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 9:27 PM EDT, Mon September 29, 2014
The Occupy Central movement has already achieved much by bringing greater attention to Hong Kong's struggle for democracy, writes William Piekos.
updated 6:09 PM EDT, Sat September 27, 2014
As Prime Minister Narendra Modi visits America, Madeleine Albright says a world roiled by conflict needs these two great democracies to commit to moving their partnership forward
updated 2:02 PM EDT, Mon September 29, 2014
John Sutter: Lake Providence, Louisiana, is the parish seat of the "most unequal place in America." And until somewhat recently, the poor side of town was invisible on Google Street View.
updated 9:11 AM EDT, Mon September 29, 2014
Julian Zelizer says in the run up to the 2016 election the party faces divisions on its approach to the U.S.'s place in the world
updated 10:19 AM EDT, Mon September 29, 2014
Ruben Navarrette says Common Core supporters can't devise a new set of standards and then fail to effectively sell it.
updated 5:45 PM EDT, Mon September 29, 2014
Earlier this month, Kenyans commemorated the heinous attack on the Westgate Mall in Nairobi.
updated 4:57 PM EDT, Mon September 29, 2014
David Wheeler says Colorado students are right to protest curriculum changes that downplays civil disobedience.
updated 9:58 PM EDT, Fri September 26, 2014
Sally Kohn says when people click on hacked celebrity photos or ISIS videos, they are encouraging the bad guys.
updated 7:55 AM EDT, Fri September 26, 2014
Loren Bunche says she walked by a homeless man every day and felt bad about it -- until one day she paused to get to know him
updated 1:41 PM EDT, Fri September 26, 2014
ISIS grabs headlines on social media, but hateful speech is no match for moderate voices, says Nadia Oweidat.
updated 8:33 AM EDT, Mon September 29, 2014
A new report counts jihadists fighting globally. The verdict? The threat isn't that big, says Peter Bergen.
updated 5:37 PM EDT, Tue September 23, 2014
Ebola could become the biggest humanitarian disaster in a generation, writes former British Prime Minister Tony Blair
updated 12:58 PM EDT, Fri September 26, 2014
ISIS has shocked the world. But will releasing videos of executions backfire? Four experts give their take.
updated 10:39 AM EDT, Fri September 26, 2014
Eric Holder kicked off his stormy tenure as attorney general with a challenge to the public that set tone for six turbulent years as top law-enforcement officer.
updated 9:09 AM EDT, Fri September 26, 2014
LZ Granderson says Obama was elected as a war-ending change agent, not a leader who would leave behind for his successor new engagement in Iraq and Syria. Is he as disappointed as the rest of us?
updated 5:10 AM EDT, Wed September 24, 2014
Gayle Lemmon says the question now is how to translate all the high-profile feminizing into real gains for women
updated 3:00 PM EDT, Thu September 25, 2014
John Sutter says the right is often stereotyped on climate change. But with 97% of climate scientists say humans are causing global warming, we all have to get together on this.
updated 8:57 AM EDT, Thu September 25, 2014
Andrew Liepman and Philip Mudd: When we declare that we will defeat ISIS, what do we exactly mean?
updated 4:40 PM EDT, Fri September 26, 2014
Thailand sex trafficking
Human trafficking is a multibillion dollar global industry. To beat it, we need to change mindsets, Cindy McCain says.
updated 6:42 PM EDT, Fri September 26, 2014
The leaders of the GOP conferences say a Republican-led Senate could help solve America's problems.
updated 10:01 AM EDT, Thu September 25, 2014
Nicholas Syrett says Wesleyan University's decision to make fraternities admit women will help curb rape culture.
updated 9:02 AM EDT, Thu September 25, 2014
Mike Downey says New Yorkers may be overdoing it, but baseball will really miss Derek Jeter
updated 8:32 AM EDT, Mon September 29, 2014
Quick: Which U.S. president has authorized wars of various kinds in seven Muslim countries?
updated 2:17 PM EDT, Wed September 24, 2014
Women's issues should be considered front and center when assessing a society's path, says Zainab Salbi
updated 2:05 PM EDT, Tue September 23, 2014
A catastrophe not making headlines like Ebola and ISIS: the astounding rate of child poverty in the world's richest country.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT