The Harvard Joint Center released its annual America’s Rental Housing Report, confirming that rental unaffordability reached unprecedented levels, affecting 22.4 million households in 2022. This marked an increase of two million households since 2019, with 12.1 million households experiencing severe cost burdens. Cost burden rates rose across all income groups, particularly impacting middle-income renters whose burdened share surged by 5.4 percentage points. Even fully employed households struggled, with 8 million full-time, year-round worker households facing cost burdens. The worsening situation has left lower-income households with minimal residual incomes, affecting their ability to meet essential expenses like food and healthcare.
Following record-breaking rent increases in 2021 and 2022, the rental market experienced a significant slowdown by the third quarter of 2023. Rent growth almost halted, with professionally managed apartment rents growing by just 0.4 percent year-over-year. Rental vacancy rates increased to 6.6 percent, with a notable rise in vacancies for professionally managed apartments. The cooling market, influenced by rising costs of debt and equity, led to a 13 percent decrease in apartment prices by the third quarter of 2023. This shift impacted apartment operators, with net operating income growth slowing to 3 percent. Multifamily construction also decelerated due to softening rent growth and rising vacancy rates.
Rental demand, buoyed by the high cost of homeownership and a strong job market, returned to pre-pandemic levels. Gen Z emerged as significant contributors to rental demand, with 7.9 million renter households in 2022. Higher-income households, with incomes of $75,000 or more, played a key role in driving rental demand, comprising 30 percent of renter households in 2022. Despite the economic vulnerability of many renters, with 32 percent earning less than $30,000, rental demand remained robust. Mobility rates among renters decreased, reflecting tightened housing markets and high apartment retention. Overall, the rental landscape is shaped by a complex interplay of economic factors, generational trends, and income disparities.