Americans Are Spending More and More on Rental Housing
Washington — The affordable housing crisis many renters face today in the U.S. feels like a product of this particular moment. The homeownership rate has tumbled since the housing bubble, pushing more and more people into rentals. Thanks to the recession, new construction hasn’t kept pace with population growth. The weak economy has meanwhile made it hard for families to cover their rent.
To top it off, more people are moving to cities like San Francisco and D.C., pushing up competition there for scarce housing.
Take a longer view, though, and an even more depressing picture emerges: High housing costs in America have been building for decades. In 1960, less than a quarter of all renter households spent 30 percent or more of their income on housing. That’s the cutoff (pre-tax) for what’s generally considered affordable. Today, nearly half of all renters spend more than that.
As other budget items have shrunk with time (food and clothing eat up relatively less of our money), for the last five decades renter households have been spending more and more of their income on housing.
At this pace, according to a new report from Enterprise Community Partners and the Harvard Joint Center for Housing Studies, nearly 15 million households could be “severely cost-burdened” by 2025, meaning they’ll be spending more than half their money on housing. Today, that number is 11.2 million.
In part, two long-term trends are colliding here. Rents have outpaced inflation for most of the last several decades. At the same time, incomes have been stagnating or falling. “The two create this sort of perfect storm,” said Andrew Jakabovics, the senior director for policy development and research at Enterprise.
The income side of this equation is easier to understand. But why is the cost of housing rising faster than the cost of a lot of other things? According to this latest report, rents have outpaced inflation every year since 1982, with the exception of one five-year stretch during the late 1990s.
Jakabovics and Chris Herbert, director of the Harvard center, offer a few explanations. New rental construction hasn’t kept pace with population growth and household formation. New housing now is often built for the high end of the market, so it contributes little to the affordable supply. Once-affordable housing has also been remodeled into luxury rentals.
Housing also hasn’t benefited from the same forces that have made your clothes and your electronics cheaper with time, like technological improvements. There have certainly been some advancements in how new buildings are designed and constructed. But they haven’t revolutionized the cost of housing the way, say, refrigeration created economies of scale for food, or how globalization created cheap T-shirts from China.
