The national homeownership rate continued its downward trend in 2014 as the share of U.S. renter households reached its highest level in 20 years, according to the annual State of the Nation's Housing report by the Joint Center for Housing Studies at Harvard University. A record number of U.S. renters are also facing housing cost burdens, the new research showed.
For the 10th straight year, the national homeownership rate dropped in 2014, falling to 64.5 percent. The rate ticked down to an even lower 63.7 percent in the first quarter of 2015.
The number of U.S. owner-occupied households fell for the eighth consecutive year in 2014, dropping by 233,000.
"Perhaps the most telling indicator of the state of the nation's housing is the drop in the homeownership rate to just 64.5 percent last year," the Joint Center for Housing Studies's Managing Director Chris Herbert said in a statement. "This erases nearly all of the increase from the previous two decades. In fact, the number of homeowners fell for the eighth straight year, and the trend does not appear to be abating."
Consequently, the rental market has been booming. Rental housing demand has been so strong that the 2004 to 2014 decade represented the "best 10-year period for rental growth since the late 1980s," the report reads.
Since 2004, renter growth has averaged 770,000 annually. And last year, the share of households that rent hit a 20-year high at 35.5 percent.
As strong rental growth continued last year, the national rental vacancy rate dropped to 7.6 percent in 2014. The vacancy rate hasn't been that low in nearly two decades, according to the report.
But with increasing rental demand and plunging vacancies comes higher rents, which increased last year at "twice the pace of overall inflation" at a rate of 3.2 percent.
Higher rents, plus incomes that have yet to bounce back to pre-recession levels, mean millions of Americans are grappling with housing cost burdens, the report showed.
A bright spot is that the number of cost-burdened homeowners dropped from 40.9 million in 2012 to 39.6 million in 2013. The bad news is that the number of cost-burdened renters hit a record high in 2013 at 20.8 million.
Here's more from the report on the housing-related fiscal burdens facing households at various income levels: "[O]ver 80 percent of households with incomes under $15,000 (equivalent to full-time pay at the federal minimum wage) were cost burdened in 2013. Just over half of homeowners and three-quarters of renters with incomes between $15,000 and $29,999 were also housing cost burdened. Even those earning $30,000-44,999 commonly face cost burdens, including 37 percent of owners and 45 percent of renters."
Locally in the "Chicago-Naperville-Elgin, IL-IN-WI" metro area, 608,600 renters (49.3 percent) were cost burdened in 2013, with 27.9 percent of them paying more than half of their income on housing.
Of the 151,100 cost-burdened renters in the "St. Louis, MO-IL" metro area, 24.5 percent experienced severe housing cost burdens.
Click through for the report's interactive map to see how other metro areas stacked up in terms of housing cost burdens for renters.
Meanwhile, affordable housing remains in short supply for extremely low-income renters, or those earning up to 30 percent of the Area Median Income.
Only 7.3 million affordable units were available in 2013 for the 11.2 million people who qualified as extremely low-income renters.
Additionally, the report found that federal housing assistance is not keeping up with the growing number of low-income renters in need. Federal subsides have made it to only about a quarter of eligible households, according to the report.
"While affordability for moderate income renters is hitting some cities and regions harder than others, an acute shortage of affordable housing for lowest-income renters is being felt everywhere," Herbert stressed. "Between the record level of rent burdens and the plunging homeownership rate, there is a pressing need to prioritize the nation's housing challenges in policy debates over the coming year if the country is to make progress toward the national goal of secure, decent, and affordable housing for all."