Increased Number of Renters
Since a number of owners either lost their homes or abandoned their mortgages during the financial crisis, there has been a marked shift in American renter demographics.
This shift has been most pronounced on the East and West coasts, where there has been a large increase in the renters. Las Vegas specifically has been hit the hardest, with the total number of renters increasing from 30-50%.
Areas that have seen the least difference in their number of renters include the areas of Buffalo and Long Island in New York, the Hartford region of Connecticut, and Boston, Massachusetts.
While overall there are still more female renters than males, it has been reported that male homeowners were 3x likelier to have made the move to a rental property.
Individuals of Hispanic ethnicity have also flooded the rental market at a rate higher than other ethnicities.
Additionally, adults aged 26-34 are buying fewer houses (in general) when compared to ten years ago.
Expensive and Expected to Rise
Because of the increased demand for rental properties, rental prices have risen dramatically. In general, the average rent check has been calculated to have risen 22% in years following the housing bus. This statistic was calculated using data from the top fifty largest housing markets in the US.
A new study conducted by the Harvard Joint Center for Housing Studies and Enterprise Community Partners predicts that the renting population of the United States will rise to approximately 4 million within the next 10 years.
Current rental vacancies sit at approximately 7% with ¼ of renters paying amounts equal to 50% (or more) of their wages. Harvard Joint Center estimates that this will only get worse in coming years.
In a best case scenario (where housing prices and income rise accordingly with inflation), the number of renters paying 50% or more will increase by more than 10% (which equates to over 13 million) by the year 2025.
To put this into perspective, prior to the financial crisis, the average individual was putting 29.7% of their income towards rent, an amount which peaked at 31.5% in 2011.
As a general financial rule, a person should never be putting more than 30% of their income towards housing. A 50% amount is astronomical.
Housing critics have stated that there is a large market for housing which the current American “bifurcated” housing supply currently does not meet.
People looking for places to live are generally restricted to brand-new single-family homes or tiny, overpriced apartments in high-rise buildings.
In light of rising rental prices, there has been an increased interest in building different types of housing to accommodate a wider scale of consumer needs.
Developers have been looking into “missing middle” housing, which refers to the medium-sized residential structures that sprung up around the United States between the years of 1870 and 1940. These include two-flats, duplexes, triplexes, rowhouses, bungalow courts, and more.
Missing middle housing proponents have unfortunately been faced with residential density zoning issues, as well as high building costs (resulting from a lack of builders).