Harvard’s Joint Center for Housing Studies (JCHS) released State of the Nation’s Housing 2012 on June 14. This annual report provides a summary and analysis of current issues in the nation’s housing markets, and predictions for the future. The authors found some signs of recovery in the for-sale housing market and continued strength in the rental market, but they also concluded that housing challenges, especially for the lowest income households, have grown.

JCHS found that homeownership rates continue to decrease as more people choose or are forced into the rental market. The number of renter households grew by 5.1 million in the 2000s, and by 1.0 million in 2011, the largest one-year increase since the early 1980s. This growth brought more diversity to the rental market. While renters are still more likely to be young, minority and have lower incomes than homeowners, the recession and foreclosure crisis have boosted the numbers of other types of renters. Minority households make up a large and growing share of the renter population, but the number of White renters is increasing. JCHS also reports that a rising number of older, married couples are choosing to rent rather than own. Married couples make up just 36% of all renters, but they accounted for 50% of the growth in renter households from 2006 to 2011.

This sharp increase in demand for rental housing has led to lower rental vacancy rates, a tightening rental market and increased rents. Coupled with disproportionate growth in the number of low income households over the last 10 years, these rising rents have led to intense competition for the diminishing supply of low-cost rental units. According to the authors’ analysis of American Community Survey data, the number of renters earning $15,000 or less grew by 2.2 million between 2001 and 2010 while the number of rental units both adequate and affordable to those households declined by 470,000 over the same time period. By 2010 the shortage of units affordable to these households grew to 5.1 million units, and of these, more than 40% were occupied by higher income households.

The authors found that between 2001 and 2010, the number of severely cost burdened households, those paying more than half of their income on housing costs, increased by 6.4 million. The increase was particularly significant among households earning under $15,000. The number of households earning under $15,000 with severe burden increased by 1.5 million from 2007 to 2010, almost double the increase from 2001 to 2007. Severely cost burdened households are more likely to be renters than owners. According to the report, the number of older households with severe burden jumped from 3.1 million in 2001 to 4.1 million in 2010, and this number is expected to continue to rise dramatically as the baby boomers age.

JCHS notes that households forced to spend so much of their incomes on housing costs are left with very little for other basic necessities. This is especially true of families with children. In 2010, households with severe burden in the bottom expenditure quartile had $619 per month left over after paying their housing costs. They spent about 40% less on food, more than 50% less on clothes and healthcare and 30% less on insurance and pensions than families living in units affordable to them.

The authors write that the federal response to the deteriorating affordability of rental units has been limited. Although the income of renters continues to fall and rents continue to rise, the Housing Choice Voucher program has increased only modestly in response. Many current proposals to close the federal deficit call for major cuts to domestic spending, including on many housing programs. JCHS states that such cutbacks would be counterintuitive, moving the country even further away from the goal of decent and affordable housing for all.

Click here to view the State of the Nation’s Housing 2012 report.