While the latest Harvard University’s Joint Center for Housing Studies (JCHS) report on the state of rental housing in the United States. shows some positive signs for inventory, the overall trend persists that low- to moderate-income renters face significant cost burdens in most markets.

“The new normal that is emerging after the shifts of the past decade include two troubling elements,” said Chris Herbert, director of the JCHS. “The first is that the market has struggled to be able to supply moderate-cost rentals, and the second is that even with recent improvements, the number and share of renters paying excessive shares of their income for housing remain not far from record levels.”

Herbert made his remarks in December at the Newseum in Washington, D.C., where the report’s findings were first presented. Following a 30-minute overview by JCHS researcher Jonathan Spader, Herbert conducted an interview with Pamela Hughes Patenaude, deputy secretary of the U.S. Department of Housing and Urban Development, which was followed by a panel discussion of housing experts. Senator Maria Cantwell (D-WA) delivered a keynote address to conclude the proceedings, which were broadcast live and are available for viewing.

In the past decade, there has been an unprecedented surge in demand for rental housing. Initially driven by foreclosures after the housing crash, the number of new renter households increased by nearly 10 million between 2006 and 2016, from 33 million to 43 million. In response, construction of new rental units has soared. After hitting a low of just 90,000 units in rental housing starts in early 2010, the number of new starts peaked at a 408,000-unit annual rate in early 2017, a figure not seen since the late 1980s.

Much of that construction has been concentrated on the high end of the market, particularly in major metropolitan areas. The percentage of newly constructed (two-bedroom) units renting for $1,500 per month or more ballooned from 15 percent in 2001 (adjusted for inflation) to 40 percent in 2016, while new construction for apartments renting for under $850 dropped from 42 percent to 18 percent during the same time period.

One of the factors driving the construction of high-end units has been the shift in the renter dynamic, as the percentage of households earning over $100,000 who rent jumped from 12 percent in 2006 to over 18 percent in 2016—an increase of 2.9 million renters. It is a demand trend that Kimberly Byrum, principal, advisory, with real estate advisory firm Meyers Research, expects to continue, especially in light of the new U.S. tax plan. “I think you’re going to see more high-income renters—if the product is available,” says Byrum. “Before there were some tax savings, but now I’m not fixing my house, I’m not getting as big of a tax break, so maybe I’m just going to downsize and move out of my home. So that trend is going to continue.”

Another primary driver of the proliferation of high-end construction has been the cost of building new units. Construction and land costs have skyrocketed in recent years, with the price of vacant commercial land increasing by 62 percent from 2012 to 2017. The cost of construction labor, materi­als, and contractor fees also have escalated by a combined 25 percent, according to the report.

As a result, the median asking rent for a new apartment increased by 27 percent during that period, to $1,480, meaning that a household income of $59,000 was necessary for the units to remain affordable, using the housing standard of 30 percent of income. And although demand in the Class A (i.e., rents of $1,700 or more) market has been slowing (vacancy increased from 4.5 percent in 2016 to 6.0 in 2017), and Class B (i.e., under $1,160) also has been easing, demand for apartments in Class C properties remains strong. The national vacancy rate in this market segment in the second quarter of 2017 was 3.3 percent (the lowest percentage since 2001), with 46 of the 100 largest metro areas reporting vacancy rates below 3.0 percent—driving marked rent increases.

“In the [major metro] areas that are experiencing the fastest population growth, you can see a consistent trend—the neighborhoods that started with the lowest rent levels have experienced the fastest rates of rent growth,” said Spader, who served as lead researcher for the report (along with colleague Shannon Reiger). “This speaks to the challenges facing some of the fastest-growing cities—how to increase supply in ways that accommodate the growing population.”

The lack of affordability is an area of concern not only for low- and moderate-income workers, but also across the income spectrum. Currently, nearly half (47 percent) of renter households are cost burdened (i.e., paying more than 30 percent of income for housing), while 25 percent (totaling 11 million households) are severely cost burdened, paying over 50 percent of their total household income for rent. In 2016, 83 percent of renter households with incomes below $15,000 experienced cost burdens, includ­ing 72 percent with severe burdens; 50 percent of renters earning $30,000 to $45,000 were cost burdened (up from 37 percent in 2001); and 23 percent of those earning up to $75,000 also were cost burdened (up from 12 percent in 2001).

And while the number of cost-burdened renters declined from 21.3 million in 2014 to 20.8 million in 2016 (with severely burdened households decreasing from 11.4 million to 11.0 million), this is a minor correction of a long-range trend. JCHS estimates that it would take 24 years for the number of cost-burdened renters to return to 2001 levels—if economic conditions were to remain the same as the 2014–2016 period.

“We are reaching the new normal, where nearly half of all renter householders are cost burdened,” said Mijo Vodopic, senior program officer at the John D. and Catherine T. MacArthur Foundation, which has been a longtime supporter of JCHS. “With so many fellow Americans challenged just to make rent, how do we expect to remain competitive in a global economy, how do we expect to improve our overall public health, and how do we expect to invest heavily in ourselves or in our future generations?”

Compounding matters, a slowdown seems to be underway in new construction in many markets, according to the report. Although rental housing starts peaked in the first quarter of 2017, they are down nationally by 9 percent year-to-date through October 2017, with multifamily starts falling in nearly half (46) of the 100 largest metro areas in the United States in the 12 months ending August 2017.

The report also makes note of another pair of troubling trends—a steady decrease in the number of very low-income households receiving rental assistance, and a loss of subsidized rental stock. “Clearly, new innovative means of supplying rental housing for both moderate- and low-income households are very much needed,” said Herbert at the conclusion of his remarks.