What is Causing the Drop of Rent-Burdened Households

The share of rent-burdened households in the United States has declined over the past decade, albeit modestly. However, it sits just below 50% after the decline. A closer look at the data may reveal a more complex narrative than one might think at first glance.  

Between 2000 and 2010, the share of rent-burdened households in the United States grew to more than half, according to Odeta Kushi, Deputy Chief Economist at First American, in a blog post. A household is considered rent-burdened if more than 30% of the household’s income goes to monthly rent, a limit set by the Department of Housing and Urban Development. 

Having peaked at 53% in 2011, the share of rent-burdened households is down to 49% as of 2018, which is the latest year measured, according to Kushi.

“While an improvement, it’s important to note that the share of rent-burdened households remains high at 49%, representing nearly 20 million households,” Kushi stated. 

Kushi points out that incomes are part of the reason for the decline in the share of rent-burdened households. Incomes for renter households have risen over the last decade by nearly 14%. From 2010 to 2018, renter incomes grew from a median of $35,000 to $40,000. 

This is a stark contrast to the previous decade, during which renter income dropped 16%. 

However, this assessment may make things appear a little rosier than they actually are. It would be nice to think that struggling renters received raises and are no longer struggling to pay their rent. However, what we may be seeing instead is evidence of the shifting profile of renters in the United States. 

The share of higher-income renters is on the rise, according to a recent report from Harvard University’s Joint Center for Housing Studies (JCHS). More than three-quarters of the growth in renter households between 2010 and 2018 was among households earning at least $75,000. In contrast, between 2000 and 2010, 93% of growth was among low-income households. 

Aside from incomes, Kushi points to a growing supply of rental units as partly to account for the decline in the share of rent-burdened households. Again, at first glance, this sounds like good news. However, a closer look at the data reveals a more complex narrative. 

The pace of multi-family housing starts has indeed grown in recent years. Between 1995 and 2007, there were about 294,000 multi-family housing starts per month, according to Kushi’s data. Since 2015, the pace has jumped to 370,000. 

In total, there have been 36 million multi-family housing starts from 2010 to 2018, Kushi pointed out. 

However, this growth in multi-family housing construction is concentrated at the high end of the market, according to JCHS. 

Kushi says the growth in housing starts has helped keep rents from outpacing income growth. From 2010 to 2018, rents increased by an average of 7%, rising from an inflation-adjusted $960 to $1,024 per month. This rate is about half the rate of renter household income growth, Kushi pointed out in her blog post. 

Meanwhile, JCHS stated in its report, “rents have been on a remarkable uptrend.” 

As evidence that new rental units are concentrated at the high end of the market, JCHS pointed out that the median asking monthly rent for an unfurnished unit constructed between July 2018 and June 2019 was $1,620. This is a 37% rise from 2000. 

The number of rental units going for under $600 per month fell by 3.1 million between 2012 and 2017, according to JCHS. 

Despite the fact that the share of rent-burdened households has declined over the past decade, there are millions of more rent-burdened households than there were in 2001, and about 25% of today’s renters spend more than half of their incomes on housing, according to JCHS.