哈佛大學(xué)住房研究聯(lián)合中心：2024年美國(guó)房屋租賃報(bào)告

20

24

AMERICA’S

RENTALHOUSING

JOINTCENTERFORHOUSING

STUDIESOFHARVARDUNIVERSITY

AMERICA’SRENTALHOUSING2024

JointCenterforHousingStudiesofHarvardUniversity

HarvardGraduateSchoolofDesign|HarvardKennedySchool

TABLEOFCONTENTS

1.ExecutiveSummary 1

2.RenterHouseholds 9

3.RentalHousingStock 17

4.RentalMarkets 26

5.RentalAffordability 34

6.RentalHousingChallenges 42

7.AdditionalResources 51

ONLINETABLESANDEXHIBITS

/americas-rental-housing

PrincipalfundingforthisreportwasprovidedbyWellsFargo.

?2024bythePresidentandFellowsofHarvardCollege.

TheopinionsexpressedinAmerica’sRentalHousing2024donotnecessarilyrepresentthe

viewsofHarvardUniversityorWellsFargo.

01

EXECUTIVE

SUMMARY

Rentalmarketsarefinallycoolingasadecades-highvolumeofnewsupplyhascomeonline,outpacingdemand.Nevertheless,morerenterhouseholdsarecostburdenedthaneverbefore,andarecordnumberofpeopleareexperiencinghomelessness.Pandemicresourcestemporarilyshoredupthehousingsafetynet,buttheneedforrentalassistanceremainsgreaterthanever.Additionally,theagingrentalstockrequiressignificantinvestmenttoaddressstructuralinadequacies,inaccessibility,andclimaterisks.Makingtheseinvestmentsischallenging,giventhecurrentmarketenvironmentofincreasingoperatingexpensesandhighinterestrates.Despitetoday’sdifficultconditions,strongdemandfromtheGenZ,millennial,andbabyboomgenerationsshouldensurethattherentalmarketslowdownisshortlived.

RentalMarketsAreSoftening

Rentalmarketsarerapidlycoolingafteraperiodofsignificantoverheating.Rentgrowthhasalmostcompletelystopped,followinghistoricallyhighrentincreasesinboth2021and2022.Inthethirdquarterof2023,rentgrowthplummetedforprofessionallymanagedapartmentstojust0.4percent,downfrom15.3percentinearly2022,accordingtoRealPage(Figure1).Whilerentsslowlyroseacrosspropertyclasses,thepaceofgrowthwasunder1percentinthethirdquarterof2023forlower-andhigher-qualityapartmentsalike.

Thisabruptdecelerationwasgeographicallywide-spread,withrentsevenfallinginsomemarkets.Inthethirdquarterof2023,rentsforprofessionallymanagedapartmentsdroppedyearoveryearin32percentofthe150marketstrackedbyRealPage,includingmanyintheWest.Just1percentofmarketspostedrentgrowthofatleast10percentinthethirdquarterof2023,asharpturnaroundfromthepreviousyearwhenrentsinhalfofthemarketsincreasedatthatrate.Whiletheslowdownisawelcomechangeforrenters,askingrentsstillremainwellabovepre-pandemiclevels.

Figure1

ApartmentRentGrowthHasStalled

AnnualChangeinAskingRents(Percent)

20

15

10

5

0

-5

20152017201920212023

AllApartmentsClassAClassBClassC

Notes:Askingrentsareforprofessionallymanagedapartmentsinbuildingswithfiveormoreunits.ClassA(ClassC)apartmentsarerelativelyhigher(lower)quality.

Source:RealPage.

JOINTCENTERFORHOUSINGSTUDIESOFHARVARDUNIVERSITY

AMERICA’SRENTALHOUSING2024

1

Someofthedecelerationmaybeexplainedbythelargenumberofnewunitsthathavecomeonlineandpushedupvacancyrates.Afterhittingapandemiclowof5.6percentinlate2021,therentalvacancyratewas6.6percentinthethirdquarterof2023,accordingtotheHousingVacancySurvey.Theriseinvacancieshasbeenevenmorepronouncedintheprofessionallymanagedapartmentsector.Inthethirdquarterof2023,5.5percentoftheseunitswerevacant,abovepre-pandemicaveragesandmorethandoubletheall-timelowof2.5percentsetinearly2022.VacancyratesinthissectorrosefastestintheSouth,reaching6.3percentinthefirstquarterof2022.

Slowingdemandhasalsohelpedrentalmarketsstabi-lizeafteratumultuous18months.Renterhouseholdgrowthsurgedinthesecondyearofthepandemic,thentumbledbeforereturningclosertopre-pandemiclevels(Figure2).Intheprofessionallymanagedapart-mentmarket,growthindemandpeakedinthefirstquarterof2022withthenetadditionofmorethan700,000householdsyearoveryearbeforeplungingtoanetlossinthefourthquarter.Followingmodestquar-terlyincreasesindemandthroughthefirsthalfof2023,anadditional91,000newrenterhouseholdsformedinthethirdquarter,nearingpre-pandemicincreases.

Figure2

ApartmentDemandHasStartedtoRebound

ChangeinApartmentHouseholds(Thousands)

800

700

600

500

400

300

200

100

0

-100

-200

201320152017201920212023

AnnualNetChange

Note:Annualnetchangeisthefour-quarterrollingtotalforprofessionallymanagedapartmentbuildingswithfiveormoreunits.

Source:RealPage.

UnaffordabilityHasHitanAll-TimeHigh

Thoughrentgrowthhasrecentlyslowedsubstan-tially,theextendedperiodofrisingrentsduringthepandemicpropelledcostburdenstonewheights.Atlastmeasurein2022,arecord-high22.4millionrenterhouseholdsspentmorethan30percentoftheirincomeonrentandutilities.Thisisanincreaseof2millionhouseholdsoverthreeyearsandentirelyoffsetsthemodestimprovementsincost-burdenratesrecordedbetween2014and2019(Figure3).Amongcost-burdenedhouseholds,12.1millionhadhousingcoststhatconsumedmorethanhalfoftheirincome,anall-timehighforsevereburdens.

Asaresult,theshareofcost-burdenedrentersroseto50percent,up3.2percentagepointsfrom2019.Thefinancialstrainhasbeenfeltacrosstheincomespec-trum.Since2019,cost-burdenshareshaverisenthemostformiddle-incomerenterhouseholdsearning$30,000to$44,999annually(up2.6percentagepoints)or$45,000to$74,999annually(up5.4percentagepoints).Higher-incomehouseholdsalsosawtheirburdenrateincreaseby2.2percentagepoints.House-holdsearninglessthan$30,000annually,apopula-tionalreadygrapplingwithpersistentlyhighburdens,recordeda1.5percentagepointincrease.

Thedwindlingsupplyoflow-rentunitsisonlywors-eningcostburdens.In2022,just7.2millionunitshadcontractrentsunder$600—themaximumamountaffordabletothe26percentofrenterswithannualincomesunder$24,000.Thismarksalossof2.1millionunitssince2012whenadjustingforinflation.Thespikeinaskingrentsduringthepandemicacceleratedthetrend,withmorethanhalfamillionlow-rentunitslostjustbetween2019and2022.

Theselosseshavecontributedtoadecades-longchallengeforrenters:rentincreasesareoutpacingincomegains.Medianrentshaverisennearlycontinu-ouslysince2001ininflation-adjustedtermsandare21percenthigherasof2022.Meanwhile,renters’incomeshaverisenjust2percentduringthesameperiod.

2

AMERICA’SRENTALHOUSING2024

JOINTCENTERFORHOUSINGSTUDIESOFHARVARDUNIVERSITY

60

30

50

25

20

40

30

15

20

10

10

5

0

0

Figure3

TheNumberofCost-BurdenedRentersHitanAll-TimeHigh

NumberofRenterHouseholds(Millions)

SharewithCostBurdens(Percent)

20122013201420152016201720182019

2011

2020

20212022

2001200220032004200520062007200820092010

SeverelyCostBurdenedModeratelyCostBurdenedSharewithCostBurdens(RightScale)

Notes:Moderately(severely)cost-burdenedhouseholdsspend30–50%(morethan50%)ofincomeonrentandutilities.Householdswithzeroornegativeincomeareassumedtohaveburdens,andhouseholdsthatarenotrequiredtopayrentareassumedtobe

unburdened.Estimatesfor2020areomittedbecauseofdatacollectionissuesexperiencedduringthepandemic.

Source:JCHStabulationsofUSCensusBureau,AmericanCommunitySurvey1-YearEstimates.

Consequently,residualincomes—theamountofmoneyavailableafterpayingforrentandutilitiestocoverotherneeds—havedroppedsignificantly.Thosewithlowerincomesareespeciallysqueezed.Renterhouseholdsearninglessthan$30,000annuallyhadanall-timelowmedianresidualincomeofjust$310permonthin2022,down47percentfrom2001afteradjustingforinflation.Further,thevastmajorityoftheserentersarecostburdened.Forthissubstan-tialsubset,themedianmonthlyresidualincomewasjust$170.AccordingtotheEconomicPolicyInstitute,asingle-personhouseholdinthemostaffordablecountiesneedsabout$2,000eachmonthtocovernonhousingneeds.

Suchtightbudgetsforcefinanciallyvulnerablerenterstomakedreadfulchoices.Centertabulationsofthe2022ConsumerExpenditureSurveyindicatethatseverelycost-burdenedrenterhouseholdsinthelowestexpenditurequartilespent39percentlessonfoodand42percentlessonhealthcarethantheirunburdenedcounterparts.Othersmayenduplivinginovercrowdedorstructurallyinadequateconditions,threateningtheirhealthandwell-being.

ARecordNumberofPeopleAreExperiencingHomelessness

Thoughpandemic-eraprotectionsandfinancialsupportstemporarilyreducedevictionfilings,theseresourcesarelargelyexpiredorwindingdown,andhousinginstabilityisonceagainontherise.TheEvictionLabestimatedthatevictionfilingsdropped58percentfromthestartofthepandemicthroughtheendof2021,aidedinpartbyfederal,state,andlocalevictionmoratoriumsandthe$46.55billionEmergencyRentalAssistance(ERA)program.However,bymid-2023,manystateshadnearlydepletedtheirERAfunds,andevictionfilingshadreturnedtopre-pandemiclevels.

Still,thepandemicraisedawarenessoftheimportanceofstablehousing,andmanystateandlocalgovern-mentsarebuildingonthatmomentum.AbouthalfoftheERAadministratorssurveyedbytheNationalLowIncomeHousingCoalitionindicatedthattheyplantocontinueoperatingtheirprogramsafterexhaustingtheirfederalallocations.Andsince2021,threestatesand12localgovernmentshaveenactedright-to-counselprogramstoconnecteligiblerentersatrisk

JOINTCENTERFORHOUSINGSTUDIESOFHARVARDUNIVERSITY

AMERICA’SRENTALHOUSING2024

3

ofevictionwithlegalrepresentation.Whiletheseeffortsarehelpful,theydonotfunctionatthesamescaleasfederalpoliciesandfundingsources.

Likeevictions,homelessnesshasgrownashousingcostshaveincreased,hittinganall-timehighof653,100peopleinJanuary2023(Figure4).Inthefirstyearsofthepandemic,renterprotections,incomesupports,andhousingassistancehelpedstaveoffaconsid-erableriseinhomelessness.However,manyoftheseprotectionsendedin2022,atatimewhenrentswererisingrapidlyandincreasingnumbersofmigrantswereprohibitedfromworking.Asaresult,thenumberofpeopleexperiencinghomelessnessjumpedbynearly71,000injustoneyear.Includedinthisincreasewereanadditional22,780peoplestayinginplacesnotintendedforhumanhabitation,includingonthestreets,incars,orinabandonedbuildings.In2023,thetotalnumberofpeopleexperiencinghomelessnessinunshelteredlocationsreached256,610,thehighestonrecord.

Risingunshelteredhomelessnessisalonger-termandgeographicallywidespreadtrend.Thenumberofunhousedpeoplestayingoutsidesheltersincreasedbymorethan83,000people(48percent)between2015and2023.Thispopulationgrewquicklyinexpen-sivestateslikeCalifornia,Washington,andOregon,whereshelterresourceswerealreadystrained,butmoreaffordablestatesalsorecordedincreases.Arizona,Ohio,Tennessee,andTexaswereamongthestateswiththelargestgrowthinthenumberofpeopleunshelteredashousingcostshaverisen.

Thecurrentadministrationhasmadeadditionalfederalresourcesavailabletoreducehomeless-nessandexpandsupportsystems.Thisincludesanunprecedented$3.1billionthroughtheUSDepartmentofHousingandUrbanDevelopment’s(HUD’s)existingContinuumofCareprogram.Significantmonieshavelikewisebeenallocatedviathe2021AmericanRescuePlan(ARP)Act,includingthe$5billionHOME-ARPprogramforservices,shelters,andhousing,plus70,000EmergencyHousingVouchers.Stateandlocalgovernmentshavealsoinvestedmorethan$3.8billion

oftheirfiscalrecoveryfundsinhomelessnessservicesandhousing.Evenso,considerablymoreaffordablehousingandrentsubsidieswillbeneededtopreventfurtherincreasesinhomelessness,tohelprehousepeopleatscale,andtoreducethecostsofthehome-lessnessresponsesystem.

HolesAreWideningintheHousingSafetyNet

Rapidlyrisingrents,combinedwithwagelossesintheearlystagesofthepandemic,haveunderscoredtheinadequacyoftheexistinghousingsafetynet,especiallyintimesofcrisis.Becauserentalassistanceprogramsarenotanentitlement,theyonlyserveoneinfourincome-eligiblehouseholds.Theirreachhasbeenfurtherconstrainedbyinsufficientbudgetoutlaysinthefaceofgrowingneed.Thoughthenumberofverylow-incomerenterhouseholdsgrewby4.4millionbetween2001and2021,thenumberofassistedhouse-holdsinthisincomerangeincreasedbyjust910,000.

Figure4

AfteraSwiftUptickin2023,aRecordNumberofPeopleAreUnhoused

PeopleExperiencingHomelessness(Thousands)

700

600

500

400

300

200

100

200720092011201320152017201920212023

TotalShelteredUnsheltered

Notes:Becauseofthepandemic,completeunshelteredcountswereunavailableinJanuary2021andshelteredcountswere

artificiallylow,likelybecauseofreducedsheltercapacity.Datafor2021arebasedon2020and2022values.

Source:USDepartmentofHousingandUrbanDevelopment,

AnnualHomelessAssessmentReportPoint-in-TimeEstimates.

4

AMERICA’SRENTALHOUSING2024

JOINTCENTERFORHOUSINGSTUDIESOFHARVARDUNIVERSITY

Consequently,60percentofverylow-incomehouse-holds(8.5million)whowereeligibleforbutdidnotreceiverentalassistancespentmorethanhalfoftheirincomeonhousingorlivedinseverelyinadequatehousingconditions—sometimesboth.Thiswasasubstantialincreasefromthe47percentofunassistedhouseholds(5.0million)withworstcasehousingneedsin2001(Figure5).

Thesubsidizedstockandrentalassistanceprogramsthatdoexisthavevulnerabilities,too.Thedwindlingpublichousingsupply,hometo835,000householdsin2022,hasamaintenancebacklogestimatedat$90billion.Toaddressthehugeneedforrepairsinanenvironmentofinsufficientcapitalfunding,theRentalAssistanceDemonstrationprogramletspublichousingauthoritiesconverttheirunitstolonger-term,stableSection8contracts.Morethan225,000publichousingunitshavebeenconvertedtodate,enablinghousingproviderstoleverageotherfundingsourcesforimprovementsandredevelopment.Still,manymoreresourcesarerequiredtosufficientlyaddressthescopeoftheneededrepairsandimprovementsandpreservethiscriticalstock.

Figure5

TheRentalAssistanceShortageContinuestoWorsen

VeryLow-IncomeHouseholds(Millions)

16

14

12

10

8

6

4

2

0

2021

2001

AssistedUnassisted:ModerateorNoProblems

SevereProblems

Notes:Severeproblemsincludespendingmorethan50%ofincomeonrentandutilitiesorlivinginseverelyinadequatehousing.

Moderateproblemsincludespending30–50%ofincomeonrentandutilitiesorlivinginmoderatelyinadequatehousing.

Source:JCHStabulationsofUSDepartmentofHousingandUrbanDevelopment,WorstCaseHousingNeedsReportstoCongress.

Thesubsidizedsupplyalsofacesexpiringaffordabilityperiodsandmaturation.TheLow-IncomeHousingTaxCredit(LIHTC)hassupportedmorethan3.6millionunitssinceitscreationin1986.Theseunitshaveaminimum30-yearaffordabilityrequirement(withlongertimelinesinsomestates),afterwhichtheycanfliptomarket-raterents.Recentestimatessuggestthataffordabilityperiodsformorethan325,000unitsaresettoexpirebetween2024and2029.Another7,000unitsarelostprematurelyeachyearwhenownersusethetaxcode’squalifiedcontractoptiontooptoutafteraninitial15-yearperiod.Likewise,theentirestockofSection515unitsmanagedbytheUSDepartmentofAgriculture(USDA),hometo378,000renterhouse-holdsinruralareas,isfacingmortgagematuritiesthatthreatencontinuedaffordability.

HousingChoiceVouchersareanothercrucialhousingsubsidyfacingchallenges.Vouchersassisted2.3millionhouseholdsin2022,coveringthedifferencebetween30percentofahousehold’sincomeandtheirarea’sfairmarketrent.Thesubsidyreliesonparticipa-tionbyprivate-marketlandlords,whoarenotrequiredtoacceptthevouchersinmostplaces.Further,theunitinspectionandapprovalprocessesaddtimeandcomplexitythatmaydetersomelandlordsfrompartic-ipating,especiallyinhotmarketswheretheincentivetoparticipatecanbelower.

Voucherholdersalsostrugglewiththeprogram.Theymaynotbeabletofindalandlordwhoacceptsvouchersorasuitableapartmentthatmeetstheprogram’sguidelines.About40percentofpeoplewhoreceiveavoucherareunabletousethesubsidyintheshortamountoftimeallottedbytheprogramtosignalease.

Whiletherehavebeenproposalstoexpandthenationalhousingsafetynetandpreserveaffordableunits,shortfallsinfederalrentalassistanceprogramsandworseningcostburdenshavepromptedstateandlocalgovernmentstoacttotheextentthattheycan.Statesandlocalitiesareleveragingotherfederalresources,suchasstateandlocalfiscalrecoveryfunds,tosupportaffordablehousing.

JOINTCENTERFORHOUSINGSTUDIESOFHARVARDUNIVERSITY

AMERICA’SRENTALHOUSING2024

5

Anumberofstates,counties,andcitiesissuedarecord

$17.2billionofmultifamilybondsin2020tosupplementLIHTCallocations.Nationwide,statesandcitiesalsogenerateabout$3billionannuallythroughhousingtrustfundstomeetlocalhousingneeds.Alloftheseeffortsarecrucialbutfallshortofthegrowingneed.

AgingRentalStockWillRequireReinvestment

Therentalstockisolderthanithaseverbeen.Themedianagewas44yearsin2021,upfrom34yearstwodecadesago.Althoughbuildingconstructionstandardsandrepairstoexistingunitshavehelpedtominimizetheproblemofstructuralinadequacy,alargenumberofrentalunitsstillfallshortofbaselinehabitabilityandsafety.Nearly4millionrenterhouse-holdsliveinphysicallyinadequateunitswithproblemssuchasstructuraldeficiencies,alackofupkeep,orinconsistentprovisionofbasicfeatureslikeelectricity,hotandcoldrunningwater,orheat.Evenamongunitsthatmeetthecriteriaforphysicaladequacy,manystillhavesignificantunmetrepairneeds.TheFederalReserveBankofPhiladelphiaestimatedin2023thatitwouldcost$51.5billiontoaddressthephysicaldefi-cienciesoftheoccupiedrentalstock.

Muchoftherentalstockdoesnotmeethouseholders’accessibilityneeds.Therapidlygrowingpopulationofolderadultswillincreasedemandforaccessibilityfeatures,giventhattheoccurrenceofdisabilitiesriseswithage.Accordingtoa2023surveyconductedbyFreddieMac,nearlyhalfofrenterswithdisabilitiessaytheirhomesareminimallyornotatallaccessible.Respondentsmostoftenreportedneedingbathroommobilityaids,homesecuritysystems,no-stepentries,andaccessibleelectricaloutlets.

Therentalstockalsoneedssignificantenergyeffi-ciencyandelectrificationmodificationstoreducegreenhousegasemissionsandthehighenergycostssqueezinglower-incomerenters.Rentalhomes—especiallythoseinsmallmultifamilybuildings—use

moreenergypersquarefootthanowner-occupiedhomes,accordingtotheResidentialEnergyConsump-tionSurvey.Olderhomesalsousemoreenergythannewerhomesandhavesignificantefficiencyandelectrificationneeds.

Aone-timeinfusionof$3.5billionfortheWeatheriza-tionAssistanceProgramthroughthe2021Infrastruc-tureInvestmentandJobsActishelpingsomerentersandrentalpropertyownerswithhomeretrofits.Simi-larly,the2022InflationReductionActprovided$8.8billioninefficiencyandelectrificationimprovementrebatesformarket-ratehousing,includingrentalunits,and$1billionforefficiencyupgradestoHUD-subsidizedproperties.However,moreincentivesareneededtomeetthechallengesofretrofittingtheexistingrentalstockandensurethatnewrentalunitsareconstructedwithhighenergyperformanceinmind.

Anothergrowingthreattothequalityofthenation’sstockofrentalhousingcomesfromtheincreasingfrequencyandseverityofweather-andclimate-relatedhazardslikewildfires,flooding,earthquakes,andhurricanes.Morethan18millionoccupiedrentalunits(41percent)arelocatedinareaswithsubstantialexpectedlossesfromsuchevents.Simultaneously,agrowingnumberofinsurersaredecliningcoverageinhigh-riskhousingmarkets,makingitincreasinglydifficultandexpensiveforpropertyownersandrenterstoobtainandaffordtheinsuranceneededtocoverpotentiallosses.Toprotecthouseholdsandcommu-nities,statesandlocalitieswillneedtopushforhazardmitigationandclimateadaptationmeasuresforindi-vidualpropertiesandacrossregions.

HighInterestRatesHaveDepressedMarketActivity

Withinterestratesrisinginto2023,thecostofdebttoacquireandbuildmultifamilypropertieshasrisen.Atthesametime,hightreasuryyieldshaveincreasedthecostofequity,asapartmentsmustprovidegreaterreturnstoinvestorstocompetewithTreasurynotes.

6

AMERICA’SRENTALHOUSING2024

JOINTCENTERFORHOUSINGSTUDIESOFHARVARDUNIVERSITY

Againstthisbackdrop,borrowingandtransac-tionactivityhasdeclined.MorethanhalfthebankssurveyedbytheFederalReservereportedthatdemandformultifamilyloanshasdecreased.Further,nearlytwo-thirdsofmultifamilylenderstightenedtheirunderwritingcriteriainresponsetouncertainprop-ertyperformanceandinterestratehikes.Multifamilymortgageborrowingwasdown48percentyearoveryearinthesecondquarterof2023.

Asthecostofcapitalhasrisen,propertypriceshavedropped.Thebeginningof2023markedthefirsttimethatapartmentpricesfellyearoveryearinmorethanadecade.Bythethirdquarter,pricesweredown13percent,aremarkableturnaroundfromthepeak23percentgrowthratepostedatthebeginningof2022.

Fallingpropertypricesreflectrisingcapitalizationrates—anindicatorofreturnsusedtocompareinvest-ments.AccordingtoMoody’sAnalytics,capratesfellthrough2022beforerisingby0.9percentagepointsoverthefirstthreequartersof2023to5.8percent.Inthecurrentenvironment,higher-riskmultifamilyinvest-mentcanbelessattractivethanlower-riskTreasuries.

Forthosewhoalreadyownrentalproperties,netoperatingincomesarerisingataslowerpaceasrent

growthmoderatesandexpensesincrease.AccordingtoYardiMatrix,thecostofoperatingmultifamilyprop-ertiesgrew9percentyearoveryearinJune2023.Inresponse,netoperatingincomegrowthslowedto3percentinthethirdquarterof2023,fromtherecenthighof25percentpostedin2021.

Whileslowingreturnscouldsparkdelinquencies,mostpropertyownersshouldbeprotectedbythesignifi-cantequityaccruedbeforethepandemic.Moreover,mostloanswereunderwrittenwithenoughcushiontocoverdebtservice.Plus,longer-termloansconstitutethelargestshareofallmultifamilydebtandhavefewernear-termmaturitiesthatwillnotrequirerefi-nancinginthecurrenthighinterestrateenvironment.Todate,delinquencieshaveonlyinchedupfromtheirultra-lowlevels.

NewMultifamilyConstructionHasSlowed

Afteramajorboom,multifamilyconstructionhasstartedtocool.Aslateasthespring,startsremainedelevatedevenasinterestratesrose,withaseason-allyadjustedannualrateof571,000unitspostedinMay2023(Figure6).Butwithmarketsslackeningand

Figure6

NewMultifamilyConstructionHasQuicklyDeclined

AnnualizedMultifamilyUnits(Thousands,SeasonallyAdjusted)

700

600

500

400

300

200

100

0

20002002

MonthlyStarts

2004200620082010201220142016201820202022

AverageStarts(3-MonthTrailing)

Note:DataareforbuildingswithatleasttwounitsandarethroughOctober2023.

Source:JCHStabulationsofUSCensusBureau,NewResidentialConstructiondata.

JOINTCENTERFORHOUSINGSTUDIESOFHARVARDUNIVERSITY

AMERICA’SRENTALHOUSING2024

7

highfinancingcostsmakingitincreasinglydifficult

tounderwritenewdeals,startshavefallensharplyinrecentmonths.InOctober2023,startsrecededto402,000units,a30percentdecreaseyearoveryear.

Nevertheless,unitsthatwerealreadyunderwaycontinuetocomeonlineinlargenumbers.Atotalof436,000multifamilyunitswerecompletedinthethirdquarterof2023onaseasonallyadjustedannu-alizedbasis,thehighestreadingsince1988andupaboutathirdfrompre-pandemiclevels.Likewise,thenumberofmultifamilyunitscurrentlyunderconstruc-tionreachedthehighestlevelonrecordinJuly2023,maintainingthatfastpaceataseasonallyadjustedannualrateof1.0millionunitsinOctober.

Whilethepipelineofunitsunderconstructionshouldhelpprovidenewsupplyinthenearterm,decliningstartscouldworsentheexistingsupplyshortage.Addi-tionally,localregulationsandzoninglawsconstrainmultifamilyconstructioninmanyneighborhoods.Nationally,anestimated75percentofthelandinmajorcitiesiszonedexclusivelyforsingle-familyhomes.Severalstateshavepreemptedlocalzoninglawstoallowarangeofhousingoptions.In2023,Montana,Vermont,andWashingtonpassedlegisla-tionthatallowsmodest-sizedmultifamilybuildingsonlotspreviouslyzonedonlyforsingle-familyhomes,followingtheleadofCalifornia,Maine,andOregon.Zoningreformsdonotguaranteetheconstruc-tionofnewmultifamilyhousing,buttheyremoveasignificantbarrier.

TheOutlook

Overthecomingyear,thesofteningoftherentalmarketwilllikelycontinueasthepipelineofunitsunderconstructionboostssupplybeyondalreadyhighlevelsandcontinuestoslowrentgrowth.Thiswillbegoodnewsforrenters,providingreliefforhouseholds