A report released by HUD the week of April 13 shows that between 2009 and 2011, the number of affordable rental units increased, but made up a smaller share of the overall rental stock. HUD’s Rental Market Dynamics report, based on the biennial American Housing Survey, focuses specifically on trends related to rental affordability.
The analysis breaks down rental units into eight affordability categories. The three most affordable categories are non-Market (either zero rent or a subsidized rent), extremely low rent (affordable to renters with incomes less than or equal to 30% of local area median income (AMI), and very low rent (affordable to renters with incomes greater than 30% but less than or equal to 50% of local AMI).
From 2009 to 2011, the rental stock grew by almost 3.3 million units, including an increase of 1.0 million units in the three most affordable categories. The largest increase came from units that were previously in the owner-occupied or seasonal stock, with a net addition of 2.1 million units, 695,000 of which were in one of the most affordable categories. Another 49,000 units were added to the most affordable categories as they filtered down from a lesser affordable category. The most affordable categories also gained 278,000 units due to a shift in the weights applied to the units in the sample survey. There was a net loss of 15,000 units because the stock of the most affordable categories lost more units than were newly constructed. The remaining growth in the number of rental units in the three most affordable categories can be attributed to a net inflow of units from the least affordable categories (49,000), and a shift in the weights applied to the units in the survey sample (278,000).
Despite the addition of one million units that were affordable at the three most affordable brackets, the share of these affordable rentals continued to decrease. The rental market share of the three most affordable categories fell from 44.8% in 2009 to 43.7% in 2011. The increase in units, but decrease in rental market share can be explained by the decreasing homeownership rate. Homeownership peaked in 2005 at 69.2%, but fell to 63.9% in the fourth quarter of 2014.
The analysis illustrates that the housing market is showing signs of recovery, but the decline in homeownership and the falling share of affordable units indicate that the housing market still lacks affordable rental housing.
A limitation to this technical report is that it is difficult to ask respondents in a general survey about whether their home is subsidized. As a result the American Housing Survey definition of subsidized housing is somewhat broad and imprecise.
Rental Market Dynamics is at http://www.huduser.org/portal/datasets/cinch/cinch11/Rental_Mrkt_09-11.pdf.