A report by the Joint Center for Housing Studies of Harvard University and Enterprise Community Partners, Projecting Trends in Severely Cost-Burdened Renters: 2015-2025, predicts that the number of severely cost burdened renter households, those spending more than half of their income on housing, is likely to increase over the next decade due to demographic changes and rental cost increases that outpace income growth.
The study projected the number of severely cost burdened renter households for 2025 under various scenarios. The baseline scenario assumed both rental costs and income would increase at the expected 2% annual rate of inflation. Under this scenario, the number of severely burdened renters was predicted to increase by 1.3 million, from an estimated 11.8 million in 2015 to 13.1 million by 2025. This predicted growth can be attributed to a growing number of millennials and older adults. The report suggests that millennials are expected to form new households as they age but will be more likely to remain renters than previous generations. The number of severely cost burdened adults aged 25 to 44 would increase by almost 569,000. The report also recognizes the significant growth over the next decade in the number of adults aged 65 and older, about 30% of whom are expected to have a severe cost burden in this scenario. The number of severely cost burdened older adults would increase by almost 694,000.
The second scenario assumed that rental costs would increase faster than income over the next ten years. Under this scenario, an additional 400,000 renters were predicted to be severely cost burdened for every 0.25% increase in annual rental costs over income growth. For example, if annual rent increases are assumed to be 2.25% and annual income growth 2.00%, then the number of severely cost burdened renter households was predicted to increase by 1.7 million (1.3 million under baseline scenario + 0.4 million) from 11.8 million in 2015 to 13.5 million in 2025. The worst case in the second scenario assumed annual rent increases of 3% and annual income growth of 2%. Under these assumptions, the number of severely cost burdened renter households would increase by 3.0 million from 11.8 million in 2015 to 14.8 million in 2025. The number of severely cost burdened adults aged 25 to 44 would increase by more than 1.3 million and the number of severely cost burdened older adults aged 65 and older would increase by 1.0 million.
The third scenario assumed that income growth would outpace rent increases over the next ten years. Under this scenario, growth in the number of severely cost burdened renter households would decline by more than 370,000 relative to the baseline scenario for every 0.25% increase in annual income over annual rent increases. For example, if annual income growth was 2.50% and annual rent increases were 2.0%, then the number of severely cost burdened renter households would still increase by 0.5 million from 11.8 million in 2015 to 12.3 million in 2025. The best case under the third scenario assumed annual income growth of 3% and annual rental cost increases of 2%. Under these assumptions, the number of severely cost burdened renter households would decline by 0.2 million, from 11.8 million to 11.6 million renter households. The number of older adults aged 65 and older would still increase by 0.4 million.
Projecting Trends in Severely Cost-Burdened Renters: 2015-2025 is available at http://bit.ly/1WeclwG