changes,decelerated in mid-2023 from a four-decade high of 8.8 percent in March 2023 to 7.2 percent in October 2023.The slowdown in apartment rent growth was geographically widespread.In the third quarter of 2023,just 1 percent of ma
262、rkets experienced rent growth of at least 10 percent annually,down from 50 percent of markets a year earlier.Instead,the majority of markets(61 percent)experienced only moderate rent growth under 5 percent,as compared to just 4 percent of markets in the prior year.And whereas not a single market rep
263、orted negative rent growth in mid-2022,rents declined in 32 percent of markets in mid-2023.The areas with the fastest-growing rents in the third quarter of 2023 include many less expensive markets in the South,Midwest,and Northeast,such as Midland-Odessa,Madison,Champaign-Urbana,Trenton,and Springfi
264、eld,Massachusetts,where apartment rents grew by at least 6 percent annually.In contrast,the bulk of the markets with declining rents was in the West and South,with year-over-year decreases of at least 4 percent in Boise,Phoenix,Austin,and Las Vegas.Simi-larly,single-family rent growth was lowest or
265、negative in metros in the West and South,including Las Vegas,Miami,and Austin.While slowing rent growth may help 04JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202426to address the affordability crisis,any relief will only be incremental,given that rents mostly remai
266、n elevated compared to pre-pandemic levels.Some of the slowing rent growth is attributable to rising vacancy rates.Nationally,the rental vacancy rate reached 6.6 percent in the third quarter of 2023,according to the Census Bureaus Housing Vacancy Survey.After falling to a pandemic low of 5.6 percent
267、 recorded in late 2021,the recent vacancy rate was on par with the 6.9 percent rate averaged in the five years preceding the pandemic.RealPage data show an even more dramatic shift for professionally managed apartments(Figure 17).The vacancy rate for these rental units climbed to 5.5 percent in the
268、third quarter of 2023,a sharp turnaround from early 2022,when surging demand brought the vacancy rate to a record low of just 2.5 percent in the first quarter.Since then,vacancy rates for professionally managed apartments have increased fastest in the South(up 3.5 percentage points,to 6.3 percent)an
269、d the West(up 2.9 percentage points,to 5.2 percent).Nation-ally,vacancies are somewhat higher in the most expen-sive Class A market segments since a large volume of newly constructed units was added to the stock.02000222023USNortheastMidwestSouthWestNote:Vacancy rate
270、s are four-quarter trailing averages for professionally managed apartments in buildings with five or more units.Source:JCHS tabulations of RealPage data.Figure 17Apartment Vacancy Rates Are Rising Every-where,Most Dramatically in the SouthApartment Vacancy Rate(Percent)High Interest Rates Constrain
271、Multifamily FinancingThe recent uptick in interest rates from their historic lows is cooling rental market activity.The interest rates for fixed-rate multifamily loans are often anchored to the yield for 10-year Treasury notes.In the second quarter of 2023,the yield rate on these Treasuries was 3.6
272、percent,nearly 3 percentage points above the rate recorded in the first year of the pandemic and the highest since the Great Recession.As a result,apart-ment mortgage rates jumped to 5.5 percent for 7-and 10-year fixed-rate loans in June 2023,according to MSCIan increase of more than two percentage
273、points from October 2021.Rising interest rates increase the cost of the debt that investors and developers use to acquire and build multifamily properties.At the same time,high Treasury yields increase the cost of equity,as investors require higher returns to compete with lower-risk Treasury notes.C
274、onsequently,it becomes harder to make proj-ects financially feasible.To make the same project work with an equal rate of return in a high interest rate environment,property developers and owners would need more revenue to offset the increased capital costs,meaning rents would need to be higher.Lende
275、rs typically want properties to have a debt service coverage ratiothe ratio of total monthly net income to total monthly debt service paymentsof at least 1.2.However,the high cost of debt in 2023 has,all else being equal,pushed down debt service coverage ratios,making it more difficult for developer
276、s to qualify for the same amount in loans.Knowing they would likely be declined,potential borrowers have pulled back from even applying for financing.More than half of the banks surveyed by the Federal Reserve noted that demand for multifamily loans has decreased.Additionally,uncertainty about apart
277、ment perfor-mance and the broader economy has tightened multifamily underwriting among nearly two-thirds of the surveyed banks.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202427The slowdown in borrowing and lending has been substantial.According to the Mortgage Bank
278、ers Association(MBA),multifamily mortgage orig-inations dropped 48 percent year over year in the second quarter of 2023.With declining originations,the amount of multifamily debt outstanding increased by less than$30 billion in the second quarter to$2.03 trillion,the weakest second-quarter showing i
279、n four years(Figure 18).Nevertheless,the sources of multifamily lending have remained relatively stable.The government-sponsored entities Fannie Mae and Freddie Mac continued to hold nearly half of all multifamily mort-gage debt and posted the largest quarterly gain of any investor group in mid-2023
280、.Banks and thrifts increased their holdings at about half the rate of Fannie Mae and Freddie Mac but still held 30 percent of multifamily mortgage debt.Meanwhile,mortgage debt held in commercial mortgage-backed securities(CMBS)made up just 3 percent of the market.00200182019202
281、0202120222023Quarterly ChangeAverage Change(4-Quarter Trailing)Source:JCHS tabulations of Mortgage Bankers Association data.Figure 18Multifamily Mortgage Flows Are SlowingMultifamily Mortgage Debt Outstanding(Billions of Dollars)Multifamily Starts Slow as Completions Remain HighMultifamily construct
282、ion is slowing in the face of soft-ening rent growth and rising vacancy and interest rates.After averaging 536,000 units in the first six months of 2023,multifamily starts slowed to a season-ally adjusted annual rate of 402,000 units in October 2023.Though this marked a 30 percent decline from the p
283、ace one year earlier,starts are decreasing from extremely high levels and remain relatively robust.While multifamily starts are cooling,the single-family built-for-rent sector has remained strong.A small share of new single-family construction is built specif-ically for the rental market.However,the
284、 number has grown steadily over the last decade,with an espe-cially large uptick during the pandemic.In 2022,69,000 single-family rental homes were started,a 77 percent increase over 2019.In the third quarter of 2023,single-family rental starts hit a new record high with an annual rate of 70,000 hom
285、es.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202428Multifamily units already under way also continue to come online at historically high numbers(Figure 19).On a seasonally adjusted annualized basis,436,000 multifamily units were completed in the third quarter of 2
286、023,up 30 percent from pre-pandemic levels.This has helped to maintain the steady flow of comple-tions despite the slowdown in starts.On a seasonally adjusted basis,the number of multifamily units under construction reached a record high of 1.0 million units in July 2023 that continued through Octob
287、er 2023.Though the slowdown in multifamily starts could lead to supply challenges in the coming years,the huge pipeline of units currently under construction has the potential to ease rents in the near term.Research by RealPage suggests that new supply puts down-ward pressure on rent growth in marke
288、ts where new units are added.In several geographies where new supply increased at a rate above the national average in 2023,rent growth notably cooled.Apart-ment absorptionthe difference between the number of households moving in and the number moving outincreased in mid-2023,which suggests that new
289、 supply is accommodating new households while still allowing rents to moderate.005006007008009001,00062820002002200420062008200022StartedUnder ConstructionCompletedNote:Data for 2023 represent the seasonally adjusted year-to-date aver
290、age through October.Source:JCHS tabulations of US Census Bureau,New Residential Construction data.Figure 19Completions Remain High and a Record Number of Units Are Under ConstructionMultifamily Units(Thousands)Construction Delays and Costs Are IncreasingWhile there is a healthy level of new supply u
291、nder construction,the question of when it will come online remains unanswered as extended construction time-lines become increasingly common.The average number of months from start to completion for multi-family buildings reached 17.0 in 2022,up from 15.4 in 2021 and 10.8 in 2012.Between 2021 and 20
292、22,the time to complete single-family homes increased from 7.2 to 8.3 months.A survey of construction and development firms conducted by the National Multifamily Housing Council in September 2023 found that 88 percent of respondents reported construction delays.Such interruptions can add to the cost
293、 of new devel-opment,as do the rising costs of labor and materials.In the second quarter of 2023,the employment cost index for private industry construction workers was up 5 percent from the prior year and 14 percent since the start of the pandemic.The price of all inputs to new residential construc
294、tion,excluding capital invest-ment,labor,and imports,also increased,up 35 percent since March 2020more than triple the growth rate in JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202429the equivalent period before the pandemic.The cost of ready-mix concrete,lumber,an
295、d brick and clay structural tile each rose by at least 25 percent after the pandemic,with even steeper price increases for gypsum(41 percent)and plastic construction products(35 percent).In response to both rising costs and the growing demand from higher-income renters,new rental units increasingly
296、target the high end of the market.Construction remains highly concentrated in large metros,where land is most expensive.The NAHB Home Building Geography Index indicates that 69 percent of multifamily permitting in the second quarter of 2023 was in large metro areas.Reflecting these trends,asking ren
297、ts for new units continue to climb.In the second quarter of 2023,the median asking rent for new units was$1,760,up 39 percent from the second quarter of 2014,according to the Survey of Market Absorption.Between 2015 and 2022,the share of newly completed units with asking rents of at least$2,050 near
298、ly doubled,to 37 percent.In the same period,the share of units with asking rents below$1,050 declined by two-thirds,to just 7 percent.This shift in new construction toward higher-cost apartments means many units are unaffordable to households with low and moderate incomes.Whether this new supply wil
299、l improve affordability for these households in the longer term remains to be seen.Property Performance WeakensApartment operators cash flow has slowed,not only because of decelerating rent growth but also because of increased operating costs and insurance premiums.According to Yardi Matrix,national
300、 total operating expenses for multifamily properties rose by 9.3 percent in the 12 months ending in June 2023.Additionally,Trepp reported that property insurance costs increased 13.6 percent annually for multifamily properties in large metro areas in 2022.Consequently,net operating incomes for apart
301、ments grew by just 3.5 percent annually in the third quarter of 2023,according to data from the National Council of Real Estate Invest-ment Fiduciaries.This was a substantial deceleration from the pandemic high of 24.8 percent in late 2021 and put the pace of net operating income growth well below t
302、he 5.3 percent annual rate averaged in the five years preceding the pandemic.Against this backdrop,apartment capitalization ratesthe net operating income divided by the prop-erty pricehave gradually risen.According to Moodys Analytics,cap rates fell through 2022 before rising by 0.9 percentage point
303、s over the first three quarters of 2023 to 5.8 percent.With the high interest rates on 10-year Treasuries,the cap rate spread was just 1.6 percentage points,considerably lower than the 3.5 percentage point spread averaged between 2015 and 2019.Multifamily properties have thus become a somewhat less
304、attractive investment than before the pandemic.Rising cap rates are pushing apartment property prices down.According to Real Capital Analytics data,apartment prices fell year over year at the beginning of 2023 for the first time since 2010 and were down 13 percent annually by the third quarter(Figur
305、e 20).This was a substantial turnaround from the peak 23 percent price growth posted at the beginning of 2022.Along with apartment prices,transaction volumes cooled in 2023 as potential buyers and sellers paused amid uncertainty about property performance and rising interest rates.According to MSCI,
306、apartment sales transaction volumes declined by 72 percent in mid-2023 from the prior year.The 2023 second-quarter volume was less than 25 percent of the$165 billion peak volume reached at the end of 2021,and approximately half of the$42 billion averaged quar-terly between 2015 and 2019.Risk of Deli
307、nquencies GrowsAs net operating income growth slows,the risk of delinquencies is increasing.So far,the composition of multifamily financing and the pre-pandemic period of rapidly accruing equity have staved off widespread defaults.Currently,the most at-risk properties are those with shorter-term loa
308、ns taken out in the last two JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 2024300100200300-15-10-5050002120222023Change in Apartment PricesIndexed Apartment Prices(Right Scale)Notes:Apartment prices are indexed to January 2015.Indexed
309、 values represent cumulative percent change.Source:JCHS tabulations of Real Capital Analytics,Commercial Property Price Indexes.Figure 20Apartment Property Prices Have Fallen from Record HighsYear-over-Year Change(Percent)Index Valueyears that leave borrowers little chance to build equity before the
310、 loan matures.These loans are more likely to be held by banks,by investor-driven lenders,or in CMBS.The 30-day delinquency rate for CMBS loans has moved upward for three consecutive quarters,hitting 3.8 percent in the second quarter of 2023,according to MBA.However,CMBS are a small share of all mult
311、ifamily loans.Further,the most recent delinquency rate is only slightly higher than the pre-pandemic average.Much of the increase has been driven by other commercial property types,such as retail,hotels,and offices.Longer-term loans that have fewer near-term matur-ities make up the largest share of
312、multifamily loans.The 60-day delinquency rates for loans held by Fannie Mae and Freddie Mac rose slightly in the second quarter of 2023 to 0.37 percent and 0.21 percent,respectively.Still,delinquencies remain low.Commercial and multi-family loans by banks and thrifts followed the same trend,with a 9
313、0-day noncurrent rate of 0.67 percent in the second quarter of 2023,up from 0.56 percent in the first quarter of 2022.While increasing,these delin-quency rates nonetheless remain much lower than the 4 percent rate recorded in the years following the 2008 housing market crash.In the event that slowin
314、g returns do lead to a greater uptick in delinquencies,new opportunities may emerge for potential property buyers to acquire a building at a more favorable price,in turn freeing up capital that they can then invest in the apartments.Meanwhile,property owners facing financial distress might otherwise
315、 cut back on maintenance and repair,to the detriment of renters.Ownership of Rental Properties ShiftsDespite the slowdown in rent growth and low cap rate spread,rental housing remains a popular investment option,offering a relatively good return compared to other commercial real estate asset classes
316、.Although investor activity has lessened in the short term,the strong and sustained performance of multifamily properties over the past two decades has attracted new investors.Most rental properties are still owned by individuals.But the healthy track record of return on rental investment has also e
317、ncouraged the profes-sionalization of smaller landlords,who are increasingly forming limited liability partnerships(LLPs)and limited liability companies(LLCs).JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202431The share of rental properties owned by nonindividual inv
318、estors,including LLPs,LLCs,real estate corpora-tions,and similar entities,keeps growing.Between 2001 and 2021,these investors increased their ownership share by 9 percentage points,to 27 percent of rental properties,according to the Rental Housing Finance Survey(Figure 21).The growth in ownership by
319、 nonindividual investors has been especially swift among small multifamily properties,for which these investors have historically been absent.Between 2001 and 2021,the share of 2-to 4-unit multifamily properties owned by nonindi-vidual investors increased by 17 percentage points,to 32 percent.During
320、 the same period,the share of 5-to 24-unit properties owned by nonindividual investors nearly doubled,to 67 percent.Among large rental properties,nonindividual ownership shares are signifi-cantly higher.Nonindividual ownership of rental prop-erties with at least 50 units increased by 6 percentage po
321、ints since 2001,to 93 percent,and by 17 percentage points,to 83 percent ownership of properties with 25 to 49 units.While nonindividual investors are somewhat less active in the single-family rental market,they have gained market share here,too.Over the last two decades,their ownership of single-fam
322、ily rentals increased by 8 percentage points,to 25 percent.The scale at which these investors operate may affect their strategies.Larger institutional investors tend to purchase newer and bigger single-family rentals in areas with fast-growing populations and rapid rent growth.By comparison,smaller
323、institutional investors are more likely to purchase smaller,older,and less expensive properties.Even as the share of single-family rental homes owned by nonindividual investors has grown,overall investor activity in this market has recently declined.This slow-down is a response to both the current i
324、nterest rate environment and uncertainty about rental property performance,prompting some investors to opt for other asset classes.Redfin data show that single-family home purchases by institutions or businesses fell 30 percent annually in the third quarter of 2023.This is the largest third quarter
325、decline since 2016,aside from the first quarter of 2023,when activity dropped even more sharply.Whether the presence of inves-tors in the single-family rental market will continue to grow depends largely on the availability of homes to purchase,the interest rate environment,the strength of other inv
326、estment returns,and the steadiness of the demand for rental housing.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202432007080901001 Unit2-4 Units5-24 Units25-49 Units50 Units or MoreTotalNumber of Units in Property20012021Note:Nonindividual investors inclu
327、de partnerships,trustees for estate,real estate corporations,real estate investment trusts,nonprofit organizations,and other entities.Source:JCHS tabulations of US Census Bureau,Rental Housing Finance Surveys.Figure 21Nonindividual Investors Own a Growing Share of Rental PropertiesShare of Propertie
328、s Owned by Nonindividual Investors(Percent)Rising operating and insurance costs will challenge rental housing providers.The OutlookWith demand stabilizing and a large volume of new apartments coming online,rent growth will likely remain slower than the frenzied pace of the early pandemic years,helpi
329、ng to cool overall inflation and relieve some of the pressure on household budgets.The robust multifamily construction pipeline may further moderate rent growth as new units hit the market.Even so,asking rents will likely remain above pre-pandemic levels.And the new supply will continue to target th
330、e high end of the market as construction costs rise.As a result,the forthcoming units will do little to solve the immediate affordability needs of lower-income households.Additionally,high interest rates present a considerable challenge for the apartment industry.As the costs of debt and equity rise
331、,ensuring that deals are profitable has become increasingly difficult.New construction and property transactions have shown signs of slowing as developers and buyers wait for greater economic certainty and a more favorable financing environment.These dynamics are likely to persist,given the expec-ta
332、tion that interest rates will remain high for at least the near term.If construction continues to slow and the supply once again constricts relative to demand,the affordability gains achieved at the high end of the rental market could be lost.Increased operating and insurance costs will also continu
333、e to challenge housing providers,especially those that are small scale or operate subsidized apart-ments and smaller rental properties.In the face of falling returns,housing providers may be less able to afford urgently needed repairs to the aging stock and preserve low-rent and assisted units.JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITYAMERICAS RENTAL HOUSING 202433RENTAL AFFORDABILITYT