Growth in high-income renters signals that access to homeownership is being limited to all but the highest-income households.
JOINT CENTER FOR HOUSING STUDIES OF HARVARD UNIVERSITY
DANIEL MCCUE, SENIOR RESEARCH ASSOCIATE
One of the major stories highlighted in our new America’s Rental Housing, 2020 is the growth in high-income renter households. After not growing between 1990 and 2004, the number of renter households shot up by over 10 million households since 2004. In the early years, between 2004 and 2010, households earning less than $30,000 per year accounted for two-thirds of the growth in renter households. But between 2010 and 2018, more than three quarters of all growth was among renters with incomes of $75,000 or more (Figure 1).
Figure 1: High-Income Households Have Driven Most of the Growth in Renters Since 2010
Meanwhile, rental markets are tight, with the US vacancy rate at its lowest level since the mid-1980s. The combination of high-end-driven rental growth and tight markets has created a challenging dynamic with several implications for renters and rental markets that practitioners, policymakers, advocates, and analysts need to keep in mind. These implications include the following:
Growing demand from high-income renters puts pressure on middle-and lower-income renters. read more
Growth in high-income renters limits the ability of high-end rental construction to ease pressures for lower-income renters. read more
Growth in high-income renters can mask growing difficulties faced by low-income renters. read more
Growth in high-income renters signals that access to homeownership is being limited to all but the highest-income households. read more
Joint Center for Housing Studies, Harvard University
Renter attitude surveys find that the majority of young renters still aspire to become homeowners and report affordability as the major barrier to homeownership. Indeed, as detailed in our latest State of the Nation’s Housing report, the income needed to afford the median home price rose 26 percent from 2013-2018 to $67,300. In 2018, households earning less than $100,000 could not afford the median-priced home in over 13 metro areas, and would need to earn over $347,000 to afford the median-priced home in the San Diego metro area – an area with a population of over 3.3 million. Since 2018, NAR data show the median US existing-home sales price was up another 5 percent in 2019 and 7 percent year-over-year in January of 2020.
In conclusion, the growth in high-income renters across the US creates unique challenges for lower-income renters that can be understated or even missed in the aggregate statistics on renter affordability.
Analysis of these challenges also shows how homeowner and renter markets are intertwined, and how affordability challenges faced by low- and modest-income renters are related to reduced homeownership opportunities among middle- and upper-income households.
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