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Housing: Lack of affordable housing squeezes middle income renters

| February 7, 2020

This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors.

Since the homeownership rate peaked in 2004 during the housing boom, there has been a decade long growth in renter households. The composition of rental households also shifted: renting has become more common among all age groups, and there has been a surge in high-income renters. Households with incomes above $75k accounted for over three-quarters of the growth in renters (3.2 million) from 2010 to 2018. Multifamily construction concentrated on the upper end of the market and institutional investors renovated existing buildings to upgrade units and charge higher rents. This caused the supply of low-cost rentals to shrink from 33% of rental stock in 2012 to 25% in 2017, while vacancy rates fell and rent increases outpaced wage gains. The impact has been particularly acute on low- and middle-income renters, where an increasing share, 56% and 27% respectively, are cost burdened – meaning they spend more than 30% of their incomes on housing costs. The MarketWatch article is here and the Joint Center for Housing Studies of Harvard University research report is here. Source: MarketWatch, JCHS, APS.

Exhibit 1: Strong growth in high-cost rentals coincides with drop in low-cost units

Source: Joint Center for Housing Studies of Harvard University, US Census Bureau

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