State of Housing #8 • 786 Words
This is the eighth edition of our “State of Housing” series, which breaks down the HB854 Statewide Housing Study released this January. You can find previous posts in this series here.
Renting is the only option for a growing number of Virginians, so available and affordable rental housing is more and more important.
The third part of the HB854 Statewide Housing Study includes eight chapters analyzing data on housing demand and needs across the Commonwealth.
In this edition, we’ll focus on the rental market. This section describes Virginia’s existing rental market and trends in renting by demographics. For a majority of low-income households across Virginia, renting is the only means of acquiring a safe and stable home. With fewer and fewer affordable homeownership opportunities, renting is becoming the only option for younger generations and seniors alike.
Older Generation X and baby boomer households are increasingly renting across Virginia.
From 2010 to 2019, the percentage of renters who are 45 years and older has increased disproportionately when compared to their younger counterparts. The number of seniors (65 years and older) who are renting has seen an increase of over 20% in Large and Small Metro Markets.
While some people may prefer the lifestyles renting allows, financial concerns remain the dominant factor in reason for renting. For seniors wanting to age in place, the costs can be difficult to manage on fixed incomes without additional financial support.
Why this matters:
Renting isn’t just for young people anymore. When we look to increase the supply of our rental housing, we need to factor in the different preferences and needs of all generations.
Even households with higher incomes are continuing to rent.
While the household income distribution for homeowners continues to skew towards the high end, renter income distribution is much more evenly distributed. Higher income households are renting more, especially in Large Metro Markets. This speaks to not only an increased preference for renting’s flexibility, but also high barriers to homeownership—even among higher income households.
Why this matters:
Housing affordability isn’t just a concern among low-income households. Housing costs are increasingly impacting households at all income levels and stages of life. This makes the need for diverse housing options—especially rentals—relevant to everyone.
Renting is becoming more expensive in every part of the state.
The demand for rental housing among higher income households has led to a corresponding response from the real estate market. There has been significant growth in the number of rental homes with gross rents above $1,250, especially in Small and Rural Markets.
Single-family detached homes are making up for the demand not met by multifamily developments across the state and country. In Large and Small Markets, nearly a quarter of the rental housing stock are single-family rentals (SFR), while in Rural Markets, that proportion is over half.
The rising market demand for rentals has left many lower income households behind. Nearly three in four renter households with incomes that are 50% of AMI or below are cost-burdened, while the cost burden among renter households between 50% and 80% of AMI has increased between 2010 and 2017.
Sourcebook: Cost Burden
Why this matters:
As more and more Virginians rent their homes, there is increasing competition between low and middle income households for a low supply of quality affordable housing. Lower income households are forced to bear housing cost burdens.
Sourcebook: Rental Housing Gap
The Low-Income Housing Tax Credit is Virginia’s major source of affordable rental housing.
Virginia Housing’s administration of the Low-Income Housing Tax Credit (LIHTC) program has led to approximately 91,599 rental housing units actively supported by LIHTC as of September 2021. But as of 2017, there were more than 300,000 cost-burdened renter households making less than 50% of AMI. Despite the gap in time, the gulf between these two numbers speaks to the persistent lack of affordable rental housing with federal assistance.
Recognizing this gap, the Virginia General Assembly enacted the state-level housing opportunity tax credit program in April 2021, increasing the annual allocation of tax credits from $15 million to $60 million in 2022.
This program comes at a time when three quarters of Virginia’s LIHTC housing stock is at risk of losing its affordability restrictions by 2040. While many properties remain affordable after the initial 15-year compliance period—and some are expected to remain affordable after the 30-year period—there is always a risk that properties will convert to market rate without additional allocations of tax credits or subsidies.
Sourcebook: Assisted Rentals
Why it matters:
Federal and state governments continue to be major investors in housing affordability. But addressing rental housing affordability takes more than just building more apartments. It also means addressing the socioeconomic conditions that force people to rent.
Coming up next time…
In the next edition of this series, we’ll dive into the sixth part of HB854’s research and findings section: housing instability and homelessness trends across Virginia.