Housing affordability is a major concern for many Americans, especially renters who face rising rents, stagnant incomes, and a limited supply of low-cost units. Housing affordability is not expected to see a major improvement in 2024 due to tight rental markets and high property prices.
According to a recent report by the Joint Center for Housing Studies of Harvard University, half of all US renters were cost-burdened in 2022, meaning they spent more than 30 percent of their income on rent and utilities. This was a record high of 22.4 million renter households, an increase of 3.2 percentage points from 2019.
The report also found that evictions have increased, homelessness has reached the highest levels on record, and the need for rental assistance is greater than ever. The Covid-19 pandemic and its economic fallout have exacerbated these challenges, leaving millions of renters at risk of losing their homes.
So, will housing affordability improve in 2024 in the US? The answer is not clear-cut, as there are many factors that affect the supply and demand of rental housing, as well as the availability and cost of financing. Here are some of the key trends and projections that may shape the rental market in 2024 and beyond.
Will Housing Affordability Improve in 2024?
Mortgage Rates and Home Affordability
- Mortgage rates are expected to drop further in 2024, which could make homeownership more attractive for some renters who can afford the down payment and closing costs. However, mortgage rates are only one component of home affordability; home prices also play a crucial role.
- Home prices have surged in recent years, driven by low inventory, high demand, and limited construction. According to the National Association of REALTORS®, on an annual basis, existing home sales (4.09 million) dropped to the lowest level since 1995, while the median price reached a record high of $389,800 in 2023. While home price growth may slow down in 2024, it is unlikely to reverse or decline significantly, as there is still a large gap between supply and demand.
Rental Demand and Supply
- Rental demand may remain strong in 2024, as many renters are unable or unwilling to buy a home. Some renters may face credit or income constraints that prevent them from qualifying for a mortgage or saving for a down payment. Others may prefer renting for lifestyle or mobility reasons, such as young adults who value flexibility and convenience over homeownership. Moreover, some renters may be discouraged by the high home prices and low inventory in their desired locations, and opt to stay in their current rentals or look for cheaper alternatives.
- Rental supply may increase slightly in 2024, as more multifamily units are completed and some homeowners decide to sell their homes and rent instead. According to the Harvard report, multifamily construction starts reaching 547,000 units in 2023, up from 509,000 in 2019. However, most of these units are aimed at the high end of the market, where vacancy rates are higher and rents are softer. The supply of low-rent units (below $800 per month) has shrunk by 2.5 million since 2011, while the number of renter households earning less than $30,000 per year has increased by 1.9 million.
Rental Assistance Programs
- Rental assistance programs may provide some relief for low-income renters who struggle to pay their rent and utilities. The American Rescue Plan Act of 2021 allocated $21.6 billion for emergency rental assistance, on top of the $25 billion provided by the Consolidated Appropriations Act of 2020.
- As of January 2024, about $18 billion of the first round of funding had been disbursed to more than 3 million households, according to the US Treasury Department. However, many renters still face barriers to accessing these funds, such as lack of awareness, documentation requirements, landlord cooperation, and bureaucratic delays.
Therefore, housing affordability is unlikely to improve significantly in 2024 in the US, as rental markets remain tight and home prices remain high. However, there may be some opportunities for renters who can take advantage of lower mortgage rates and increased rental supply at the upper end of the market.
For low-income renters who face severe cost burdens and housing instability, rental assistance programs may offer some temporary relief, but more long-term solutions are needed to address the underlying structural issues of inadequate supply, insufficient income, and unequal access.
