Dynamics of the Affordable Rental Housing Supply

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Housing analysts continue to point to the nation’s short supply of affordable rental housing for low-income families as a critical problem. Although the American Housing Survey (AHS) reflects a relatively stable number of rental units from 1991 to 2005, there is much more to the story. In State of the Nation’s Housing 2006, the Joint Center for Housing Studies (JCHS) at Harvard University reported that the shortfall in rental units available to low-income households reached 5.4 million in 2003. According to JCHS, the supply of low-cost rental units has eroded steadily over the past decade, with roughly 200,000 units dropping from the inventory each year. In a recent Cityscape article, economist David Vandenbroucke of HUD’s Office of Policy Development and Research (PD&R) says, “The housing stock is least sufficient for the lowest income households.... Only about 8 affordable units exist for every 10 ELI [extremely-low-income] households. Available units amount to about half this number. The stock of affordable, available, and adequate units is sufficient to house only about a third of ELIs.” ¹

While there were gains in some rental unit categories, the supply of affordable housing units for low-income families decreased between 2003 and 2005.

Housing Inventory Dynamics

Although the size of the housing stock changes over time, net numbers do not reveal the dynamics of how units are lost and added over time. PD&R conducts a series of statistical analyses called the Components of Inventory Change (CINCH) to learn more about these housing dynamics. This tool allows housing analysts to use AHS data to examine housing inventory changes. When units are lost or added to the longitudinal AHS sample, CINCH analyses shed light on the underlying activity that leads to those losses and additions to the housing stock. According to Components of Inventory Change: 2003 – 2005, most losses and gains in total housing units occurred for the reasons listed in the following table:

Losses	Gains
Demolition or disaster Mergers or conversions Movement of units Damage or condemnation Change to nonresidential use	New construction Mergers or conversions Movement of units Change from nonresidential use Restoration of temporary loss

The rental unit supply, a subset of the total housing stock, is also affected by changes in tenure; that is, when the owner’s decision to vacate or occupy a unit affects the unit’s status. Of the estimated 38.1 million rental units existing in 2003, 14.7 percent were no longer in the inventory by 2005. More than half of these units became owner occupied, whereas others became seasonal units or secondary domiciles, and still others were converted to housing for migrant workers. Others were demolished or destroyed. Of the estimated 38.4 million rental units existing in 2005, 15.7 percent were new additions; more than half of these were owner occupied in 2003.

A separate analysis of the rental housing subset, Rental Market Dynamics: 2003 – 2005, provides a picture from within the subset that is not immediately obvious. It reveals the direction and magnitude of changes in the number of units distributed across eight rent affordability categories. Overall, the results of this study show that between 2003 and 2005, shifts in the nature of the inventory favored less affordable rental units:

• Nonmarket units (subsidized or no cash rent) increased;
  
  
• Extremely-low-rent units, which are affordable at 30 percent of area median income (AMI), markedly declined with movement to higher affordability categories and loss of units from the stock;
  
  
• Very-low-rent units (affordable at 31 – 50 percent of AMI) substantially declined, mostly due to losses from the housing stock;
  
  
• Low-rent units (affordable at 51 – 60 percent of AMI) remained stable;
  
  
• Moderate-rent units (affordable at 61 – 80 percent of AMI) sizably increased;
  
  
• High-rent units (affordable at 81 – 100 percent of AMI) rose, largely as a result of movement among affordability categories;
  
  
• Very-high-rent units (affordable at 101 – 120 percent of AMI) increased modestly with a net inflow of units from nonrental sources that offset the net loss of units to other affordability categories; and
  
  
• Extremely-high-rent units (affordable at more than 120 percent of AMI) substantially increased with additions to the inventory.