Demand exceeds supply of affordable rental housing

In the early 2000s, as every Class B and C apartment and office building was being converted to condos, suggestions that some people might prefer renting brought complaints from Realtors and home builders.

That was the "Buy Now, Maybe Pay Later" housing boom, during which the multifamily rental industry began calling its inventory "apartment homes" as a way of competing.

So one morning in early September 2007, we awoke to find that we were overstocked with houses and condos that no one could afford and not enough apartments to accommodate the corresponding increase in renters.

Today, the Philadelphia apartment market is stronger than ever. Every week, another building is gobbled up by investors who update kitchens, baths, and common areas, as well as turn outdoor areas into "resorts."

Multifamily construction is at the top of its game, as well. Still, studies show there aren't enough apartments to meet the growing demand.

Capital One and New York University's Furman Center for Real Estate and Urban Policy found that lower incomes and a tight rental market in Philadelphia have made finding affording housing difficult.

The number of available rental units increased by only 14 percent between 2006 and 2014, but the renter population expanded by 23 percent during that same period, the study showed.

The share of the population that rents increased in both city and suburbs. Yet 45 percent of city dwellers rented in 2014, compared with 49 percent in principal cities of metro areas nationwide. Less than a quarter of suburban residents were renters, the study reported.

Rental housing stock in the metropolitan area did not keep pace with the rise in renter population. The rental market tightened, and the vacancy rate fell from 11 percent in 2006 to 8 percent in 2014, the study reported.

Average renting-household size rose by 8 percent over the same period.

In 2014, incomes in the Philadelphia area were the second lowest of the 11 largest metro areas examined, making it difficult for many households to afford rents, the study said.

The median gross rent - generally defined in the industry as unit rent plus estimated utility costs - was slightly above $1,000, the fifth-lowest median rent among the 11 metro areas examined and about $50 more than the median in other areas nationwide.

A household earning the median income for renters in the metro area could have afforded only 28 percent of recently available units in 2014.

According to U.S. Department of Housing and Urban Development definitions, a household or family is considered "rent-burdened" if it pays more than 30 percent of its household income in gross rent.

HUD defines a household as "severely rent-burdened" if it pays more than 50 percent of its income in gross rent.

The share of Philadelphia-region residents who were rent-burdened rose to 55 percent from 51 percent, the Capital One-Furman Center study showed.

The share of renters who were severely rent-burdened rose from 27 percent in 2006 to 30 percent in 2014.

Both those shares were tied for the third-highest among the metro areas examined.

Among the lowest-earning quartile of renters, the share that was severely rent-burdened in 2014 was 78 percent, the study showed.

A 2011 assessment by the Harvard University Joint Center for Housing Studies said that more than 28 percent of the 1999 affordable-housing stock had been lost by 2009 through a combination of conversions and rents increasing relative to incomes.

215-854-2472 @alheavens

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