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Where is Rent More Affordable?Where is Rent More Affordable?Ali Anari2020-04-22T05:00:00Ztierra-grande
Residential
The Takeaway

A recent Real Estate Center study shows that, while rental housing remains more affordable in Texas than in the nation as a whole, affordability growth in the Lone Star State has slowed.​​

​​Rental housing affordability is about the relationship between rent costs and renters' incomes. While Texas rental housing is more affordable than the national average, affordability growth in the Lone Star State has slowed in recent years.

Rent as a percentage of the renter's income is commonly used to measure rent affordability. A key question debated in rental housing economics and housing policy has been, what percent of income can be allocated for rent without impeding the renter's ability to cover basic expenses such as food, clothing, transportation, and health care? The debate resulted in the 30 percent rule. In other words, renters should pay no more than 30 percent of their incomes on housing rents.

According to the U.S. Department of Housing and Urban Development, families who pay 30 percent or more of their income for rent are considered rent-burdened. Severe rent burden is defined as paying 50 percent or more. The 30 percent rule has been criticized on the grounds that household incomes vary greatly, and 70 percent may not be enough for some families to cover other expenses (see infographic). In addition, some argue that the 30 percent rule does not take into account regional cost-of-living differences.


For its affordability study, the Real Estate Center looked at median rent as a percentage of median income and put renters into one of three affordability brackets:

  • rent is less than 30 percent of income (affordable),
  • rent is 30 to 49.9 percent of income (less affordable), or
  • rent is 50 percent or more of income (least affordable).

The study used five-year averages from 2010 to 2018 for the U.S., Texas, and Texas Metropolitan Statistical Areas. The averages are reported in the U.S. Census Bureau's American Community Survey.

Texas, U.S. C​​ompared

Texas had more than 3.6 million occupied rental housing units in 2018, accounting for 38.1 percent of the state's total occupied housing units (Table 1). Nationally, 36.2 percent of occupied housing units were rentals. The state's inventory of rental units grew 21.1 percent from 2010 to 2018 while the national inventory grew 13.5 percent. Texas' higher percentages are due to its population growth rate being greater than that of the U.S.

​​
​Texas' median monthly rent in 2018 was $998, lower than the nationwide average of $1,023 (Table 1). The state's median monthly rent increased by 27 percent from 2010 compared with 21.6 percent for the U.S. The upward trends in median rents have accelerated for both the state and the nation since 2015, and the difference between the state's rent and the nation's narrowed from $55 to $25 between 2010 and 2018 (Figure 1). Median rent accounted for 29.1 percent of the state's median income in 2018, smaller than the nation's 30.1 percent. This rental housing affordability indicator has not changed significantly for Texas since 2016 (Figure 2).



The market share of Texas' affordable rental units was 52.1 percent in 2018, higher than 49.8 percent for the U.S. (Table 1). The growth rate in market share has slowed since 2016 (Figure 3).


The market share of less affordable rental units in Texas was close to the nationwide average from 2010 to 2018 (Table 1 and Figure 4).


Texas' share of least affordable rental units in 2018 was 22.8 percent, smaller than 25.2 percent for the U.S. (Table 1). For both the state and the nation, the least affordable rental housing indicators trended upward before 2014 but have since trended downward (Figure 5).


The number of Texas renters in the affordable bracket rose 21.4 percent from 1.4 million in 2010 to 1.7 million in 2018 (Figure 6). Renters in the less affordable bracket increased 22.2 percent from 691,680 to 845,400 while least affordable rose 17.6 percent to 769,280 (Figure 6).


Affordability in T​​exas Metros

Dallas-Fort Worth-Arlington, Houston-The Woodlands-Sugar Land, Austin-Round Rock, and San Antonio-New Braunfels accounted for 70.3 percent of the state's occupied rental housing units in 2018 (Table 2).


As a percentage of occupied housing units, College Station-Bryan had the largest share of rental units (49.3 percent) followed by Lubbock, Killeen-Temple, Austin-Round Rock, Waco, and Dallas-Fort Worth-Arlington.

Houston-The Woodlands-Sugar Land had the highest growth rate of demand for rental units among the four major metros from 2013 to 2018, followed by Dallas-Fort Worth-Arlington, Austin-Round Rock, and San Antonio-New Braunfels. Among the smaller metros, Killeen-Temple had the highest growth rate followed by Lubbock, Laredo, and Midland.

Median monthly rent in 2018 varied across Texas metros from as high as $1,233 in Midland to as low as $710 in Brownsville-Harlingen (Table 3). Midland had the highest median rent followed by Austin-Round Rock, Dallas-Fort Worth-Arlington, Houston-The Woodlands-Sugar Land, Odessa, and San Antonio-New Braunfels. Brownsville-Harlingen had the lowest median rent, followed by McAllen-Edinburg-Mission, Texarkana, Wichita Falls, El Paso, and Laredo.

Midland had the highest growth rate of median monthly rent from 2013 to 2018 followed by Odessa, Austin-Round Rock, and Dallas-Fort Worth-Arlington (Table 3). Killeen-Temple had the lowest, followed by Texarkana, Wichita Falls, and Tyler (Table 3).

​​
In terms of median rent as a percentage of median income, Odessa was the most affordable Texas metro, followed by Midland, Sherman-Denison, and Killeen-Temple (Table 4). College Station-Bryan had the highest median-rent-to-median-income percentage followed by Laredo, Lubbock, Brownsville-Harlingen, and McAllen-Edinburg-Mission. College Station-Bryan's low rental housing affordability is mainly due to a large student population that ordinarily earns less than the rest of the population and distorts the reported statistics.


Odessa was the most affordable Texas metropolitan rental market in 2018 in terms of shares of rental units where renters pay less than 30 percent of their incomes for rent, followed by Sherman-Denison, Killeen-Temple, Midland, and Amarillo (Table 5). College Station-Bryan had the smallest share of affordable rental units, followed by Laredo, Lubbock, Brownsville-Harlingen, and McAllen-Edinburg-Mission. Again, College Station-Bryan's low rental housing affordability is mainly due to its large student population.


​San Angelo had the largest share of less affordable rental units in 2018, followed by Laredo, El Paso, and Brownsville-Harlingen (Table 5). College Station-Bryan, Lubbock, Laredo, McAllen-Edinburg-Mission, Brownsville-Harlingen, and Waco were the least affordable rental markets.

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Dr. Anari (m-anari@tamu.edu) is a research economist with the Real Estate Center at Texas A&M University.

Digital and Print2270https://www.recenter.tamu.edu/articles/tierra-grande/Where is Rent More Affordable-2270 https://assets.recenter.tamu.edu/Documents/Articles/2270.pdf

 

 

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