This CNBC article’s thesis is:

As more Americans find it harder to afford a home, rental demand is soaring, especially for single-family homes.

Source: Renting a single-family house just got more expensive

Practicing factfulness, what has been the trend in affordability over time? Home affordability, surprisingly, is actually at a high level, contrary to the reporter’s assertion.

The reporter could have written “As Americans find it hard to afford a home…” but that is not what was written. Instead, the reporter has made an untrue assertion – one that is frequently asserted but is not based on actual data. These repeated assertions, however, result in a popular meme that housing is become ever less affordable.

There are indices that track home affordability and these can be used to compare affordability, over time. The Federal Reserve Bank of San Francisco has produced this chart:

A value above 100 indicates homes are affordable.

A ratio of 100 indicates that median- family income is just sufficient to purchase the median-priced home. When the ratio falls below 100, as it did during the late-1970s and through the mid-1980s (illustrated in Chart 1), the typical household has less income than necessary to purchase the typical house. During the late-1970s through the mid-1980s, housing was relatively unaffordable. Ratios above 100 indicate that the typical household has more income than necessary to purchase the typical house. Over the ten-year period ending in 2003, the HAI shows that housing was relatively affordable nationally. The HAI averaged around 134 during the period, indicating that the typical household income was about 34 percent above the income necessary to qualify for the typical home.

The Federal Reserve Bank of St. Louis also produced a similar index through April of 2019 (this index has been discontinued since then). Not only is the index above 100, it reached high points (meaning increased affordability) in 2019.

There are, of course, problems with any metrics like this. One is that measures based on a median value lose information of the distribution of income or prices, and that home prices (and rent) need to be looked at locally, in the context of local incomes. Another is that home affordability may be viewed as either a home owner’s purchased price, or as a monthly rental cost.

The Urban Institute produced a detailed report in 2018 that takes these factors into consideration. This chart looks at home affordability, over time in selected local markets. The higher the trend line, the greater the affordability. Interesting, affordability has been increasing over this period. The blue line represents the U.S. (overall) housing affordability index.

The second part of the CNBC article’s thesis is that demand – relative to supply – for rental homes is “soaring” and this appears to be true, for several reasons. One is that millennials believe renting is cheaper than buying thereby increasing demand for rentals.

The demand for rental units is also driven by economic growth (creating jobs and low unemployment) and also by an increase in immigration.

In some markets, the supply of rental units may be decreasing due to newly enacted rental control measures that discourage investment in rental properties (Oregon, for example). Yet new apartment construction is said to be booming nationwide – but rental demand is, apparently, high for single family homes and the demand for rental homes – at the price renters are desiring to pay[1] – is larger than the supply.

Summary

By several measures, housing affordability is very good at this time, contrary to media statements.  Apartment construction is expanding significantly, but there appears to be a shortage of single family rental homes.

This post illustrates how media reporters make assertions not supported by the data. These assertions become memes. These memes, while not true, become established as “conventional wisdom” facts. Then, based on erroneous “facts”, people push for public policy changes that may make the situation even worse.

[1] In economics, a “shortage” means you are not able to find what you want, at the price you are willing to pay. That last part is a critical part of understanding supply versus demand and what people actually mean when they say something is in a “shortage”.