Is the boom in apartment development coming to an end? The fourth-quarter reports from most commercial real estate companies’ research arms suggest that it’s not. But the latest report from the Joint Center for Housing Studies of Harvard University? It’s contrarian.
In its 2017 America’s Rental Housing report, the Joint Center argues that the booming growth in rental housing might be coming to an end. The report says that fewer new renter households are being formed, rental vacancy rates have risen and apartment rent increases have slowed.
At the same time, it’s becoming more difficult for a growing number of renters to afford monthly apartment rents. The study reports that nearly 21 million renter households continue to pay more than 30 percent of their income on rents.
“This year’s report paints a complicated picture of the rental market,” said Christopher Herbert, the Joint Center’s managing director, in a statement. “We’re finally seeing the record growth in renters slowing down. There are alarming trends that suggest a growing inability to supply housing that is affordable for middle- and working-class renters, let alone those with very low incomes.”
What are some of the signs of concerns in the apartment market? The Joint Center reported that rents have increased more slowly in most markets across the United States. The report, citing figures from RealPage, says that the year-over-year increase in nominal rents for professionally managed apartments was 2.7 percent in the third quarter of 2017. That’s a slowdown from 4 percent a year earlier and 5.6 percent two years ago.
There’s been a slowdown in new apartment construction, too. Multifamily starts plateaued in 2016 and have now fallen by about 9 percent through October of 2017.
Those apartment units added to the rental stock are concentrated in the high end of the market, according to the Joint Center. The share of new units renting for $1,500 or more rose from 15 percent in 2001 to 40 percent in 2016. The share of new units renting for less than $850 a month fell from 42 percent of the rental stock to 18 percent.
It’s little surprise, then, that nearly half of all renter households – 47 percent – are what is known as cost-burdened. This means that they pay more than 30 percent of their incomes for housing. There are 11 million renter households paying more than 50 percent of their income for housing.