The rental housing landscape in America is rapidly changing: new people are becoming renters and many properties are aging.  Meanwhile, the pace at which new rental housing supply is being created can’t meet growing demand.

This supply shortage is particularly acute for affordable housing, leading to an ongoing crisis. Tens of millions of Americans live in housing they cannot afford. We recently reported on the huge housing cost burden felt by renters and homeowners: almost 20 million households are extremely cost burdened, meaning they spend at least half of their income on their rent or mortgage.   

At a rental housing summit and public discussion on rental policy and apartment demand, both recently hosted by the Urban Institute with support from the National Multifamily Housing Council, Yardi, RealPage and the National Apartment Association, we identified four emerging issues in the rental housing market that state, local, and federal policymakers must focus on to address our nation’s affordable housing crisis.

1. Renters don’t look like they used to.

Renter demographics are rapidly changing. Millennials are not buying homes as early as previous generations did, leading them to remain renters for longer periods.

Meanwhile, people age 65 and over constitute a growing portion of the renter population. In the northeast, for example, renters age 55 and older are expected to account for more than 30 percent of rental households, according to a recent report commissioned by the National Multifamily Housing Council.

The majority of new immigrants to the US will also likely become renters, contributing to rental demand.

2. Supply isn’t keeping pace with demand.

About 4.6 million multifamily units are needed by 2030 to meet the demand for rental housing. Yet Harvard’s Joint Center for Housing Studies found that only 9 million new housing units were added in the past 10 years, the lowest ever in a 10-year period. Vacancy rates are also incredibly low in rental units.

Further, construction is constrained for single-family rental housing, although more robust for multifamily rental units. However, except for the limited number of units build with Low Income Housing Tax Credits, multifamily units under construction tend to be high-end developments clustered in a few urban areas, so they aren’t contributing to the supply of affordable housing.

3. Beyond building new supply, we need to fix what we already have.

Even if we began building more new rental housing for those with moderate and low incomes, we must aggressively preserve existing housing stock.

Around 11.7 million rental housing units were built before 1980 and need renovation.

The current affordable housing stock in particular also tends to be older, presenting a great opportunity for making units more affordable. But this stock needs repair and investment, which can create more costly outcomes.

Rentals in small buildings, however, are often overlooked and underrepaired, partly because these projects aren’t as attractive to investors. But great ideas are emerging that offer cost-effective ways to rehabilitate smaller units while keeping them affordable to renters. To protect these underappreciated sources of affordable housing, we must develop tools that encourage preservation of smaller, more affordable projects.

4. Single-family rentals are gaining popularity.

Around 40 percent of American renters live in single-family units. In 2015, single-family rentals comprised 57 percent of America's total rental housing stock, up from 51 percent a decade prior.

Single-family rentals can be an important component of an affordable housing strategy, especially for larger families, and particularly if single-family rental developers can access the range of tools and government programs that are currently reserved solely for multifamily projects.

As the affordability crisis continues, these trends can inform policy

Almost 40 million Americans live in housing they cannot afford. Affordability can be affected by the age of the structure, neighborhood conditions, and several other factors, including

• construction costs;
• tight bank financing on construction;
• little focus on preserving  our current housing supply; and
• homeownership occurring less and later, putting pressure on rents.

Living costs also extend beyond rent payments, encompassing transportation, utilities, and energy costs.

These trends, and others putting pressure on housing costs—such as regulatory-related costs, including those related to land use, building codes, and building materials—can pose significant barriers to the pace and cost of constructing and rehabilitating more units to meet increasing demand.

We should review existing regulations in earnest, modernize those that serve a useful purpose (such as protection from fire and natural disasters), and get rid of those that restrict construction, including of affordable housing, without compensating benefits.  Financing for rental housing, especially single-family rentals, also needs updating.

It’s time to allow innovation and bold thinking to inspire solutions to the many challenges we face in the availability of affordable housing, especially as emerging demographic changes increase demand for more, and more affordable, rental housing.