Rental Housing Is Getting Unaffordable. What’s to Be Done?
Yesterday, Harvard's Joint Center for Housing Studies released a report on the rise of renting in America—and the parallel rise in the housing-cost burden for renters. The long trend toward homeownership, the study finds, has reversed, with the rental share of households climbing from 31 percent in 2004 to 35 percent in 2012. Meanwhile, the percentage of renters paying more than 30 percent of their income for housing—considered the threshold of affordability—rose from 38 percent to 50 percent between 2000 and 2010, and the share of "severely burdened" renters, paying more than half their income toward rent, increased from 19 percent to 27 percent.
Compare that to a story today from Annie Lowrey in the New York Times Magazine on how Americans are increasingly staying put in their cities. The percentage of people moving across state lines is now half what it was in the 1990s. You'd think that geographic mobility, considered a key ingredient in America's economic success, would logically be tied to renting, while homeowners would have more trouble picking up and moving. So what gives?
Part of the answer lies in where people are moving to: cities. Central cities are home to 43 percent of renters, the Harvard study finds, while suburbs—containing 49 percent of the population—have only 40 percent of renters. This shouldn't come as any surprise to residents of the District, which has been gaining around 1,000 residents a month. Reversing the flight to the suburbs of much of the second half of the 20th century, people want to live in cities now. Not only are they moving there as college graduates; they're increasingly staying there as they start families. And in cities, many or most people rent. (Here in D.C., as of 2011, the figure was 55 percent.)
This is a great thing for cities, particularly D.C., which needs population growth to make up for the fact that most people who work here don't live here and don't pay taxes here. (Not to mention all those federal facilities that aren't contributing property taxes.) But it also causes problems. Particularly when it comes to housing.
What conclusions can we draw from the Harvard study? The study itself posits two: "Part of the solution is to persist in efforts to reduce regulatory barriers to construction of rental housing in general, because expanding the supply helps to reduce rent inflation for all households. But efforts to develop low-cost rentals deserve particular attention."
The first element is the Matt Yglesias theory: The rent is too damn high because we're artificially keeping it that way with restrictions on new supply. Just today, in fact, he reiterated that argument, blaming zoning for both limiting supply and keeping that supply out of historically desirable neighborhoods like those west of Rock Creek Park. When wealthy people have nowhere to move in these neighborhoods, they'll opt for places that are getting new supply, like Logan Circle and Columbia Heights. Rents there will then increase, and lower-income residents will be forced out.
This, of course, is also an argument for changing the Height Act to allow taller buildings, particularly in areas where the demand already exists. (Relatedly, see this Washington Post story today on just how much value people place on location when it comes to office rents.) Sure, building luxury high-rises downtown won't directly make housing more affordable for anyone. But it will give those wealthy folks a place to move that's not, say, Columbia Heights, so that when new units come to Columbia Heights, there won't be the same upward rent pressure from those well-heeled would-be residents. This will only become more important as the District's population continues to climb.
Still, while loosening regulatory constraints is helpful in the long run, the second element is needed for short-term (and long-term) relief: building and preserving more affordable housing. Mayor Vince Gray has committed $187 million to affordable housing. Ward 5 Councilmember Kenyan McDuffie has introduced a bill that would require a portion of each housing development on public land to be affordable. These measures are a good start, but won't bring D.C.'s housing burden from high to zero.
Which raises the question: Is the 30 percent affordability threshold no longer realistic? Half of all renters now pay at least 30 percent of their income toward housing. That number may only increase as more people move to cities and rental housing gets more expensive. While the price of a Mac laptop has declined over the past decade and a half and the price of milk has increased slightly, any longtime D.C. resident will tell you that rents have tripled or quadrupled in many neighborhoods in that time period. Most moderate-income people I know pay at least a third of their after-tax income toward rent. (For low-income people, it's overwhelming: According to the study, a full 71 percent of renters making under $15,000 spend more than half their income on rent.) As much as we need to fix the affordability issue, we may need to fix the formula as well.
Graph from the Harvard study