Fewer Households Cost Burdened in Small Apartment Assets
Data on the extent of housing-cost burden shows that relatively fewer households in small apartment properties are impacted severely by rental expenses.
Fewer Small Asset Households Impacted Adversely
In our recent blog, we reported that the average share of household income going toward housing expenses was at a historical high across all asset classes. A deeper dive into the extent of the affordability issue, as discussed here, is to examine the number of households classified under increasing cost-burden brackets.
Using the HUD definition of cost burden, households that spend between 30% and 50% of their household income on housing costs are classified as ‘Moderately Burdened’. Those spending over 50% are categorized as ‘Severely Burdened’.
As shown below, based on the latest data from the American Community Survey (ACS) 2016, 23.4% of households in small asset multifamily were ‘Moderately Burdened’, while another 27.4% share households were ‘Severely Burdened’1 .
Taken together, the share of burdened households in small asset properties stood at 50.8%. This compares favorably to single-family rentals and large asset multifamily, which registered cost-burden rates of 52.0% and 53.1%, respectively.
In fact, the extent of burden was greater in the latter asset classes, which had a higher portion of households that were Severely Burdened – 31.8% in single-family and 30.2% in large multifamily – compared to only 28.4% in small apartment buildings.
Improving Housing Cost Affordability Picture Across Asset Class
An encouraging reversal from this cycle’s overarching narrative, the share of burdened households decreased across all asset classes from 2014 to 2016, as depicted below.
The share of households classified as burdened declined by 1.8 percentage points in small apartment properties, compared to 0.9% in large buildings, and 2.3% for single-family rentals.
Small properties play a crucial role in reinforcing workforce housing in major U.S. employment centers, combining larger unit sizes with urban-core adjacent locations; property owners and managers can expect this demand to be steady and mutually beneficial.
1 All data is sourced from the American Community Survey (ACS), unless otherwise stated. ACS statistics are sample-based estimates of the compositional profile of the total population in the given year of data collection, and include a margin of error.