Tuesday, June 27, 2017

Our Disappearing Supply of Low-Cost Rental Housing

by Elizabeth La Jeunesse
Research Analyst
It’s not an illusion: low-cost rental housing in the US is disappearing. And our 2017 State of the Nation’s Housing report has the numbers to prove it.

Using ACS data from 2005 and 2015, our new report shows how gains in the supply of high-end units and losses of low and modest-priced units over the past decade has shifted the entire rental stock toward the high end. Nationwide, the number of units renting for $2,000 or more per month (in constant, inflation-adjusted dollars) nearly doubled between 2005 and 2015, while the number of units renting for below $800 fell by 2 percent (Figure 1).

Figure 1: Across the US

Released in conjunction with the report, our new interactive tool shows how this shift played out differently in the nation’s 100 largest metropolitan areas. Metros reporting the most dramatic losses of units renting for less than $800 per month included Austin, Seattle, Portland, and Denver – all places where apartment markets heated up in recent years.

Austin’s transformation was particularly striking. The number of units with rents under $800 declined by nearly 40 percent (a loss of around 27,000 units), while those with rents at $2,000 or more increased more than three-fold (Figure 2).

Figure 2: Austin

The pattern was similar in Denver, where the number of units renting for under $800 declined by nearly a third, a loss of 31,000 modest-priced rentals, even as the number of units with rents over $2,000 per month tripled, an increase of more than 24,000 units (Figure 3).

Figure 3: Denver


The largest aggregate increases in high-cost rentals took place in the New York, Los Angeles, San Francisco, and Washington DC metro areas. According to ACS data, the New York metro added nearly 250,000 units renting for more than $2,000 per month, while it lost more than 120,000 units renting for less than $800 a month (Figure 4).

Figure 4: New York

Los Angeles underwent a similar shift in rental stock, losing over 94,000 units renting for less than $800 between 2005 and 2015, while gaining over 200,000 high-cost units (Figure 5).

Figure 5: Los Angeles


The San Francisco and Washington DC metropolitan areas both added over 100,000 high-cost rental units. In San Francisco, the highest-cost rental segment (those renting for more than $2,400 per month) underwent particularly rapid growth, rising by 145 percent, from almost 60,000 units in 2005 to more than 146,000 units in 2015. In contrast, the stock of low-priced rentals in the region, which was quite low in 2005, was virtually unchanged over the subsequent decade (Figure 6).

Figure 6: San Francisco



In general, areas with large numbers of assisted rental units saw little or no growth in their stock of low-priced rentals but significant growth in the most expensive units. For example, the number of units renting for less than under $800 in the Boston metro was basically unchanged, while the number of units renting for more than $2,000 grew by 70 percent (Figure 7).

Figure 7: Boston

Because of such shifts, in most metro areas the share of units that rented for less than $800 a month fell between 2005 and 2015. In Austin, for example, the share of units renting for under $800 per month declined from over a third in 2005 to less than 15 percent in 2015. Similarly, the share of units renting for under $800 per month in New York City metro, home to around 3.5 million renter households, dropped from 23 percent of all units in 2005 to just 18 percent in 2015. And in the Washington, D.C. metro, the number of units renting for less than $800 per month dropped from 15 percent in 2005 to just 10 percent in 2015.

In contrast, both the number and the share of low-rent units rose in a few metros, including the Las Vegas, Cleveland, Sacramento, and Detroit metros. These areas tended to have larger numbers of distressed properties as well as lower rates of economic growth and multifamily construction, which combined to hold down the growth in real rents between 2005 and 2015. In Detroit, for example, there was a 17 percent increase in the share of units renting for less than $800 a month and only a small rise in the number of high-rent units (Figure 8).

Figure 8: Detroit



Use our interactive tool to see how the distribution of rental units changed in the nation’s 100 largest metro areas between 2005 and 2015.

Download an Excel file with the data for each metro area (W-16).

Wednesday, June 21, 2017

Wait... What? Ten Surprising Findings from the 2017 State of the Nation’s Housing Report

by Daniel McCue
Senior Research Associate

Every year, when we release our State of the Nation’s Housing report, we’re asked some variation of the question: “What surprised you in this year’s report?” Given all the time and effort that goes analyzing the data and writing the report, we are so close to it that little surprises us by the time of publication. Nevertheless, here are 10 findings in this year’s report that were new and maybe even a bit surprising:

1. For-sale inventories dropped even lower over the past year.   


For the fourth year in a row, the inventory of homes for sale across the US not only failed to recover, but dropped yet again. At the end of 2016 there were an historically low 1.65 million homes for sale nationwide, which at the current sales rate was just 3.6 months of supply - almost half of the 6.0 months level that is considered a balanced market.

2. Fewer homes were built over the last 10 years than any 10-year period in recent history.

Even with the recent recovery in both single-family and multifamily construction, markets nationwide are still feeling the effects of the deep and extended decline in housing construction. Over the past 10 years, just 9 million new housing units were completed and added to the housing stock. This was the lowest 10-year period on records dating back to the 1970s, and far below the 14 and 15 million units averaged over the 1980s and 1990s.



3. Single-family construction grew at a faster pace than multifamily construction.

The slow recovery in single-family construction picked up its pace in 2016. For the first time since the Great Recession, the rate of growth in single-family construction outpaced multifamily construction.

4. Smaller homes may be coming back.
Behind the growth in single-family construction, and as a new development in 2016, construction of smaller homes is back on the rise. The median square footage of newly completed single-family homes declined slightly, due to increase in construction of smaller-sized homes (less than 1,800 sqft).
 
5. Rental markets are still strong.  

Although there are signs of moderation, the slowdown in multifamily rental markets appears to be limited, so far, to a small number of markets. Indeed, last year, multifamily construction levels were still on the rise in most of the country, rents declined in just 10 of the 100 markets, multifamily loan originations and lending volumes both hit new record highs, and rental vacancy rates were at a 30-year low.

6. Long-term, metro-area home price trends show surprisingly wide variations.

Home prices have rebounded widely across the nation. In 2016, prices were up in 97 of 100 metros, and 41 metros had regained their nominal peak price levels from the mid-2000s. Over the longer period of time, however, the combined impact of the boom and bust has resulted in significant differences in home price appreciation across the country. In some metros (particularly on the coasts) real home prices have grown by 50 percent or more since 2000, while prices in 16 of the top 100 metros (mainly in the Midwest and South) were below 2000 levels, after adjusting for inflation.

7. The 12-year decline in the US homeownership rate may be nearing an end.

Homeownership rates flattened last year and the number of homeowners increased for the first time since 2006, suggesting trends in homeownership may be strengthening. In addition, first-time homebuyers accounted for a higher share of sales in 2016 than the year before. Still, lending remained skewed to highest credit score borrowers.

8. The homeownership gap between whites and African-Americans widened to its largest disparity since WWII.

The post-2004 decline in homeownership has been especially severe for African-Americans and has pushed black homeownership rates to fully 29.7 percentage points lower than that for whites. Comparing census data going back to WWII, the white-black difference in homeownership rates has never been wider.

9. More than half of all poor now live in high-poverty neighborhoods.

Poverty is growing, concentrating, and suburbanizing all at the same time. Overall, the total number of people living in poverty in the US increased by nearly 14 million in 2000-2015. Moreover, 54 percent of the nation’s poor live in high-poverty neighborhoods (those with poverty rates over 20 percent).

10. Poverty is growing across metros and in rural areas.

Poverty has been on the rise throughout cities, suburbs, and rural areas. Indeed, while the number of poor living in high-poverty tracts in dense, urban areas grew by 46 percent between 2000 and 2015, the number of poor living in high-poverty tracts in moderate- and lower density suburban areas more than doubled.

Read the full State of the Nation’s Housing report on our website.

Friday, June 16, 2017

Growing Demand and Tight Supply are Lifting Home Prices and Rents, Fueling Concerns about Housing Affordability

A decade after the onset of the Great Recession, the national housing market has, by many measures, returned to normal, according to the 2017 State of the Nation’s Housing report, being released today by live webcast from the National League of Cities. Housing demand, home prices, and construction volumes are all on the rise, and the number of distressed homeowners has fallen sharply. However, along with strengthening demand, extremely tight supplies of both for-sale and for-rent homes are pushing up housing costs and adding to ongoing concerns about affordability (map + data tables). At last count in 2015, the report notes, nearly 19 million US households paid more than half of their incomes for housing (map + data tables).

National home prices hit an important milestone in 2016, finally surpassing the pre-recession peak. Drawing on newly available metro-level data, the Harvard researchers found that nominal prices in real prices were up last year in 97 of the nation’s 100 largest metropolitan areas. At the same time, though, the longer-term gains varied widely across the country, with some markets experiencing home price appreciation of more than 50 percent since 2000, while others posted only modest gains or even declines. These differences have added to the already substantial gap between home prices in the nation’s most and least expensive housing markets (map).

“While the recovery in home prices reflects a welcome pickup in demand, it is also being driven by very tight supply,” says Chris Herbert, the Center’s managing director. Even after seven straight years of  construction growth, the US added less new housing over the last decade than in any other ten-year period going back to at least the 1970s. The rebound in single-family construction has been particularly weak. According to Herbert, “Any excess housing that may have been built during the boom years has been absorbed, and a stronger supply response is going to be needed to keep pace with demand—particularly for moderately priced homes.”

Meanwhile, the national homeownership rate appears to be leveling off. Last year’s growth in homeowners was the largest increase since 2006, and early indications are that homebuying activity continued to gain traction in 2017. “Although the homeownership rate did edge down again in 2016, the decline was the smallest in years. We may be finding the bottom,” says Daniel McCue, a senior research associate at the Center.

Affordability is, of course, key. The report finds that, on average, 45 percent of renters in the nation’s metro areas could afford the monthly payments on a median-priced home in their market area. But in several high-cost metros of the Pacific Coast, Florida, and the Northeast, that share is under 25 percent. Among other factors, the future of US homeownership depends on broadening the access to mortgage financing, which remains restricted primarily to those with pristine credit.

Despite a strong rebound in multifamily construction in recent years, the rental vacancy rate hit a 30-year low in 2016. As a result, rent increases continued to outpace inflation in most markets last year. Although rent growth did slow in a few large metros—notably San Francisco and New York—there is little evidence that additions to rental supply are outstripping demand. In contrast, with most new construction at the high end and ongoing losses at the low end (interactive chart), there is a growing mismatch between the rental stock and growing demand from low- and moderate-income households.

Income growth did, however, pick up last year, reducing the number of US households paying more than 30 percent of income for housing—the standard measure of affordability—for the fifth straight year. But coming on the heels of substantial increases during the housing boom and bust, the number of households with housing cost burdens remains much higher today than at the start of last decade. Moreover, almost all of the improvement has been on the owner side. “The problem is most acute for renters. More than 11 million renter households paid more than half their incomes for housing in 2015, leaving little room to pay for life’s other necessities,” says Herbert.

Looking at the decade ahead, the report notes that as the members of the millennial generation move into their late 20s and early 30s, the demand for both rental housing and entry-level homeownership is set to soar. The most racially and ethnically diverse generation in the nation’s history, these young households will propel demand for a broad range of housing in cities, suburbs, and beyond. The baby-boom generation will also continue to play a strong role in housing markets, driving up investment in both existing and new homes to meet their changing needs as they age. “Meeting this growing and diverse demand will require concerted efforts by the public, private, and nonprofit sectors to expand the range of housing options available,” says McCue.



Live Webcast Today @ Noon ET

Tune into today's live webcast from the National League of Cities in Washington, DC, featuring:

Kriston Capps, Staff Writer, CityLab (panel moderator)
Chris Herbert, Managing Director, Joint Center for Housing Studies
Robert C. Kettler, Chairman & CEO, Kettler
Terri Ludwig, President & CEO, Enterprise Community Partners
Mayor Catherine E. Pugh, City of Baltimore, Maryland

Tweet questions & join the conversation on Twitter with #harvardhousingreport

Tuesday, June 13, 2017

Would More Coordination Between Service Providers Help Address Youth Homelessness in Greater Boston?

by David Luberoff
Senior Associate Director
On a January night in 2015, 180,760 youth and young adults experienced homelessness, according to counts completed in communities across the country.

While the federal government aims to prevent and end youth homelessness by 2020, achieving that goal is challenging because many organizations that serve youth and young adults experiencing homelessness are small nonprofit organizations with small staffs and limited funding. As a result, providers often operate in silos, which not only leads to an inefficient use of limited resources but also makes it challenging to evaluate the community’s progress in ending youth and young adult homelessness.


In “Toward Developing a Regional Coordinated Entry System for Youth and Young Adults Experiencing Homelessness in Greater Boston” – a paper that received this year's Joint Center’s prize for the best student paper on housing – Elizabeth Ruth Wilson, who just received her Master in Public Policy from the Harvard Kennedy School (HKS), examines how Y2Y Harvard Square, a student-run shelter for young adults, could address some of these problems. Written as a Policy Analysis Exercise (PAE), HKS’ equivalent of a master’s thesis, the paper focuses on whether Y2Y, which was Wilson’s client, could improve services by working with other providers to develop a “regional coordinated entry system.”

The PAE draws on published materials, interviews, and site visits and includes case studies of five areas around the country that are planning and/or implementing coordinated entry systems designed to help providers better coordinate and improve intakes, assessments, and referrals for youth who are experiencing homelessness. Wilson found that while developing such systems can be challenging, their benefits generally outweigh their costs. In addition, after assessing three options for creating a coordinated regional system in Greater Boston, she recommended developing a system in Greater Boston modeled on the approach used in Portland/Multnomah County, Oregon, which has an entirely separate coordinated entry system that brings together four key youth and young adult providers. A similar system in Greater Boston, Wilson argued, could help improve and streamline the work of the three key entities that serve youth experiencing homelessness in Greater Boston: Y2Y, Bridge Over Troubled Waters, and Youth on Fire.



While Wilson believes creating such a system in Greater Boston “would benefit clients, providers, and the community,” she also notes doing so may be challenging “because Y2Y, Bridge, and Youth on Fire have limited capacity, use two different information systems, and have different funding requirements.” To overcome those challenges, she proposed short-term strategies for improving Y2Y’s capacity and collaboration with other providers. These efforts, she noted, can lay the foundation for transitioning to a regional coordinated entry system in the future. She also recommended that Y2Y, which is run by volunteers, hire paid, full-time managers, create an advisory board, and build a real-time analytics dashboard. In addition, Wilson suggested that Y2Y work with other providers to begin developing standardized procedures for client identification, intake, and referrals and a shared evaluation process. While these recommendations would be a major improvement, Wilson notes they “will not be sufficient to prevent and end youth and young adult homelessness.” Rather, she contends, they need to be pursued in conjunction with other efforts to increase the stock of affordable housing in Greater Boston and provide resources to assist and support those at risk of experiencing homelessness. Together, she says, “[those activities] will help ensure all youth and young adults in the [Greater Boston] community have a permanent place to call home.”

Download a copy of Elizabeth Ruth Wilson’s award-winning PAE.

The photos for this post were provided by Facing Homelessness, a nonprofit that works to reduce stigma associated with homelessness and encourages people to Just Say Hello to people they encounter who are in need, instead of just passing by. 

Friday, May 12, 2017

Cincinnati Event Focuses on Lessons from the PRO Neighborhoods Initiative

by Matthew Arck
Associate Analyst
The challenges—and the unexpected benefits—of collaboration among community development financial institutions (CDFIs) were the subject of a recent gathering in Cincinnati that focused on the experiences of CDFIs that have received funding from the Partnerships for Raising Opportunities in Neighborhoods (PRO Neighborhoods) program, a five-year, $125 million competitive initiative funded by JPMorgan Chase.

Kicking off the event, Karen Keogh, Head of Global Philanthropy at JPMorgan Chase, welcomed civic and non-profit leaders, along with the directors of the award-winning CDFIs to a renovated union hall in Cincinnati’s Over-the-Rhine neighborhood, commenting that the neighborhood, which many of the attendees had a personal hand in revitalizing, was “like Brooklyn, but cooler.” In her remarks, Keogh described JPMorgan Chase’s philanthropic efforts, focused on workforce readiness, small business growth, consumer financial health, and supporting communities and neighborhoods. Part of this last area of focus, the PRO Neighborhoods initiative encourages CDFIs to take on specific community development challenges.

At the event, Alexander von Hoffman, a Joint Center Senior Research Fellow who is examining the initiative’s methods and achievements, and Colleen Briggs, Executive Director of Community Innovation at JPMorgan Chase, discussed findings of the Joint Center’s research on the work of the PRO Neighborhoods recipients. Dr. von Hoffman noted that, according to a Progress Report released last fall, the entities funded by the first seven PRO Neighborhood awards have made $240 million in loans and leveraged another $350 million in additional funding. This funding has helped create 2,400 jobs and produced or preserved 1,600 units of affordable housing. 

These efforts, von Hoffman said, spanned a wide array of programs, partnerships, and places. They ranged from groups like ROC USA, which took its model of helping the residents of manufactured houses purchase their mobile-home parks into new states, to collaborations between diverse programs in specific areas, such as PRO Oakland, which makes loans to small businesses, nonprofit groups, and low-income housing developers along International Boulevard and in downtown Oakland, California. Carrying out complex collaborations in diverse locales, von Hoffman explained, has taught the PRO Neighborhoods group leaders that to succeed they must be flexible, sensitive to markets, and communicate regularly with their partners.

L-R: Charlie Corrigan (Vice President, JPMorgan Chase) moderates as Joe Neri (CEO, IFF) and Jeanne Golliher (CEO, Cincinnati Development Fund) discuss lessons from their CDFI collaboration, the Midwest Nonprofit Lenders Alliance. 

















Successful partnerships require strong relationships, added Jeanne Golliher and Joe Neri, the CEOs of Cincinnati Development Fund (CDF) and IFF, two CDFIs that were part of the Midwest Nonprofit Lenders Alliance (MNLA), one of seven entities funded in 2014 via a pilot program that became the PRO Neighborhoods initiative. They explained that MNLA, which is the subject of a recent Joint Center case study, brought together CDF’s local knowledge and IFF’s underwriting expertise to provide long-term facility loans to nonprofits in the Cincinnati and Dayton, Ohio, metro areas. (These included several projects in the Over-the-Rhine neighborhood.) Recounting the “courtship” that led to the CDF and IFF collaboration, Neri and Golliher described how clear communication and commitment to shared values and social goals turned “love at first sight” into a strong and fruitful “marriage.” Neri, for example, noted that Golliher’s passion for the people of Cincinnati ultimately led IFF to provide funding for a homeless shelter that was outside their organizations’ planned collaboration.

In formal and informal discussions at the event, leaders of other entities that have been funded by the PRO Neighborhoods program echoed Golliher and Neri’s remarks. Several participants noted that getting on the same page and hashing out details at the beginning of a collaboration can easily take a full year. This means that potential partners must be patient and probably should build “ramp-up” time into their plans. Extending the relationship metaphor that Neri and Golliher had used, several people also cautioned against “shotgun marriages” between CDFIs who come together only to secure funding from grants. While such partnerships may initially seem like a good idea, poorly thought out collaborations often end in heartbreak, they warned. On the other hand, some participants noted, well-thought out collaborations often go beyond their original scope and foster a sense of commonality and common purpose that led to better engagement with local officials and civic leaders.