Rental Housing Shortage

Report Outline
New Urban Housing Crisis
Impact of Condominium Sales
Future of the Rental Market
Special Focus

New Urban Housing Crisis

Renters Face Low Supply, High Demand

Coping with shortages has become an American way of life in the last decade. Another item now has been added to the list of things in short supply — rental housing. Reasonably priced rental units in good neighborhoods are becoming as hard to find as gasoline for less than $1 a gallon. Nationally, fewer than 5 percent of the rental units are vacant, a level the Department of Housing and Urban Development (HUD) considers “dangerously low.” In many large cities vacancy rates are as low as 2 percent. People who are able to find a place to rent are paying more for the privilege. The gap between what a family pays for rent and for home ownership has practically disappeared in some cities.

The shortage of rental housing is being attributed partly to rising construction, maintenance and utility costs. A report published recently by the Congressional Joint Economic Committee said: “Sophisticated investors view the multi-family structure, except under unique circumstances and unique locations, as a relatively riskful, non-inflation-proof investment.” Consequently, fewer apartment buildings are being constructed.

Further aggravating the problem is the conversion of many existing apartments to condominiums or cooperatives. This trend is expected to escalate as rents fail to keep up with expenses. “Private rental housing in the United States has no future,” Michael Sumichrast, chief economist for the National Association of Home Builders, said recently. “We need them, but they are very hard to build.”