Source: Joint Center for Housing Studies of Harvard University (2024)
Multifamily housing starts fell by 46% in 2023, driven by high borrowing costs and economic uncertainty. Rent control exacerbates supply constraints by discouraging new development and further straining financial viability for property maintenance.
Key Findings: Broader Housing Market Trends and the Role of Rent Control
Rising Rental Costs and Affordability Challenges:
○ National rents increased 26% since early 2020, outpacing income growth and leaving half of all renters cost-burdened.
○ Severe cost burdens (spending more than 50% of income on rent) reached a record 12.1 million households in 2022, up 14% since 2019.
Erosion of Low-Cost Rental Stock:
○ Between 2012 and 2022, 2.1 million units priced below $600/month were lost, leaving just 7.2 million affordable units nationwide.
○ Rising operating costs, demolitions, and conversions contributed to the loss of 6.1 million units priced below $1,000/month.
Financial Strain on Housing Providers:
○ Operating costs for multifamily properties rose by 7.1% year-over-year, led by surging insurance premiums (+27.7%) and maintenance costs (+8.8%).
○ High expenses paired with slower rent growth led to declining net operating income and diminished resources for property upkeep.
Declining Multifamily Construction:
○ Multifamily housing starts dropped 46% in 2023, reflecting high borrowing costs and reduced developer confidence due to economic uncertainty.
○ With fewer new units in development, long-term housing supply constraints will worsen.
Conclusion:
This comprehensive analysis highlights systemic challenges in the rental housing market. Rent control policies exacerbate these issues by discouraging investment in new development and undermining the financial sustainability of existing rental stock. The result is a cycle of declining quality, reduced availability, and worsening affordability for renters.