The housing industry has become so accustomed to believing that renting is a popular trend and option among the millennial generation. However, research shows that picture is distorted and younger consumers are not as big on renting as we believe they are.
The Joint Center for Housing Studies of Harvard University released research Wednesday to set the record straight about exactly who makes up rental households in the market and how they are faring with affordability issues.
According to the research, in mid-2015, 43 million families and individuals live in rental housing and the share of all U.S. households that rent rose from 31 percent to 37 percent, its highest level since the 1960s.
Now, here's where things get tricky.
The millennial generation (under age 30) have added nearly 1 million renters over the last decade, while the Gen-X generation (born 1965-1984) added 3 million. The largest increase to the renter rankings comes from those in their 50s and 60s, adding 4.3 million people.
So while the market likes to believe that those in their 20s occupy the largest share of renters, the Harvard research shows it's really those over 40 that make up the majority of the rental market.
“Record-setting demand for rental housing due to demographic trends, the residual consequences of the foreclosure crisis, and an increased appreciation of the benefits of being a renter has led to strong growth in the supply of rental housing over the past decade both through new construction and the conversion of formerly owner-occupied homes to rentals,” said Chris Herbert, Managing Director of the Joint Center For Housing Studies at Harvard.
With the growing number of renters and increased demand comes higher pricing on rental properties, the report showed. Renters' incomes have fallen 9 percent since 2001, pushing the number of cost burdened renters from 14.8 million in 2001 to 21.3 million in 2014. Overall, 49 percent of renter are cost burdened, while 26 percent are severely cost burdened.
Herbert noted that the crisis among renters that spend a large portion of their income on housing persists because "the market has been unable to meet the need for housing that is within the financial reach of many families and individuals with lower incomes. These affordability challenges also are increasingly afflicting moderate-income households.”
The study also outlined that housing policies are not sufficiently addressing affordability issues, often overlooking gaps and enduring a reduction in funding.
“In 2015, rental housing in America is a tale of two markets, where upper-income renters are finding a healthier supply of housing choices and landlords and private sector investors are benefiting from higher rents, but too many families earning less than $50,000 per year are having to make trade-offs between putting a roof over the their heads and food on the table," Herbert explained. "These negative trends are poised to go from bad to worse, as the most cost-burdened populations–minorities and the elderly–grow, and incomes continue to grow more slowly than rental costs.”
Click here to view the complete research data.
A live webcast will broadcast their findings in the release event for "America’s Rental Housing: Expanding Options for Diverse and Growing Demand" Wednesday from 1:00 p.m. to 3:00 p.m. in Washington, DC.
The webcast will feature a panel that will be moderated by Emily Badger of The Washington Post, with housing experts Ellen Seidman of Urban Institute, Paul Roldán of Hispanic Housing Development Corporation, Toby Bozzuto of The Bozzuto Group, and Chris Herbert of the Joint Center for Housing Studies at Harvard University.
Click here to watch the live webcast.