For more than a decade, the number of American households that rent has expanded year after year, sometimes by more than a million renters annually. However, last year, the explosion of renters in the wake of the foreclosure crisis began to fade – for the first time since 2004, the number of renter households declined.
Twelve years of growth has permanently transformed the housing landscape. High-income earners account for a much larger share of renters in the U.S. today than they did when the rise of renting began in 2005. Between 2006 and 2016, the share of households earning more than $100,000 that rented their housing grew from 12 percent to 18 percent – a spike of nearly 3 million people, or almost one-third of the 9.9 million increase in renters overall.
Clearly, this is a shift with implications for high-cost cities and the economy at large. As a report from Harvard’s Joint Center for Housing Studies explained, it’s a testament to the reach and depth of the foreclosure crisis that so many former homeowners or would-be homeowners instead joined the ranks of renters. But even though the expansion of renters’ ranks may be slowing, the changes in rental housing, and in the people who choose to rent, are here for good.
The new normal, according to the Harvard report, is that today’s renters are older, wealthier, and more likely to have children. Between 2006 and 2016, the median age of renters in the U.S. jumped from 36 to 40. Families with children now represent a larger share of renter households (33 percent) than homeowner households (30 percent).
Much of the expansion in rental housing came in the conversion of single-family homes traditionally bought by households with children. Between 2006 and 2016, the report states, “the number of single-family homes available for rent increased by nearly 4 million, lifting the total to 18.2 million.” Adding to single-family-home conversions was a multifamily-home construction boom in major metro downtown areas and commercial corridors.
Rising apartment and condo buildings in gentrifying cities and neighborhoods shows where a large and growing share of renters has settled. In these areas, soaring costs for labor, land, and building materials have created rental properties that overwhelmingly cater to high-income households. Between 2011 and 2016, the median monthly rent jumped by 27 percent, to $1,480, mostly because rental housing is so expensive to build where renters want to live.
In addition, renter incomes aren’t necessarily keeping up with the cost of living. For a household to pay $1,480 a month but not spend more than 30 percent of their income on rent, a household needs to make at least $59,000. The median renter income is $37,300.
Over the last two years, the number of “cost-burdened” households – those paying more than 30 percent of their income toward rent – fell from 21.3 million in 2014 to 20.8 million in 2016. The number of “severely cost-burdened” households – those with rents accounting for more than half their income – dipped as well, from 11.4 million to 11 million.
Clearly, there is still a large number of people caught up in the aftermath of the housing crisis.
“At the average rate of improvement from 2014 to 2016, it would take another 24 years for the number of cost-burdened renters to return to the 2001 level,” according to the Harvard report.