Demand for rental housing is on the rise, but the federal government is reducing its role in the sector, according to a report from ""Harvard University's Joint Center for Housing Studies"":http://www.jchs.harvard.edu/ (JCHS). As such, the Center expressed concern for the future availability of affordable housing.[IMAGE]
""As policymakers take steps to reduce the role of the GSEs and FHA in multifamily lending, it is important to bear in mind the key role these institutions play in the affordable segment of the market, as well as in underserved and weaker markets where capital outside of government channels is scarce,"" stated the JCHS report.
More than 1.1 million rental households took shape from 2011 to 2012, accounting for all net household growth over the year.
Rental households now make up 35 percent of all households in the United States, according to JCHS.
The demographics of renters are changing, with increased numbers of families and older individuals renting, but ""[r]elative to owner households, renters are more likely to[COLUMN_BREAK]
be young, low-income, and minority, and are also more likely to be single-person households,"" JCHS stated.
The median household income for a rental household is $31,200 as of 2011, which is about half the median household income for homeowners, according to JCHS.
As rental demand rises, prices rise in response. The median asking price for a vacant rental home in 2012 was $720, a record-high, according to JCHS.
Rents are rising at a faster pace than inflation. The yearly increase in the consumer price index for rental residences in April was 2.7 percent, well above the rise in inflation over the same time period Ã¢â‚¬" 1.1 percent. The index has risen for 34 consecutive months.
Amid these conditions, multifamily loans are performing better, with a decline in 90-day delinquency rate from 4 percent in 2009 to less than 2 percent last year.
Researchers at the Center are concerned that as the federal government decreases its activity in the multifamily market, affordable housing may become scarce.
The Federal Housing Finance Agency (FHA) has pledged to decrease the GSEs' multifamily activity by 10 percent this year, and the FHA will also likely decrease its activity in the multifamily market.
""Scaling back the lending capacity of the GSEs and FHA raises concerns about future financing for affordable multifamily housing,"" said JCHS in its report.
One solution, according to the researchers, is for the FHA to engage in risk-sharing with state and local governments. This format has already financed more than 100,000 affordable rental housing units with lower costs to the federal government than traditional GSE-backed or FHA-insured loans, according to JCHS.