To afford rent, teachers and nurses are living in smaller, older homes

The Great Reshuffling has the potential to improve housing affordability for millions of Americans able to work remotely from a less expensive market. But for occupations that require in-person work—teachers and nurses, for example—affordability is becoming more of a challenge as rent growth sets new records. Many renters in those in-person jobs are battling for a small slice of the rental market comprising smaller, older homes, a new Zillow® analysis shows.

The analysis highlights the impact that more than a decade of underbuilding has had on renters as well as the need for communities to make it easier to build homes. New construction in the U.S. has fallen behind by millions of homes since the Great Recession, helping fuel record home value growth and increasing pressure on the rental market.

"Many renters have been able to keep costs low even as prices have grown over the past several years, but merely affording rent does not mean they are thriving," said Zillow economic data analyst Nicole Bachaud. "A deeper look shows a big slice of the market is out of reach for workers looking to maintain a comfortable rent burden. That often means renting an older home with less space but a smaller price tag, or doubling up with roommates or a partner."

While rent burdens—the share of income spent on rent—can appear low, especially when compared with recent growth in rent prices, renters often live with roommates or a partner, or target less desirable homes to keep housing costs manageable. The typical teacher spends about 22% of their income on rent, well below the widely accepted 30% rule for housing affordability. That's up only slightly from roughly 20% of income spent on rent five years ago, despite rent prices growing almost 24% over that period. To keep their rent costs this low, only a fraction of the rental market is available to teachers.

In Boston, for example, teachers on average only spend about 18.5% of their income on rent, down from about 20% in August 2016. But to do so, they must choose from only 6% of rentals in Boston that are priced low enough. Those homes are almost 300 square feet smaller and 33 years older than the typical Boston rental. While age does not always tell the whole story when it comes to quality, living in an older home increases the likelihood of living in unhealthy or unsafe conditions.

Even in Tampa, where teachers spend almost 28% of their income on rent, just under the 30% affordability threshold and much higher than the 17.2% they spent five years ago, teachers are limited in their rental options. Only 2.2% of the Tampa rental market is available for teachers who don't want to exceed that share of income spent on rent each month.

One way for communities to ease price pressures on renters is to make it easier to create new inventory, including relaxing zoning restrictions. Basic supply and demand is the primary driver of growing housing costs, so increasing the supply of affordable housing types can help meet demand. Zillow research has shown that even modest densification could exceed what is likely needed to meaningfully slow housing price growth over the long term.

"Boosting supply is the clearest path to improving affordability," Bachaud said. "Allowing for even small amounts of new density could have a big impact on prices."

Nurses face similar hurdles in finding an affordable rental. While nurses who rent live affordably in all large metros according to the 30% rule, they are renting homes at least 100 square feet smaller than the typical rental in each market. In San Diego, where nurses spend about 24.5% of their income on rent, only 8% of rentals are affordable at that rent burden.

Portland, Ore. is the most equitable rental market for nurses, with nearly two-thirds (63.4%) of the market available for nurses who spend 17.3% or less of their income on rent. The median rental available at that rent burden is 111 square feet smaller than the typical Portland rental, the second-smallest difference of any large market; affordable rentals for nurses in Washington, D.C., are 108 square feet smaller than a typical rental.

—Zillow

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