A lasting fallout from the Great Recession has been a sharp rise in the number of Americans who are renting rather than owning their homes. Sky-high real estate costs, financial insecurity, and job instability have pushed many people out of the home-buying market and into rental units, especially in large cities. Following supply and demand, the increase in renters has come with an increase in rental prices. Those prices have eased a bit in the last several months, but there is a disturbing trend in the numbers: Rents for the most expensive places are declining while rents for cheaper places are rising, adversely affecting those on the lower end of the income scale.
Benjamin Keys, a real estate professor at Wharton and a fellow at the National Bureau of Economic Research; Aaron Terrazas, a senior economist at Zillow; and Jenny Schuetz, a fellow in the Metropolitan Policy Program at the Brookings Institution, discussed the current trends in the rental market. They reveal that the glut of new, luxury construction units eases the price points in the upscale rental market, but there lacks an abundance of lower-priced rentals, creating a discrepancy in the top and bottom markets. Fewer affordable rentals means fierce competition for housing for lower-income renters.
The highly-desirable metro areas continue to see the largest rent increases and demand outpacing supply for affordable housing, leaving legislators to revisit zoning laws for higher-density housing and rent controls on newer buildings. While home ownership continues to be a goal for many Americans, the three agree that even with a majority of Americans working toward home-ownership, there will continue to be a steady demand for rentals even as that market slows down.
Read more at Knowledge@Wharton.
