Loss of rental units squeezes renters and buyers
The loss of nearly 200,000 rental units to the wrecking ball each year in the United States may bulldoze the housing hopes of millions of salary-squeezed workers and interrupt the upward mobility of house-hunters.More than 95 percent of Americans rent at some point in their lives, and the value of rental stock is estimated at more than $2.7 trillion.Yet, according to research by the Harvard University Joint Center for Housing Studies, the loss of affordable rental properties will stretch rental markets and tighten the grip on housing costs for people who can least afford it.Nic Retsinas of the Joint Center says U.S. housing policy has long centered on homes, and the deteriorating rental climate across most of the nation has been overlooked.For the 34 million families who write monthly rent checks, median rents have risen from $734 in 1994 to $974 today. In that same span, monthly renter income grew from $2,272 to $2,348.The disparity has put people in a bind, says Retsinas. Some 70 percent of the lowest income renters – almost 6 million families – spend more than 50 percent of their income on rent.”There’s not much left if you spend $15,000 a year on rent,” says Retsinas. It goes beyond housing, he says, because the more paid on rent, the less there is to spend on other necessities such as food, insurance, and clothing.But rental housing is caught in something of a catch-22. Joint Center for Housing Studies figures show about 300,000 new rental units are built each year, about half the amount built in 1980. This would still seem to more than offset the loss of older units.Those new units, however, are largely built for higher income renters who prefer to stay close to urban cores. The pricier units are well beyond the affordability range for people who relied on cheaper properties. The upshot is that renters are pushed farther away from cities or more people are forced to live in the same apartment and share rental costs. Retsinas says this compounds sprawl issues and adds to transportation costs.Higher rent amounts may delay the upward movement of potential home buyers. The effect of higher rents “may reduce the pipeline for people coming up the ladder” to purchase a home, says Retsinas. If rents surpass someone’s ability to save for mortgage down payments, the traditional stepping stone from rent-to-buying may not be in place.Retsinas also has seen “increasing resistance by communities to rental housing. It’s almost as if we’ve demonized renters.”High land costs and stringent zoning restrictions have squelched construction of affordable units, he says.
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