Harvard’s Joint Center for Housing Studies Releases America’s Rental Housing 2024

Harvard's Joint Center for Housing Studies Releases America's Rental Housing 2024

Harvard's Joint Center for Housing Studies recently held a virtual event convening public, private, and nonprofit housing policy experts to share findings and recommendations from the Center's latest report — America's Rental Housing 2024.

The rental housing affordability crisis has deepened across all income groups and now affects half of all U.S. renters. A 2024 report from the Joint Center for Housing Studies (JCHS) of Harvard University reveals that although the rental market is cooling, evictions and homelessness are rising. During a JCHS virtual event, "America's Rental Housing 2024," housing policy experts from the public, private, and nonprofit sectors shared the report's findings and policy recommendations. Whitney Airgood-Obrycki, senior research associate at JCHS, gave an overview of the report. Robbie Sequeira, staff writer at Stateline, moderated a panel discussion between Peter Cannava, head of multifamily capital at Wells Fargo; Ethan Handelman, deputy assistant secretary for multifamily housing at HUD; Chris Herbert, managing director at JCHS; and Jacqueline Waggoner, president of the solutions division at Enterprise Community Partners. An increasing percentage of renters are cost burdened and facing housing instability and homelessness. The panelists articulated several policy solutions that can boost affordable rental housing supply and protect renters: implementing a Housing First model to mitigate homelessness, enacting low-cost capital arrangements to ease financial challenges, breaking regulatory barriers to enable the construction of multifamily housing, and preserving existing housing stock.

Rising Cost Burden

Rental costs have stabilized following historic increases in 2021 and 2022. As of the third quarter of 2023, rental growth slowed to rates of less than 1 percent, down from 15 percent in early 2022. Although these reduced growth rates have offered relief for some households, asking rents still exceed prepandemic levels. The report finds that 50 percent of all renters are now cost burdened, paying more than 30 percent of their income on rent and utilities. The overall cooling of the rental market comes as the supply of lower-cost units has diminished; more than 2.1 million units renting for less than $600 per month have been lost since 2012. From 2012 through 2022, higher construction costs and increased demand from high-income renters fueled an increase of 8.4 million units renting for more than $1,400, which is unaffordable for most renters.

Panelists discussed the effects of these rental market shifts on homelessness rates and examined solutions to keep people stably housed. As of January 2023, more than 653,000 people were experiencing homelessness — the highest on record. During the pandemic, rental assistance and eviction moratoria helped families stay in their homes and thwarted an increase in homelessness. As these protections ended, rents rose in 2022, and the number of people experiencing homelessness jumped by approximately 71,000 people in just 1 year. One solution to the homelessness crisis, noted Herbert, is a Housing First approach, which offers people housing without prerequisites for entry. Permanent supportive housing commonly is offered through the Housing First approach and provides wraparound services such as case management, financial assistance, life skills, health care, and behavioral counseling. As Herbert indicated, "Housing First is not housing only." "Homelessness is solvable," noted Waggoner, and harnessing resources into models such as Housing First can help households achieve stability and quality of life.

Financial Constraints

The report found that although multifamily housing construction increased during the pandemic, it began to slow in late 2023. In October 2023, new multifamily housing starts were down by 30 percent from 2022, and the report notes that the reduced starts could have lasting effects on the current shortage of multifamily housing. High interest rates are making these projects more challenging to develop, with property owners needing larger loans to finance property acquisition and construction, said Airgood-Obrycki. From October 2021 to June 2023, multifamily mortgage interest rates increased more than 2 percentage points to 5.5 percent. In addition, noted Cannava, property insurance premiums have skyrocketed by 30 or 40 percent in some areas, which can limit the number of affordable units a property owner can provide. Cannava explained that in some cases, borrowers opt for reduced coverage to bring down their insurance costs, but this strategy can place properties in an insecure position if a natural disaster occurs. In addition, these increased insurance costs also can lead property owners to compensate by cutting back on maintenance and necessary upgrades.

Breaking Barriers

More states are reducing regulatory barriers to facilitate multifamily construction. Historically, discriminatory zoning laws have restricted people of color and low-income residents to limited areas. Waggoner explained that zoning reform is critical to increasing the supply of affordable housing. For example, she said that allowing the construction of low-density structures such as accessory dwelling units in areas previously zoned exclusively for single-family homes can expand the availability of affordable housing in neighborhoods of opportunity. Herbert highlighted a housing choice law in Massachusetts that requires every community served by local transit to have one zoning district where a minimum of 15 units is permitted per acre as of right. This law demonstrates the power of states as partners in solving the housing supply crisis, especially in high-opportunity areas that lack adequate zoning for multifamily housing.

HUD has implemented several initiatives to spur affordable housing development. Risk sharing at the state and local levels helps spread the high costs of multifamily projects to avoid passing on that burden to renters. Handelman explained that under the Biden-Harris administration's Housing Supply Action Plan, HUD and the U.S. Department of the Treasury restarted the Risk Sharing Program and the Federal Financing Bank, which together help state and local housing finance agencies access low-cost capital for affordable housing production. Handelman indicated that the initiative has already disbursed $1.9 billion to approved state and local agencies. In addition, the Rental Assistance Demonstration (RAD), which works primarily to preserve aging public housing, has invested approximately $19 billion in construction improvements to help properties meet quality and environmental standards. HUD also increased and indexed the Federal Housing Administration's large loan limit to ensure that high-cost projects that require larger loans can "get normal underwriting and move through the process more expeditiously," with few regulatory barriers, said Handelman.

Mitigating Risk to Aging Housing

The report indicates that the country's rental housing stock is aging, with a median age of 44 years in 2021 — an increase from 34 years in 2001. This aging housing stock requires substantial upgrades in habitability, energy efficiency, and accessibility standards, and it also faces a heightened risk of damage from climate change and extreme weather events. Waggoner discussed the disproportionate impact of climate change on people of color based on the location of housing in low-income neighborhoods and the history of land use policies. She explained the need to eliminate red tape and expedite federal assistance to help these communities recover after a disaster. Panelists also discussed the need to adopt climate policies that are preventative rather than reactionary. Doing so requires a greater focus on adaptation by examining the location of utilities in a structure and using innovative construction methods and materials to increase resilience to floods and wind, said Herbert. Adaptation plans should include all classes of rental housing, especially units managed by small "mom-and-pop" landlords, Herbert noted, who help supply a substantial portion of the affordable rental housing stock. To this end, HUD has acted to increase funding for green and energy-efficiency upgrades through the Inflation Reduction Act of 2022 and has already awarded $300 million to developments to improve energy efficiency.

Looking Ahead

Considering the widening gap between the rental housing supply and what people can afford, panelists highlighted the need to expand rental assistance and reform zoning laws. The need for more rental assistance has outpaced available funds; only one-quarter of income-eligible renter households are able to receive assistance, leaving many households vulnerable to housing instability. In addition to regulatory barriers that hinder multifamily construction in single-family neighborhoods, high financing costs have made multifamily housing projects difficult to pencil out. Handelman explained that programs such as RAD are vital to preserving the existing housing stock, some of which is in "the hearts of our cities, right near transit." As extreme weather events become more frequent, the panelists emphasized the importance of deploying federal resources to make energy-efficient upgrades to aging buildings and improving hazard mitigation plans. Taking these steps can unlock more affordable housing supply to accommodate the growing need.