Affordable Rents Remain Elusive Amid Strong Demand, Lagging Incomes
Robust demand for apartments and subpar salaries are leaving residents struggling to afford rent in many U.S. cities, including Miami, where a solution to the nationwide problem may be taking shape.
Miami and San Diego are the two most rent-burdened metropolitan areas in the country, according to Freddie Mac, the government-sponsored enterprise focused on carrying out federal efforts to support home ownership. Greater Los Angeles, New York City and Orlando round out the top five, according to Freddie Mac's findings.
The mortgage giant said its 20-city rankings are based on aggregate data from widely cited affordability studies completed by the National Low Income Housing Coalition, New York University and Harvard University. The findings indicate a need for apartment development, which in turn can spur retail projects and eventually industrial demand for distribution centers as new residents shop online.
“The vast majority of the units Freddie Mac finances are affordable,” Steve Guggenmos, a Freddie Mac vice president, said in a statement. “Even so, our research shows that supply just hasn’t kept pace with demand in many metros, and that’s pushing affordable rents out of reach for millions of American families.”
San Francisco did not rank in the top 10, while Washington, D.C., and Boston also did not make the list. Guggenmos explained that incomes in those high-cost areas generally are keeping up with rents.
“What tends to be lost in the analysis is the impact of high rents on tenants who earn well below the median renter income,” he said in the statement. “Firefighters, police officers, teachers and other members of a city’s vital workforce earn only modestly more than their suburban or rural counterparts. As a result, they often struggle to afford housing in the communities in which they serve.”
The report defines metropolitan Miami as Miami-Dade, Broward and Palm Beach counties, while San Diego is made up only of San Diego County.
Freddie Mac noted that the rental affordability problem extends beyond Miami to other parts of the Sunshine State.
“Rents in Florida are near the average for the top 50 metro areas,” according to the report. “However because renter household income in these markets is significantly lower than the national average, many households are considered rent-burdened.”
Miami-Dade historically has been one of the most rent-burdened areas in the country, though there is reason for optimism, according to Christos Costandinides, an economist with CoStar Market Analytics. The county leads all major metropolitan areas with the highest number of apartment units under construction as a percent of inventory, according to CoStar data.
With more supply in the pipeline, rents are projected to increase over the next year by an average of 2%, slightly below the estimated rate of inflation in Miami-Dade County. Meanwhile, Miami's median household incomes have grown by more than 25% over the past five years and are expected to rise by 17% in the next five years.
“So Miami’s affordability is rising as household income is rising above that of the rest of the country, and rental affordability should continue to improve over the next five years given the large construction pipeline,” Costandinides said in an email.
Still, he cautioned that Miami-Dade needs to broaden its economic base to accelerate household income growth.
In San Diego, the apartment supply is less than what is necessary to support population growth, and budget-conscious renters are suffering the most, according to the latest report from CoStar Market Analytics.
“Fewer areas of San Diego offer affordable options for residents, leading to a noticeable uptick in out-migration,” the report noted.
The other cities on Freddie Mac’s list are, in order from the top five: New Orleans; Tampa, Florida; San Jose, California; Virginia Beach, Virginia; Denver; Las Vegas; San Francisco; Philadelphia; Portland, Oregon; Chicago; Atlanta; Sacramento, California; Austin, Texas; and Richmond, Virginia.
Article Via: CoStar
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