Freddie Mac: More High-Income Households Renting, But Low-Income Renters Face Limited Options

Fewer than 10 percent of rental units are currently affordable to renter households earning 50 percent of median renter income, reported Freddie Mac, McLean, Va.

“Rental affordability continues to be a major issue as demand remains high and supply of affordable housing is both insufficient and more likely to decline than it is to grow,” said Freddie Mac Vice President of Multifamily Research and Modeling Steve Guggenmos.

Guggenmos said the GSE’s new report, Rental Affordability Reexamined, isolates renter income to better capture the availability of affordable housing to individual renters. “Although prior analyses have shown strong income growth among renters in recent years, the new report finds those numbers have been skewed by the introduction of high-income households to the pool of renters and an increase in the number of wage earners living in renter households,” he said. “Taking these changes in renter household composition into account, the new study finds that despite aggregate statistics that suggest renter household income grew relative to rent growth, households are not better off as the availability of affordable housing for individual households has not improved in the past decade.”

Rental Affordability Reexamined compared the rent amount of each rental unit with the median income (as opposed to the average income) of renters for that unit’s respective metro area. It found:

–Every year since 2010, fewer than 10 percent of all rental units are affordable to households making 50 percent or less of median renter income. That’s more than four times lower than when using the most common income measure: median family income.

–Shifting household composition partly explains why affordability appears to be getting better over time. The arrival of higher-income households into the renter group–including former homeowners with high incomes compared with most renters–drove up income for this new renting cohort.

–The number of wage earners in each renter household increased by 2.4 percent between 2010 and 2018, which increased household income without boosting the income of individual renters.

–Correcting for these factors relevant to income results, affordability levels have not improved when using renter income but instead remain essentially flat and are extremely low in all periods.