|Harvard’s Joint Center for Housing Studies (JCHS) releases today its annual report entitled The State of the Nation’s Housing 2015. This year’s report highlights low homeownership rates and continuing renter housing cost burdens as areas of concern. The Joint Center’s report concludes that the housing market, buoyed by the persistent strength and demand of the rental market and continued employment growth, can regain some of the recovery momentum that was lost during 2014. The report also comments on the value of the Housing Credit and tax-exempt bonds, highlights the gap between housing needs and federal appropriations, and demonstrates the importance of preservation of at-risk affordable housing.
One of the major drags on housing recovery in 2014, according to the report, was the ongoing decline of homeownership rates. Homeownership rates in the United States continued their downward trend, with rates falling for the eighth straight year, marking a 20-year low with 64.5 percent in 2014. The report warns that this trend is not likely to dissipate in the near future; the homeownership rate in the first-quarter of 2015 was 63.7 percent. The report states that steady erosion of household incomes since the beginning of the recession and the tightening of credit by mortgage lenders are primary factors in homeownership rates being at their lowest levels in over two decades.
According to the report, the demand for rental units among all age groups has soared as homeownership rates have fallen. JCHS cites a United States Census Bureau Housing Vacancy Survey (HVS) that found that rental household growth has averaged 770,000 every year since 2004, making that the best 10-year period for renter grown since the 1980s. The report states that 3.2 million single-family detached homes were moved to the rental market, on net, between 2004 and 2013 to meet the surge in rental demand. Developers also reacted to the increased demand for rental homes by adding 1.2 million apartment starts since 2010.
The report states that although cost burdens (spending more than 30 percent of the household’s income on housing) have long been common among low-income households, many more moderate-income households are suffering cost burdens as well. The report shows that almost half of all renters had housing cost burdens, with more than a quarter being severely burdened (spending more than 50 percent of the household’s income on housing) in 2013. In the ten highest-cost metro areas, including Boston, Los Angeles, New York, and San Francisco, three-quarters of renters earning $30,000 – $45,000 and just under half of those earning $45,000 – $75,000 had disproportionately high housing costs.
The report argues that reversing the worrying trends of lower homeownership and higher renter cost-burdens will require a firm commitment by the nation. The report cites Fannie Mae’s, Freddie Mac’s, and the Federal Housing Administration’s (FHA) efforts to expand low-down payment lending as an important step to correcting homeownership rates. JCHS believes that multifamily construction will be unable to keep up with the demand for rental units in most metro areas. This shortage will ensure that rents will continue on their steady rise, creating a shortfall of affordable rental units even as the number of cost-burdened renters continues to grow.
The report, supporting materials, and video from an event for the report’s release are available on JCHS’ website, including the link to a webcast today at 12:00 p.m. (Eastern).