Between 2010 and 2018, over three-quarters of rental growth was in high-end rentals or those with incomes of $75,000 or more. According to Daniel McCue, Senior Research Associate with the Harvard Joint Center for Housing Studies, this growing demand from high-income renters is putting pressure on middle- and lower-income renters.
The reason why high-end renters have put a strain on low-income renters is the lack of high-end supply. There are more high-income renters than high-end units, leading many to rent units that would otherwise be rented by low-income renters.
“Thanks to the work of the National Low Income Housing Coalition and the Urban Institute, the lack of low-end units affordable to low-income renters is well known, with only 37 units affordable and available for every 100 extremely low-income renter households nationwide,” said McCue. “But as we noted in 2018, there is also a wide gap between the number of high-income renters and high-end rental units.”
Additionally, new rental stock is expensive, as the median asking rent of units built in 2019 was roughly $1,600 a month, which requires an income of $64,000 per year. This construction is not meeting the demand of high-income renters, meaning that new high-end units are being rented out by new, high-income renters, rather than by current high-income renters trading up to a newer unit, and therefore fewer old units are left to ‘filter down’ to lower-income renters.
McCue also notes that the growth in high-income renters signifies that access to homeownership is limited to the highest-income households.
“he fact that homeowner growth is so highly skewed towards households at the extreme high end of the income spectrum suggests that at least some of the growth in high-income renters is due to access to homeownership being increasingly limited to all but those with the highest incomes, leaving more and more households whose incomes are well above the US median income still unable to buy homes,” said McCue. “Growth in high-income renter households favors those with characteristics traditionally associated with first-time homebuyers, led by college-educated, married, non-Hispanic white households under 35.”