The U.S. housing market has tried to shake of the lingering effects of the financial crisis, but the sector continues to face stiff headwinds.

Homeownership rates continue to slide, single-family construction remains near historic lows, and existing-home sales have slowed, according to the State of the Nation’s Housing 2015 report.

After peaking above 69 percent prior to the recession, the homeownership rate has since dropped back to its lowest level since 1993 at 64.5 percent, according to the report. Existing-home sales dropped 3 percent in 2013–2014. In addition, the 650,000 single-family home construction starts last year are still well below prerecession levels.

“This would have been the worst year for single-family housing construction in the last half-century before this downturn,” says Chris Herbert, managing director at the Harvard Joint Center for Housing Studies. Herbert was one of five industry panelists who discussed key findings in a webcast that coincided with a release of the report.

Declining homeownership has produced a surge in demand for rental housing and highlighted radically different conditions between the owner and renter markets. The strong demand for rental housing is outstripping supply, resulting in low vacancy rates, rising rental rates, and a boom in development activity.

A whole host of factors are putting downward pressure on homeownership rates. “We are suffering from post-traumatic stress syndrome as a result of the foreclosure crisis,” says Paul Weech, president and CEO of NeighborWorks America. Prior to the crisis, everyone expected home values to rise. Homeownership was viewed as a good investment, and that is no longer true. “So, people are very, very cautious about going back into the market,” he says.

Despite low interest rates, access to financing remains more difficult for many potential buyers. The median income is lower, lending criteria are more stringent, and some buyers came out of the recession with poor credit. So, for some potential buyers who may want to purchase, they do not have the financial ability to do so in the current market.

“Household incomes have really been falling sharply through the recession,” adds Herbert. “Median household income is now back to where it was in 1995. So, in some sense, we have not had that buying power.”

Access to capital has been another impediment. Banks are more cautious, and they also face more rigorous regulatory requirements. “No one would want to go back to the type of lending environment that we had that led to the housing crisis, but I think it also is a fair statement to say that the pendulum has probably swung a little bit too far in the other direction and has tightened up credit to the point where it is having an impact on the market,” says Lynn Fisher, vice president of research and economics at the Mortgage Bankers Association.

Other key factors fueling the decline in homeownership include a shift in preferences related to homeownership and lower growth in new household formations. Baby boomers with empty-nest syndrome are opting to downsize or simplify their lives with condo purchases or apartment rentals. The young generation of millennials also favors renting. Millennials are coming out of college saddled with high levels of student loan debt, and they also are a generation that is putting off getting married and starting a family.

The slow recovery in the home market also has broader implications for the economy. Many Americans saw a tremendous loss of wealth from homes that were “under water,” or valued less than the mortgages still owed. Falling values also translated into loss of equity for many homeowners. Home equity is now slightly above $11 trillion, while bank deposits are at about $10 trillion, notes Fisher. “So, this is such an important piece of wealth for most homeowners,” she says.

That lost wealth has affected minorities the hardest. African Americans and Latinos tend to have most of their wealth in their homes; white households tend to have more diversified portfolios of wealth. So, as the stock market has recovered, white households have tended to do better financially, while minority groups have trailed farther behind, says Don Chen, director, metropolitan opportunity, at the Ford Foundation. Although home values have improved, 15 percent of homeowners still who have less than 20 percent equity in their homes, according to the report.

The housing report clearly indicates a “tale of two markets,” with the single-family home market lagging and the rental apartment market leading in the recovery. Renter household growth has averaged 770,000 annually since 2004, including more than 900,000 new rental households over the last year and over 1 million in 2014, according to the report. The national vacancy rate dipped to 7.6 percent, while MPF Research estimates that vacancy rates for professionally managed apartments were even lower at 4.6 percent.

To meet that demand, apartment construction is at its highest point since 1989. Developers have added 1.2 million new apartment units since 2010. In addition, the number of single-family detached homes in the rental market increased by 3.2 million between 2004 and 2013. “That expansion of the rental market is really phenomenal,” says Herbert.

Yet, some disparity exists in the available supply of rental housing and the new product being built. Much of the new construction has focused on high-end, Class A properties that offer resortlike amenities, and not enough at the moderate- and low-income levels. That has resulted in growing housing costs, with the percentage of cost-burdened renters rising to near-record highs. In 2013, almost half of all renters had housing cost burdens (paying more than 30 percent of income for housing), including more than a quarter with severe burdens (paying more than 50 percent of income for housing), according to the report.

Nationally, rental housing rates increased by 3.2 percent, which is twice the rate of inflation. In high-demand cities such as New York and San Francisco, gentrification is a problem because people are getting squeezed out of cities or neighborhoods due to the rising housing costs. “Cities are really scrambling to come up with solutions, but the fact is that you can’t really do this without capital,” says Chen. “You can’t do it without public investment and private capital, and the mechanisms for investing a lot more in affordable housing are just not there like they used to be.”

As the economy continues to improve, incomes are once again starting to rise. However, the rent burdens plus the declining homeownership rate emphasize the need to address housing policy, notably the cost and availability of low- and moderate-income housing options in the United States. The State of Housing report has been reporting year after year about the high rent burdens, especially for low-income people. “What is noteworthy is how much it has grown over the last couple of years, and how much worse the problem has gotten,” adds Weech.