Harvard’s Joint Center for Housing Studies Report: America’s Rental Housing 2022 Release

Harvard’s Joint Center for Housing Studies Report: America’s Rental Housing 2022 Release

The 2-year period following the onset of the COVID-19 pandemic was marked by an initial decrease in rental housing demand followed by a rapid increase in demand and decrease in vacancy rates by the third quarter of 2021. On the surface, the rental market appears to have rebounded; however, a January 2022 report from the Joint Center for Housing Studies (JCHS) of Harvard University more closely examines the data to reveal disproportionate housing stability between high-income and low-income renters that the pandemic exacerbated. On January 21, 2022, JCHS held a virtual event, “America’s Rental Housing 2022,” and invited housing policy experts from the public, private, and nonprofit sectors to discuss the report’s findings. Jerusalem Demas, policy reporter for Vox, moderated the panel, which included Peggy Bailey, a senior advisor in HUD’s Office of the Secretary; Calvin Gladney, president and chief executive officer of Smart Growth America; Chris Herbert, managing director at JCHS; and Kara McShane, the head of commercial real estate at Wells Fargo.

Disproportionate Recovery in Housing Stability

The report highlights persistent challenges in housing affordability stemming from the termination of emergency assistance programs and the disparate effects of the rental market recovery on lower-income and higher-income households. In the third quarter of 2021, thanks to rising demand from high-income earners unable to find for-sale housing and a surge in construction, rental rates were 10.9 percent higher and vacancies 4.6 percent lower than they were at the onset of the pandemic. At the same time, an unprecedented amount of federal emergency housing support — more than $46 billion in 2021 — ended, leaving low-income renters vulnerable to evictions and housing instability. According to Whitney Airgood-Obrycki, research associate at JCHS, these statistics reveal the need for a housing safety net for low-income households and additional government investment in affordable housing programs.

Challenges to Building Affordable Housing in Desirable Markets

Despite periodic fluctuations in rental trends, the shortage of affordable housing remains constant. The panelists point out that many barriers to new construction are regulatory in nature. Herbert explains that developers often struggle to find land that is zoned for housing, and when they do find the land, they are likely to face a difficult approval process and resistance from neighborhood residents. To address these difficulties, governments can pass by-right laws and mandate areas to allow and create multifamily properties. These laws exist in California and are expanding to other states such as Massachusetts, which mandated that communities that host a public transit service must designate at least one zoning district to allow multifamily housing.

Land use aside, Gladney posits that outdated form-based codes that dictate design standards are hindering new construction. Instead of enforcing Euclidean zoning, or traditional zoning that creates districts based on permitted uses, Gladney recommends that jurisdictions modify these codes to mimic the architecture and style of single-family homes, potentially eliminating opposition from neighbors who believe that multifamily properties are unsightly and threaten their neighborhood’s character. In addition, code reform that allows more types of multifamily homes would promote more efficient and economical design. Developers could choose to build various housing layouts that accommodate a range of households. For example, units designed especially for single-person households would be smaller and efficiently match spatial needs, lowering the costs of production and increasing affordability for the renter. Finally, alternative means of production such as offsite and modular construction, panelized housing, and automation can also reduce costs.

Amending Public Policy to Protect Renters from Natural Disasters

Alongside the pandemic, disasters exacerbated by climate change, such as floods, winter storms, and heat waves, have devastated the rental housing stock, and investments are necessary to reinforce protections for nearly 2.1 million units of low-income housing in hazardous areas. According to the JCHS report, 40 percent of low-income housing tax credit units, 50 percent of units subsidized by the U.S. Department of Agriculture, and 30 percent of HUD project-based voucher units are at risk, and Gladney emphasizes that HUD must consider policies that strategically place subsidized housing in safer areas. One such policy is climate-smart zoning, which incentivizes landlords and owners to upgrade their properties to better protect tenants. Funding, training, and tracking the progress of sustainable interventions may help maintain these buildings while increasing their resilience to climate change risks.

In terms of mitigation, Herbert argues that regulations tend to favor homeowners instead of renters, who are more likely to face detrimental effects from a disaster. For example, 29 states require sellers to disclose to buyers whether the property being sold is located in a flood zone, whereas only 1 state requires landlords to disclose this information to renters before they sign a lease. Regarding disaster response and adaptation, the proportion of Community Development Block Grant Disaster Recovery funds given to homeowners far exceeds the proportion that supported renters who were affected by disasters.

Furthermore, the stigma of renting has relegated affordable housing to high-risk areas and exacerbated segregation. Gladney suggests that housing advocates should counter the negative perception of multifamily housing by substituting messaging that focuses on the positive aspects of multifamily affordable housing. Gladney believes that, unless addressed, this stigma will continue to disproportionately oust rental housing to climate risk areas that are away from economic opportunity.

Leveraging Private Capital Supports Affordable Rental Housing

The panelists agree that private capital from large financial institutions as well as government-sponsored enterprises and nonprofits is key to meeting the demand for affordable housing. McShane and Bailey assert that some households are forced to rent because not enough affordable options for homeownership exist, so using private capital to assist homebuyers ultimately alleviates pressure on renters. According to McShane, Wells Fargo lends to more than 150 community development financial intuitions, which offer financing to low-income households. Wells Fargo’s Community Lending and Investment disbursed nearly $8 billion in private capital in 2021 to develop or maintain approximately 44,000 affordable housing units.

McShane explains that banks should target mission-driven organizations because they have already committed to the goal of creating affordable housing but may lack the capital to maximize their impact. One such organization is Breaking Ground, a nonprofit in New York City whose latest rental property, a 37-unit building, received 47,000 applications. Private funding to these organizations not only increases supply but also supports the operations and evidence-based services needed to maintain housing stability for tenants.

Although the pandemic and hazardous climate change events have offered lessons on how to better support low-income households during a crisis, the panel discussion ultimately focuses on how to shift from emergency support to permanent support. Accomplishing this shift successfully requires cohesion among policymakers, the private institutions that fund the construction of affordable housing, and the nonprofit organizations with the expertise to ensure long-term success for low-income renters.