Dan Immergluck
Ann Carpenter
Abram Lueders
Federal Reserve Bank of Atlanta
Community and Economic Development Department
Discussion Paper 2016-3
May 2016

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From the last quarter of 2012 to the last quarter of 2015, median rents rose 23.4 percent in the South, according to the Census Bureau. Accordingly, an increasing number of households in the South are cost-burdened, which is defined as a household spending more than 30 percent of its income on housing. A growing number of households spend over 50 percent of their income on rent, making them severely cost-burdened. The percentage of such severely cost-burdened households with incomes below $35,000 reached 80 percent in 2014 in eight central cities in the Southeast (Atlanta, Birmingham, Jacksonville, Memphis, Miami, Nashville, Orlando, and Tampa). Cost-burdened households have significant challenges, including forced trade-offs among housing, transportation, child care, health care, and other necessities.

The increase in cost-burdened households is due in part to the decrease in affordable rented units in urban areas. This paper examines the landscape of low-cost rented housing units in these eight southeastern cities. The authors find that low-cost rented units (defined as those with gross rents of less than $750 per month) decreased in all eight cities between the American Community Survey periods of 2006–10 and 2010–14. Based on these data, each of these eight cities is losing hundreds, and sometimes thousands, of low-cost rented units annually.

Housing trends affecting the rental housing market include the conversion of formerly owner-occupied homes into rental units, the aging and abandonment of low-cost rented units, and competition in the market with high-cost or luxury rented housing, including conversion of formerly low-cost units into more luxurious units, and the increased competition with luxury developers and therefore higher land prices. Based on the authors' analysis, greater levels of loss of low-cost rented units are disproportionately concentrated in certain types of neighborhoods, including those with higher shares of young adults, a larger portion of newer housing units, and lower poverty rates. These factors are generally consistent with areas experiencing rising rents and the conversion of lower-cost units into higher-cost ones in areas perceived to be attractive to higher-end rental housing.

JEL Classification: H20, H70, R210, R310

Key words: affordable housing, rented housing, cost-burdened households, housing policy

The authors would like to Karen Leone De Nie, assistant vice president of community and economic development at the Atlanta Fed, and Carl Hudson, director of the Atlanta Fed's Center for Real Estate Analytics, for thoughtful comments and review of this work during drafts. The views expressed here are the authors' and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors' responsibility.

Comments to the authors are welcome at daniel.immergluck@coa.gatech.edu, ann.carpenter@atl.frb.org, or alueders77@gmail.com.