Skip to main content

Why middle class can't afford rents

By Robert Hickey
updated 12:41 PM EDT, Wed April 23, 2014
Construction of luxury condos in Brooklyn, New York, in 2009.
Construction of luxury condos in Brooklyn, New York, in 2009.
STORY HIGHLIGHTS
  • In numerous cities, rents are becoming unaffordable for middle-class families
  • Robert Hickey: Part of the problem is demand for rental homes has skyrocketed
  • He says most new housing development is high-end, catering to high-earners
  • Hickey: One solution is to set a portion of new developments to be affordable

Editor's note: Robert Hickey is a senior research associate at the Center for Housing Policy, the research division of the National Housing Conference, a nonprofit that provides ideas and solutions for America's housing challenges. The opinions expressed in this commentary are solely those of the author.

(CNN) -- A decent, safe and affordable home is something all Americans need to thrive. While the lowest-income households continue to lack access to affordable rental homes, increasingly, middle-income households are also shut out.

A new analysis by Zillow finds that the typical renter can no longer afford the median rent in 90 cities across the United States. Many Americans are severely cost-burdened: 4 million working renter households pay more than half of pre-tax income on rent.

Robert Hickey
Robert Hickey

Rents are consuming large shares of income. In Boston, for example, the median rent hit $2,458 in March, up 24% from three years ago. A household would need to earn at least $96,000 annually to afford this, based on the standard definition of affordability, in which one should pay no more than 30% of income for housing. Consider that in Boston an elementary school teacher makes approximately $58,000 per year and a registered nurse $73,000, and you get the picture that the middle class is getting squeezed. Similar median rents are now the reality in Los Angeles ($2,383) and Washington ($2,453).

The housing recovery is a few years old, and home prices have started to rebound. But why isn't the rental market fixing itself?

Demand for rental homes has skyrocketed

We are seeing a major demographic convergence on the rental market. Demand is fueled by an exploding population of 20- to 30-year-old millennials looking to rent their first homes, baby-boomer retirees choosing to downsize to apartments, former homeowners exiting foreclosure, and would-be homeowners who can't access mortgages in the tightened credit market. Everyone is eyeing the same locations: cities, transit-friendly suburbs, and town centers that are walkable and close to jobs.

In the early 20th century, industrial tycoons like the Rockefellers and Carnegies amassed fortunes in railroads, steel or oil. Here, a view of Cornelius Vanderbilt's residence in New York in 1908. In the early 20th century, industrial tycoons like the Rockefellers and Carnegies amassed fortunes in railroads, steel or oil. Here, a view of Cornelius Vanderbilt's residence in New York in 1908.
Income inequality in America
HIDE CAPTION
<<
<
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
>
>>
Income inequality in America Income inequality in America

We're not building enough housing in desirable places

The pace of new residential construction has been insufficient to make up for the years when it was at a virtual standstill. We're simply not building enough rental housing -- affordable or otherwise -- in the places people want to live.

For example, in San Francisco, one of the fastest growing job markets in the country, there has been an average of about 1,500 units built annually, a level far below what is needed by the growing workforce. Last year alone, the city added 47,000 jobs.

Most new housing is high-end

In many cities, demand is so great that there are easily enough high-income renters to support prices well out of reach for the middle class, not to mention lower-wage employees and seniors. And we can expect the imbalance between supply and demand to keep rents high for well beyond the short term.

Moderately priced housing, even if it is profitable, is not as profitable as luxury housing, so the market alone will not build it.

How to fix the problem?

Local governments have preciously few housing resources these days. What they have is rightly targeted at those with the greatest housing needs: our lowest income households. But here are two ideas that would help make more housing affordable for the middle class.

Solution 1: Link growth with affordability

We need to loosen zoning restrictions to allow more rental housing to be built where it's needed most. There is room and adequate infrastructure to support sensible growth in many of our cities, transit-served suburbs and small town centers, where we should be relaxing height limits, reducing parking requirements, and permitting more modest-sized apartments and micro-units.

But given the huge demand and limited immediate availability of land, we cannot just build more housing and solve the problem, at least not in the short term. Consider Washington's recent experience. Median rents increased by 18% between 2010 and 2013 even as the city added more than 11,000 housing units. We need to keep growing, but we also need to make sure that more of what we build is affordable.

When developers are allowed to build to heights or density greater than that ordinarily permitted by law, they should be required to share a portion of that new value by including some affordable housing for low- and middle-income renters.

This is how places like Fairfax County and Arlington County, Virginia are building out their transit station areas and streetcar corridors. Developers and residents are both on board, because it's a win-win deal. Developers profit from the enormous new potential unlocked by the zoning changes, while communities benefit from the addition of mid- and lower-priced homes that meet local needs and are close to transit. Hundreds of cities and counties nationwide have adopted similar "inclusionary housing" policies.

Solution 2: Help more qualified home buyers

We need to open a release valve on the rental market by letting more qualified, middle-income households buy a home. The National Housing Conference has assembled a broad coalition to advocate replacing the temporary patchwork we have now with a reliable system to help people buy a home. Housing finance reform based on sound principles would help homeowners and ease pressure on the rental market.

These housing solutions are doable, capable of winning bipartisan support and urgently needed.

Follow us on Twitter @CNNOpinion.

Join us on Facebook/CNNOpinion.

ADVERTISEMENT
Part of complete coverage on
updated 8:21 AM EDT, Mon September 1, 2014
Carlos Moreno says atheists, a sizable fraction of Americans, deserve representation in Congress.
updated 12:25 PM EDT, Sun August 31, 2014
Julian Zelizer says Democrats and unions have a long history of mutual support that's on the decline. But in a time of income inequality they need each other more than ever
updated 12:23 AM EDT, Sun August 31, 2014
William McRaven
Peter Bergen says Admiral William McRaven leaves the military with a legacy of strategic thinking about special operations
updated 12:11 PM EDT, Fri August 29, 2014
Leon Aron says the U.S. and Europe can help get Russia out of Ukraine by helping Ukraine win its just war, sharing defense technologies and intelligence
updated 1:24 PM EDT, Fri August 29, 2014
Timothy Stanley the report on widespread child abuse in a British town reveals an institutional betrayal by police, social services and politicians. Negligent officials must face justice
updated 9:06 PM EDT, Fri August 29, 2014
Peter Bergen and David Sterman say a new video of an American suicide bomber shows how Turkey's militant networks are key to jihadists' movement into Syria and Iraq. Turkey must stem the flow
updated 11:54 AM EDT, Mon September 1, 2014
Whitney Barkley says many for-profit colleges deceive students, charge exorbitant tuitions and make false promises
updated 10:34 AM EDT, Fri August 29, 2014
Mark O'Mara says the time has come to decide whether we really want police empowered to shoot those they believe are 'fleeing felons'
updated 10:32 AM EDT, Thu August 28, 2014
Bill Frelick says a tool of rights workers is 'naming and shaming,' ensuring accountability for human rights crimes in conflicts. But what if wrongdoers know no shame?
updated 10:43 PM EDT, Thu August 28, 2014
Jay Parini says, no, a little girl shouldn't fire an Uzi, but none of should have easy access to guns: The Second Amendment was not written to give us such a 'right,' no matter what the NRA says
updated 1:22 PM EDT, Sat August 30, 2014
Terra Ziporyn Snider says many adolescents suffer chronic sleep deprivation, which can indeed lead to safety problems. Would starting school an hour later be so wrong?
updated 9:30 AM EDT, Fri August 29, 2014
Peggy Drexler says after all the celebrity divorces, it's tempting to ask the question. But there are still considerable benefits to getting hitched
updated 2:49 PM EDT, Fri August 29, 2014
The death of Douglas McAuthur McCain, the first American killed fighting for ISIS, highlights the pull of Syria's war for Western jihadists, writes Peter Bergen.
updated 6:42 PM EDT, Tue August 26, 2014
Former ambassador to Syria Robert Ford says the West should be helping moderates in the Syrian armed opposition end the al-Assad regime and form a government to focus on driving ISIS out
updated 9:21 AM EDT, Wed August 27, 2014
Ruben Navarrette says a great country does not deport thousands of vulnerable, unaccompanied minors who fled in fear for their lives
updated 9:19 AM EDT, Wed August 27, 2014
Robert McIntyre says Congress is the culprit for letting Burger King pay lower taxes after merging with Tim Hortons.
updated 7:35 PM EDT, Tue August 26, 2014
Wesley Clark says the U.S. can offer support to its Islamic friends in the region most threatened by ISIS, but it can't fight their war
updated 4:53 PM EDT, Tue August 26, 2014
America's painful struggle with racism has often brought great satisfaction to the country's rivals, critics, and foes. The killing of Michael Brown and its tumultuous aftermath has been a bonanza.
updated 3:19 PM EDT, Tue August 26, 2014
Rick Martin says the death of Robin Williams brought back memories of his own battle facing down depression as a young man
updated 11:58 AM EDT, Tue August 26, 2014
David Perry asks: What's the best way for police officers to handle people with psychiatric disabilities?
updated 3:50 PM EDT, Mon August 25, 2014
Julian Zelizer says it's not crazy to think Mitt Romney would be able to end up at the top of the GOP ticket in 2016
updated 4:52 PM EDT, Mon August 25, 2014
Roxanne Jones and her girlfriends would cheer from the sidelines for the boys playing Little League. But they really wanted to play. Now Mo'ne Davis shows the world that girls really can throw.
updated 5:04 PM EDT, Mon August 25, 2014
Kimberly Norwood is a black mom who lives in an affluent neighborhood not far from Ferguson, but she has the same fears for her children as people in that troubled town do
updated 5:45 PM EDT, Fri August 22, 2014
It apparently has worked for France, say Peter Bergen and Emily Schneider, but carries uncomfortable risks. When it comes to kidnappings, nations face grim options.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT