The Mortgage Bankers Association (MBA) is proposing a new way to measure rental affordability by distinguishing between the quality and quantity of rental units under consideration.

Seeking to better understand a decline in rental affordability over the past decade, the trade group’s Research Institute for Housing America (RIHA) explained in a white paper published Tuesday that other metrics such as rent-to-income ratios or shares of cost-burdened renters conflate quality and quantity pressures.

“Although the popular narrative is that housing expenditure has been rising out of the control of consumers, observed increases in rental expenditure could reflect an increase in the quality of housing or locational amenities that are desirable to households,” says the introduction to the report.

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Demand-side pressures on rental affordability are much less discussed and less understood than supply-side drivers of worsening rental affordability, according to the MBA. Economists see consumers as “price-takers” when it comes to rents charged by landlords, but what consumers ultimately choose to spend also reflects a set of renter preferences.

RIHA assesses that housing quality accounts for as much as half of rising rental expenditures.

“The key question is how much of observed rental expenditure is discretionary, i.e., ‘wants,’ versus that required to secure minimally acceptable shelter, i.e., ‘needs,’” wrote Gary Engelhardt, an economics professor at Syracuse University and author of the special report for RIHA.

Using the newly developed model of affordability, the researchers determined that rental housing has become less affordable in 232 of 282 metro areas since 2014 as national rents rose 17% in real terms over the interim decade.

“However, affordability improved in 50 metro areas, predominantly smaller and non-coastal areas. So, rental housing has not become less affordable everywhere,” Engelhardt noted.

Rental demand facing broader disruptions

As quickly as rents have risen in recent years, supported by poor homebuying affordability that has kept many would-be buyers renting longer, major demographic shifts are underway that could rearrange rental affordability.

A report published last Thursday by the Joint Center for Housing Studies (JCHS) at Harvard University says rental demand is poised to shift structurally lower as Trump administration immigration policies “sharply reduce renter household growth.”

Citing data from the U.S. Census Bureau’s third-quarter housing vacancy survey published Oct. 30, the center’s report flagged a jump in rental vacancy rates and no growth in households over the past 12 months. Over the course of 2022, 2023 and 2024, new rental households started by immigrants had grown by 571,000.

Including earlier rent hikes during the COVID-19 pandemic, national rents have moved sharply higher since 2020, absorbing the impact of pandemic-era economic and workplace disruptions, supply shortages in certain markets and a surge in new rental households.

“In contrast to their impact on rental markets, recent immigrants contribute little to homeowner household growth each year, as increases in immigrant-headed homeowner households come mainly from those who’ve been in the country for a decade or more,” said Daniel McCue, a senior research associate at JCHS who wrote the analysis.

Home listings platform Realtor.com reported that the national median rent was $1,694 in August, up 14.5% from 2019 levels. Apartment List says the median rent was $1,384 in October, or about 19% higher than the median of $1,160 in 2019. Zillow’s rent index reflected typical rents of $1,932 in September, up nearly 40% from 2019 levels.

These indexes all measure rent affordability from a lens that the new MBA model would suggest does not sufficiently control for constant quality amid constantly changing market conditions.

Renters in Mount Vernon-Anacortes, Wash., for example, lost the equivalent of $1,212 annually in income due to shifts in constant-quality rental prices in the decade since 2014.

“Alternatively, renters there would have needed to have been compensated $1,212 per annum each year from 2014-2023 to be as well off in 2023 (under higher rental prices) as in 2014,” said Engelhardt.