Renting homes has become more popular than ever, but renters are struggling. A new report released by the Joint Center for Housing Studies at Harvard University found that half of all renters were cost burdened as of 2022.
“Climbing rents in recent years propelled US cost burdens to staggering new heights,” said the center. It also said an all time high of 22.4 million renter households spent more than 30% of their income on rent and utilities.
There were historically high rent increases in 2021 and 2022, but growth tanked in the third quarter of last year. Even as the rental market cools, the center found that there is also record homelessness and a great need for rental assistance programs. Although pandemic resources have helped renters in recent years, those resources are drying up, leaving vulnerable populations in a lurch.
“Additionally, the aging rental stock requires significant investment to address structural inadequacies, inaccessibility, and climate risks,” according to the report. “Making these investments is challenging, given the current market environment of increasing operating expenses and high interest rates. Despite today’s difficult conditions, strong demand from the Gen Z, millennial, and baby boom generations should ensure that the rental market slowdown is short lived.”
Compared to 2019 – before the pandemic – the percentage of cost-burdened renters increased by 3.2%. While rents were 21% higher in 2022 compared to 2001, renters’ incomes rose just 2%. This week, Michigan Gov. Gretchen Whitmer even noted that “rent is too damn high,” a reference to the meme-worthy New York gubernatorial candidate Jimmy McMillan, per WWJ.
“The financial strain has been felt across the income spectrum,” as rent increases still outpace income gains, said the center.
It also noted that the bulk of renter household growth over the last decade was driven by younger generations. In particular, millennials are renting at older ages and with higher incomes than people in previous generations.
“Having come of age during the Great Recession with fewer job prospects, lower wages, high student loan debt, and tightened mortgage lending, many have delayed homeownership,” the study explained. “As a result, the number of millennial-headed renter households grew by an enormous 6.2 million between 2009 and 2019 to a peak of 16.2 million. Likewise, the share of renters earning at least $75,000 annually has risen by more than 6 percentage points to 30% during this same period. Much of the growth has come from renters who are married and have college educations, a demographic that fits previous generations’ profile of first-time homebuyers.”
As the amount of higher-income renter households grows, a “dwindling supply of low-rent units is only worsening cost burdens,” for lower-income renters, said the study.
“In 2022, just 7.2 million units had contract rents under $600—the maximum amount affordable to the 26 percent of renters with annual incomes under $24,000,” it said. “This marks a loss of 2.1 million units since 2012 when adjusting for inflation.”
Looking to the future, the Joint Center for Housing Studies said that a high number of renters is expected for years to come, fueled in part by Gen Z.
“Households that lack the financial resources to become homeowners continue to rely on the rental market as their sole source of housing,” it said. “These households are an equally important component of demand. Ensuring that they have adequate, affordable housing is an ongoing policy challenge.”