Skip to main content

Why middle class can't afford rents

By Robert Hickey
April 23, 2014 -- Updated 1641 GMT (0041 HKT)
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
August 19, 2014 -- Updated 2203 GMT (0603 HKT)
It used to be billy clubs, fire hoses and snarling German shepherds. Now it's armored personnel carriers and flash-bang grenades, writes Kara Dansky.
August 20, 2014 -- Updated 1727 GMT (0127 HKT)
Maria Haberfeld: People who are unfamiliar with police work can reasonably ask, why was an unarmed man shot so many times, and why was deadly force used at all?
August 18, 2014 -- Updated 2152 GMT (0552 HKT)
Ruben Navarrette notes that this fall, minority students will outnumber white students at America's public schools.
August 19, 2014 -- Updated 2121 GMT (0521 HKT)
Humans have driven to extinction four marine mammal species in modern times. As you read this, we are on the brink of losing the fifth, write three experts.
August 19, 2014 -- Updated 1158 GMT (1958 HKT)
It's been ten days since Michael Brown was killed, and his family is still waiting for information from investigators about what happened to their young man, writes Mel Robbins
August 20, 2014 -- Updated 1723 GMT (0123 HKT)
Sally Kohn says the Ferguson protests reflect broader patterns of racial injustice across the country, from chronic police violence and abuse against black men to the persistent economic and social exclusion of communities of color.
August 18, 2014 -- Updated 1242 GMT (2042 HKT)
The former U.K. prime minister and current U.N. envoy says there are 500 days left to fulfill the Millennium Goals' promise to children.
August 18, 2014 -- Updated 1310 GMT (2110 HKT)
Julian Zelizer says the left mistrusts Clinton but there are ways she can win support from liberals in 2016
August 20, 2014 -- Updated 1738 GMT (0138 HKT)
Peter Bergen says the terror group is a huge threat in Iraq but only a potential one in the U.S.
August 16, 2014 -- Updated 1734 GMT (0134 HKT)
Mark O'Mara says the way cops, media, politicians and protesters have behaved since Michael Brown's shooting shows not all the right people have learned the right lessons
August 17, 2014 -- Updated 1523 GMT (2323 HKT)
Retired Lt. Gen. Mark Hertling says the American military advisers in Iraq are sizing up what needs to be done and recommending accordingly
August 15, 2014 -- Updated 1941 GMT (0341 HKT)
Marc Lamont Hill says the President's comments on the Michael Brown shooting ignored its racial implications
August 15, 2014 -- Updated 2146 GMT (0546 HKT)
Joe Stork says the catastrophe in northern Iraq continues, even though many religious minorities have fled to safety: ISIS forces -- intent on purging them -- still control the area where they lived
August 14, 2014 -- Updated 2226 GMT (0626 HKT)
Tim Lynch says Pentagon's policy of doling out military weapons to police forces is misguided and dangerous.
August 15, 2014 -- Updated 1315 GMT (2115 HKT)
S.E. Cupp says millennials want big ideas and rapid change; she talks to one of their number who serves in Congress
August 14, 2014 -- Updated 2357 GMT (0757 HKT)
Dorothy Brown says the power structure is dominated by whites in a town that is 68% black. Elected officials who sat by silently as chaos erupted after Michael Brown shooting should be voted out of office
August 14, 2014 -- Updated 1149 GMT (1949 HKT)
Bill Schmitz says the media and other adults should never explain suicide as a means of escaping pain. Robin Williams' tragic death offers a chance to educate about prevention
August 15, 2014 -- Updated 1505 GMT (2305 HKT)
Nafees Syed says President Obama should renew the quest to eliminate bias in the criminal justice system
August 14, 2014 -- Updated 2024 GMT (0424 HKT)
Eric Liu says what's unfolded in the Missouri town is a shocking violation of American constitutional rights and should be a wake-up call to all
August 13, 2014 -- Updated 1922 GMT (0322 HKT)
Neal Gabler says Lauren Bacall, a talent in her own right, will be defined by her marriage with the great actor Humphrey Bogart
August 15, 2014 -- Updated 1056 GMT (1856 HKT)
Bob Butler says the arrest of two journalists covering the Ferguson story is alarming
August 13, 2014 -- Updated 2035 GMT (0435 HKT)
Mark O'Mara says we all need to work together to make sure the tension between police and African-Americans doesn't result in more tragedies
August 18, 2014 -- Updated 2006 GMT (0406 HKT)
Pepper Schwartz asks why young women are so entranced with Kardashian, who's putting together a 352-page book of selfies
August 13, 2014 -- Updated 2308 GMT (0708 HKT)
Michael Friedman says depression does not discriminate, cannot be bargained with and shows no mercy.
August 12, 2014 -- Updated 1525 GMT (2325 HKT)
LZ Granderson says we must not surrender to apathy about the injustice faced by African Americans
ADVERTISEMENT