The outlook for owners of area rental properties has been buoyant for some time, but last month a widely-publicized report added to the long range outlook. The study presented multiple scenarios in which demand is likely to outpace the supply of rental properties in the U.S., creating a market bound to reward their owners. Not such good news for tenants, though—or, as The Wall Street Journal summarized, “Renting is unlikely to get easier anytime soon.”
The report, which was issued by Harvard University’s Joint Center for Housing Studies and the affordable-housing organization Enterprise Community Partners, focused on the growing number of U.S. households for whom rent payments present a ‘growing burden’ in terms of the percentage of income they comprise.
According to the study, nationwide, rents have continued to grow faster than incomes over the last 15 years, hindering affordability. Added to that, many federal housing subsidies have been cut in recent years. One result is that the number of households who pay more than half their income to rent is estimated at 11.8 million—three million more than in 2000.
“Renters Will Continue to Struggle for the Next Decade, Harvard Study Says” was the headline that topped Laura Kusisto’s WSJ article summarizing the report. Although the study found that some factors contributing to the rise were due to temporary economic conditions that are unlikely to continue, other demographic factors will persist. Growth in groups of those in their mid-20s to mid-30s and in the Hispanic population (both groups “tend to be disproportionately renters”) have added to demand for rental housing. At the same time, the private sector has had difficulty producing profitable housing “that is affordable to lower- and moderate-income families.”
The trend might slow and even reverse should incomes begin to outpace rents—but the overall effect might have marginal results. One expert is quoted as saying that even a full decade of solid income growth would likely produce little change in the number of severely burdened households.
One nay-saying group to challenge that outlook is the Mortgage Bankers Association, which in August concluded that Americans will form “at least” 10 million new owner household in the next decade. Such growth would be expected to ease pressure on rental stocks, lightening demand enough to slow rental price escalation.
Whichever group is right, it’s evident that the owners of local rental properties currently stand to benefit from some of the economic currents that continue to garner headlines. That’s the kind of incentive that interests the investment-minded—and if that sounds like you, why not give me a call to review some of the rental properties in town currently listed for sale?