Limited Options Persist for Low-Income Renters

Over the last decade the affordability of rental housing has remained at a low level, according to new research from Freddie Mac Multifamily.

Fewer than 10% of all rental units are affordable to low-income renter households—those earning 50% or less of median renter income—for every year since 2010, said its new report, “Rental Affordability Reexamined.”

That’s more than four times lower than when using the most common income measure: median family income, said the report, which assessed the availability of affordable housing for renters by looking specifically at renter income.

While earlier affordable housing analyses have shown strong income growth for renters, those figures are skewed by the influx of high-income households, including former homeowners to the renter pool, the report found. It noted that the results, in part, reflect a shift away from home ownership since the Great Recession..

What’s more, the number of wage-earners per renter household increased by 2.4% from 2010 to 2018, which increased household income even though income of individual renters did not increase.

Even though aggregate statistics suggest that household income for renters has grown relative to rent growth, individual renter households are not better off, the report found, because the availability of affordable housing for them has not improved in the past decade.

“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 Steve Guggenmos, vice president of Multifamily Research and Modeling at Freddie Mac.

The report calculates multifamily rental affordability using unit-level rent data from the American Community Survey’s Public Use Microdata Sample.

The new Freddie Mac report follows on one last year, “Diminishing Affordability–Inescapable” that found a drop in affordable multifamily rental units from 56% to 39% for very low-income households making 50% or less of area median income (AMI). The affordability drop was most pronounced in fast-growing metro areas such as Austin, Denver and Orlando, the earlier report found.

Instead of using area median income, which includes income for both renter and owner households, the new report looks at renter income exclusively.

Median renter income is about 46% lower than family income, a figure derived from both renter and owner income that’s known as the Federal Housing Finance Agency (FHFA) set income. The median renter income in 2018 was $41,000, compared with a weighted average FHFA income across all metropolitan statistical areas of $76,300, the report said.