How the Affordability Crisis Is Hitting Renters

By: Anneken Tappe · June 25, 2024 · Reading Time: 2 minutes

Record home prices and elevated interest rates have priced many Americans out of the housing market. But renting comes with its own affordability perils, according to a report from Harvard University.

Rent Hike

The number of “cost-burdened” renters — those spending more than 30% of their income on housing — is at a record high, per the Harvard report .

Roughly half of the 45 million renters in the U.S. met this threshold at last count in 2022, while those paying more than half their household income on housing also hit an all-time high of 12.1 million.

Rent growth has outpaced wage growth for decades, but an ongoing housing shortage is to blame for the recent record highs. So what happened? It turns out the for-sale housing market is to blame here as well.

The U.S. has a shortage of housing units, which is keeping demand and prices high. Save for a short-lived increase in the first quarter, existing home sales have steadily declined for more than a year, for example. This has created more demand for rental units, driving prices up.

At the same time, higher borrowing, labor, and operating costs have been hurdles for new multifamily housing projects, which could otherwise absorb some of the rampant demand.

Regulatory Reform

Rising housing costs have put a financial burden on millions of American households, and are likely contributing to a growing unhoused population across the nation, which hit a record-high of 653,100 individuals in 2023, per the Harvard report.

To counteract this trend, Lael Brainard from the White House’s National Economic Council has argued for legislative action like tax credits and rent caps to lower costs, as reported by CNN .

State and local governments are also experimenting with regulatory reforms to boost the supply of affordable homes, offer down payment support, and provide access to low mortgage rates, and Treasury Secretary Janet Yellen just announced a $100 million affordable housing fund.

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