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Homelessness Rate Increases Faster in Least Affordable Rental Markets

Homelessness Rate Increases Faster In The Least Affordable Rental Markets

If the rent burden increases by 2 percentage points, an additional 1,500 Americans will become homeless.
  • An estimated 661,000 people were homeless in 2017, more than 100,000 more than were officially reported.
  • The expected homelessness rate in a community increases at an accelerated pace after rents reach 32 percent of the local median income.
  • The rent burden exceeds this 32 percent tipping point in about one-quarter of the regions analyzed.

Rising rents across the country are burdening financially limited renters, and contributing to a higher homelessness rate in many of the nation’s least affordable markets.

The U.S. Department of Housing and Urban Development (HUD) estimates that 553,752 people nationwide experienced homelessness in 2017i, based on a point-in-time count in January. Since 2010, the counted homeless population has fallen by about 13 percent. However, prior researchii shows these counts are imprecise, and likely do not include the entire homeless population in the country. The actual number of people who were homeless is estimated to be closer to 661,000iii, 21 percent higher than the officially reported population.

New research from Zillow®, in collaboration with researchers at the University of New Hampshire, Boston University School of Social Work and University of Pennsylvania, shows that the homelessness rate accelerates much more quickly when the rent burdeniv climbs above 32 percent. The research also identified distinct groups of communities respond similarly to changing rents and poverty levels, among other latent factors – all of this information can help policymakers and social-service organizations in otherwise disparate areas hone in on the most effective mitigation efforts by learning from the experiences of other areas in their peer group. This new research expands on Zillow research last year that examined the relationship between rising rents and homelessness.

Today, December 11, Zillow will host “Priced Out: Rising Rent and Homelessness Across America,” a roundtable discussion in Washington, D.C., based on this new research. It will be livestreamed at https://www.zillowgroup.com/thought-leadership/events/.

Nationwide, about 1,500 more people can be expected to experience homelessness when the rent burden increases by 2 percentage points. The effects of a larger rent burden are more extreme in already unaffordable areas where rent burdens are beyond the 32 percent tipping point. In Los Angeles, that 2-percentage point increase could force an additional 4,227 people into homelessness. In other communities, homelessness is predicted to decline despite increasing rent burdens.

Nationwide, a renter earning the median U.S. income and looking to rent the median-priced apartment should expect to spend about 28 percent of their income on rent, up from historic norms closer to 26 percentv. But across the country, the rent burden already exceeds the 32 percent threshold in 100 of the 386 Continuums of Carevi included in this analysis, led by Monroe County in Florida, where the median market rate rent consumes 62.9 percent of the area’s median household income. Also on this list are Los Angeles (49 percent), Portland, Oregon (36.7 percent), and Seattle (34.2 percent), all of which have declared a homelessness “state of emergency.”

All of these areas fall into the same group of communities defined by high rates of homelessness, unaffordable housing and high rates of extreme poverty. This cluster is home to 15.1 percent of the total U.S. population, but 47.3 percent of the nation’s homeless population as officially reported by the 2017 HUD point-in-time count.

Conversely, a separate cluster, which includes areas like Pittsburgh and Cook County, Illinois, is characterized by a low homelessness rate, affordable housing, and the lowest rates of extreme property. This does not mean homelessness doesn’t exist in these areas, only that housing costs and low income play a smaller part in defining the challenge in these communities, and unobserved factors may be playing a bigger role.

“It’s undoubtedly good news that the overall level of homelessness has fallen nationwide, even as housing costs have increased. But that zoomed-out view obscures some very real, local tensions between housing affordability and homelessness, and ignores the reality that success in tackling homelessness in one community doesn’t necessarily have the same effect in another,” said Skylar Olsen, Zillow Director of Economic Research and Outreach.

“This first-of-its-kind research both quantifies the true scale of the problem and reinforces the idea that every community has its own unique challenges. But there are similarities that can be identified, even among communities of wildly varying sizes and locations, and learnings to be shared. The homelessness challenge itself is hugely multifaceted and nuanced from community to community, and requires local and national solutions that are equally flexible, nuanced and informed.”

For additional data on specific regions or Continuums of Care, email press@zillow.com.

Zillow
Zillow is the leading real estate and rental marketplace dedicated to empowering consumers with data, inspiration and knowledge around the place they call home, and connecting them with great real estate professionals. In addition, Zillow operates an industry-leading economics and analytics bureau led by Zillow Group’s Chief Economist Dr. Svenja Gudell. Dr. Gudell and her team of economists and data analysts produce extensive housing data and research covering more than 450 markets at Zillow Real Estate Research. Zillow also sponsors the quarterly Zillow Home Price Expectations Survey, which asks more than 100 leading economists, real estate experts and investment and market strategists to predict the path of the Zillow Home Value Index over the next five years. Launched in 2006, Zillow is owned and operated by Zillow Group, Inc. (NASDAQ:Z and ZG), and headquartered in Seattle.

i https://www.hudexchange.info/resource/5639/2017-ahar-part-1-pit-estimates-of-homelessness-in-the-us/
ii https://arxiv.org/abs/1707.09380
iii This analysis covers 386 of 399 Continuums of Care, which include 98.7 percent of the counted homeless population in 2017.
iv Rent as a share of income
v Zillow 2018 Q3 Rent Affordability Index
vi Geographic areas that coordinate support services for people who are homeless. They typically match with individual cities, individual counties, or groups of counties.

SOURCE Zillow, Inc.

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