Rental housing market skews to wealthy, reducing supply of affordable homes
By David Pendered
Cities across the country join metro Atlanta in facing shortages of affordable housing that stem, in part, from a surge in the proportion of rental homes that are built and priced for wealthy folks who want to rent, not own, a home, according to a recent report from a think tank at Harvard University.
Nationwide, the proportion of renters with household incomes above $100,000 rose by more than half between 2006 and 2016. In 2006, the rate was 12 percent; in 2016, the rate was more than 18 percent, according to the December report by the Joint Center for Housing Studies of Harvard University.
The impact on the market comes as no surprise:
- “While the share of new units renting for at least $1,100 jumped from 37 percent in 2001 to 65 percent in 2016, the share renting for under $850 shrank from just over two–fifths to under one–fifth.” (The dollars are adjusted for inflation.)
The report, America’s Rental Housing 2017, begins with this observation:
- “After a decade of broad-based growth, renter households are increasingly likely to have higher incomes, be older, and have children. The market has responded to this shift in demand with an expanded supply of high-end apartments and single-family homes, but with little new housing affordable to low- and moderate-income renters. As a result, part of the new normal emerging in the rental market is that nearly half of renter households are cost burdened.”
The findings of America’s Rental Housing 2017 closely track those presented by a real estate analyst at the June 6 meeting of the Atlanta Regional Housing Forum.
Geoff Koski, of the Bleakly Advisory Group, said the region’s dearth of affordable homes results from a lack of housing at all prices ranges. The overall shortage of housing is driving up the cost of available homes.
The region has a deficit of about 230,000 housing units, based on the premise that every 1.5 jobs creates demand for one home, Koski said. Touching on a point raised in the Harvard study, Koeski said the housing that has been built since the Great Recession has been built for an affluent market.
“Housing costs, especially near employment centers, are rising more rapidly than incomes,” he said. “Since the Great Recession, housing production is down and concentrated in the upper end.”
Another parallel issue named by Koeski and the Harvard study is the regulatory challenge of developing apartments and condos at all price points. Again, the trickle down effect reduces the amount of affordable homes built as many developers seek greater compensation for the time taken to gain government approval for a project.
“We have restrictive zoning and development policies that make it difficult [to develop] in the City of Atlanta and elsewhere,” Koski said. “We don’t have the right development policies. They are hurting us.”
America’s Rental Housing 2017 included the regulatory issue in a section that addressed construction costs. Citing estimates from RS Means, which tracks construction costs, the report noted the cost of building a basic, three-story apartment structure rose by 8 percent in the one-year period from 2016 to 2017. The report then noted:
- “Tight land use regulations also add to costs by limiting the land zoned for higher-density housing and entailing lengthy approval processes.”