Many Americans are renters—and while it’s still considered a more affordable option than buying a home, renting comes with its own cost burdens. These burdens are not limited to the lowest-income renters either.
Harvard University’s Joint Center for Housing Studies recently published a paper tackling this very issue, titled “Subsidizing the Middle: Policies, Tradeoffs, and Costs of Addressing Middle-Income Affordability Challenges,” by researchers Alexander Hermann, Whitney Airgood-Obrycki, Nora Cahill and Peyton Whitney.
Focusing on data from 2022, the report notes that nearly a third of all renters (14.4 million) earned 60% to 120% of area median income. Drilling down further, the report found that 80% of lower-income households were rent burdened in 2022, while 33% of middle-income households faced similar burdens.
Unsurprisingly, lower-income renters generally face steeper cost challenges than middle-income renters. In fact, middle-income renters had between $2,500 – $2,900 of leftover income, while lower-income renters had only $600 leftover. The main distinction is that while middle-income renters are impeded from long-term investments such as savings or retirement, lower-income renters face immediate choices between the costs of basic needs, such as food.
Regional breakdown
The report mapped all 50 U.S. states in four categories based on the number of cost-burdened middle-income renters in the state, from lowest to highest.
- Less than 20% of middle-income renters in the state are cost-burdened
- 20% – 29% of middle-income renters are cost-burdened
- 30% – 39% of middle-income renters are cost-burdened
- 40% or more of middle-income renters are cost-burdened
The most divided region is the Northeast, with New England being relatively more affordable than the rest of the country. Almost every state in the region has only 20% – 29% of its middle-income renters facing cost burdens, excluding Massachusetts, where the burdens are higher than its neighbors—30% – 39% of middle-income renters in that commonwealth are cost-burdened. Looking out to the bordering Tri-State area, New York and New Jersey also fall into the 30% – 39% range.
The states with the lowest amounts of cost-burdened renters are almost all rural Midwestern states: West Virginia, Kentucky, Indiana, Iowa, Missouri, the Dakotas, Nebraska and Kansas. The primary geographic outliers are Alabama and the similarly rural/lower populated Alaska. Ohio, with a recorded population of 11.76 million, is the most densely populated of the states where fewer than 20% of middle-income renters face cost burdens.
The South and West—generally reported as the more active regional housing markets in the nation—feature the greatest cost burdens for renters. In particular, 55% of middle-income renters in Florida are noted in the report to be cost-burdened, followed by Hawaii (50%), California and Nevada (both 49%), and Arizona (43%).
Policy prescriptions
Noting that statewide programs are the key to addressing rents, the paper investigates several such programs across different states. The overarching conclusion is that these existing programs, which are means-tested based on area median income, are designed primarily for middle-income renters and could let those who earn below the median fall through the cracks. For instance, the paper classifies the Florida Missing Middle Property Tax Exemption (an exemption for new construction) targeted at renters who make 80% – 120% of area median income.
The paper goes on to conclude that legislators should consider relief beyond “direct subsidies” to cost-burdened renters. Prescribed solutions include “loosening restrictive zoning ordinances to allow a broader range of housing types, expediting permit processes, removing parking mandates and/or providing density bonuses for projects that hit a specified affordability level.” These programs could, the authors argue, reduce cost per unit, improve the burdens faced by renters across the income spectrum.
To read the full paper, click here.
