HomeMy WebLinkAbout02-09-15 PM Perlstein Affordable Housing Article in todays WSJAmerican cities—and not just the priciest ones—are more and more the domain of renters.
Renters made up the majority of the population in cities at the core of nine of the nation’s 11 largest metro areas in 2013, a sharp change from 2006,
when renters were the majority in just five of those cities, according to a new report.
Cities have always had a larger number of renters when compared with suburban areas, in part because the cost of owning a home within a city’s limits is
out of reach for many residents, especially in high-cost places such as New York, San Francisco and Washington, D.C.
From: dp
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Subject: affordable housing article in todays WSJ
Date: Monday, February 09, 2015 12:30:06 PM
U.S. NEWS
Renters Are Majority in Big U.S. Cities
Even Relatively Inexpensive Places Move Away From Homeownership
Transplant Mark Tobia is renting an apartment in Houston, where renters made up 54% of the population in 2013, up from 41% in
1970. PHOTO: MICHAEL STRAVATO FOR THE WALL STREET JOURNAL
Feb. 8, 2015 4:46 p.m. ET
By LAURA KUSISTO and KRIS HUDSON 92 COMMENTS
But the report, scheduled to be released Monday by New York University’s Furman Center and Capital One Financial Corp. , found a significant shift in
the proportion of renters in all major cities—even in lower-density, relatively inexpensive places such as Houston and Dallas.
A resulting demand for apartments is rising so fast that it is starting to overwhelm supply in many cities, which is pushing up housing costs nationwide. “As
the number of renters grow, if the supply of rental housing does not keep up—as it has not in most of these cities—then vacancy rates will fall, rents will
rise, and more renters will struggle with the costs of housing,” said Ingrid Gould Ellen, the Furman Center’s faculty director.
In some cases, the rise in the number of renters reflects a reversion to levels before the housing boom, when easy credit and no-down-payment
mortgages allowed many renters to become homeowners. Once the boom turned to bust, people went back to renting, either because they lost their
homes to foreclosure or they became skittish about owning. In Chicago, renters made up 53% of the population in 1990, then dropped to 46% at the
height of the housing boom in 2006 and returned to 52% in 2013.
In other cases, long-term demographic trends and changing attitudes have
diminished the appeal of the traditional American dream of homeownership. In
Houston, just 41% of the population were renters in 1970. The rate rose to 51%
by 2000 then declined slightly during the housing boom before starting to rise
again, hitting 54% in 2013.
Texas cities have seen explosive job growth, drawing many transplanted younger
workers with entry-level or middle-income jobs. Dallas-based apartment
developer Brad Miller said the young people he sees prefer to rent and want to
be able to pick up and move to places such as Denver at a moment’s notice
without having to worry about whether they can sell a condominium. “They’ll go
where the jobs are and where the money is,” said Mr. Miller, president of Encore
Multi-Family.
Mark Tobia, a single 27-year-old, moved to Houston from Boston last September
to take a job as a project manager in construction for Group 1 Automotive Inc. He
chose to rent an apartment in a complex owned by Camden Property Trust not
far from the city’s downtown. “I didn’t want to buy a place not knowing if I’d like
Houston or if I’d like the job,” Mr. Tobia said, adding that he has since become
comfortable with both.
But for many, slow income growth and a lack of savings are the main reasons for
renting instead of buying, even as mortgage rates remain historically low.
Accumulating savings has become even more difficult as rents rise in many
cities. Rents outpaced inflation in all of the 11 cities except for Dallas and
Houston, where they remained largely flat, according to the NYU-Capital One
report. Rents rose the most in Washington, D.C., over the seven-year period, with
a 21% increase in the median rent when adjusted for inflation.
“For many people, the biggest obstacle to buying is saving enough for a down
payment, which is more difficult if you’re paying a lot of rent,” said Jed Kolko,
chief economist at Trulia Inc.
The Furman Center found New York City no longer has the largest share of renters of any of the big cities, having been outstripped by Miami, where
65% of the population rents, a percentage point higher than New York. The nation’s largest city is also one of several where the percentage of renters
has been on a long-term decline, falling from 71% in 1970 to 64% in 2013.
Among the 11 cities, Philadelphia had the smallest percentage of renters in 2013, just 44%, up from 37% in 2006 and 33% in 1970. Nationwide, 64% of
households were own-occupied and 36% were renter-occupied at the end of 2014.
In the short term, economists and developers said they expect to see the percentage of renters continue to rise in most cities. “I don’t think the American
dream is dead,” said Mr. Miller, the Dallas developer. “It’s different, and it’s taking longer for people to obtain the American dream.”
Write to Laura Kusisto at laura.kusisto@wsj.com and Kris Hudson atkris.hudson@wsj.com