The Coming Crunch in Rental Housing

Anthony Downs

The ANNALS of the American Academy of Political and Social Science, 1983, vol. 465, issue 1, 76-85

Abstract: Is there a rental housing shortage? Not yet, but one may arise soon—especially in fast-growth areas. Rental housing still accommodates over one-third of all U.S. households, with eight out of nine rental units provided by private owners. Yet recent moves of many better-off households to homeownership have shifted the composition of renters toward higher fractions of the poor. Residential rents have lagged behind living costs for 20 years. Even so, investing in rental units has been kept profitable by tax shelter and other factors. Higher real capital costs will weaken most of these factors in the 1980s, while making homeownership more difficult. This will raise demands for rental housing. But developers will not supply much more until rents rise or interest rates fall. Hence rents will soon begin rising rapidly, penalizing the poor. Rent controls would aid them at first but would only aggravate shortages in the long run. A better policy would be letting rents rise enough to motivate developers to build new units, while aiding the poor through a nationwide housing voucher program. This could be paid for by moderately reducing existing tax benefits enjoyed by more affluent homeowners.

Date: 1983
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Persistent link: https://EconPapers.repec.org/RePEc:sae:anname:v:465:y:1983:i:1:p:76-85

DOI: 10.1177/0002716283465001007

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