The booming multifamily mortgage market has risen to new heights, passing the lofty $1 trillion mark. But while that may mean boom times for apartment lenders, increasing demand may not translate into good times for renters.
Apartment mortgages outstanding hit $1.02 trillion at the end of the third quarter of 2015, according to the Mortgage Bankers of America.
That was up a hefty 2 percent in one quarter, rising $19.3 billion from the end of the second quarter. And it was the highest level since MBA started tracking commercial and multifamily mortgages in 2007.
It's no secret what's fueling the increasing demand for apartments: the decreasing demand for homeownership. "With the U.S. homeownership rate at its lowest since 1967, the U.S. renter population is the largest it has ever been, and now stands at 43 million households," according to a report by Apartment List, a rental search engine.
The laws of supply and demand mandate increased prices for in-demand products and services, and the rental markets are no different. But affording higher rents has rarely been more difficult than it is today: As of 2014, more than half of the nation's renters -- 52 percent -- were considered "cost-burdened."
The housing market defines a "cost-burdened renter" as someone who spends at least 30 percent of his or her income on housing. At 30 percent to 50 percent, renters are deemed "moderately burdened." If they pay more than 50 percent, they are counted as "severely burdened."
According to Apartment List, the rise in demand for apartments, plus the very modest growth in renters' incomes in recent years, is causing the pinch.
"The share of cost-burdened renters has risen in many cities and states across the nation," the website says. "According to the census data used in our analysis, the share of cost-burdened renters is 40 percent or higher in all but two states as of 2013."
The worst rental markets correspond to the nation's most expensive housing markets: both coasts, plus Hawaii. "Florida, Hawaii and California have the worst scores: Each of them have cost-burden rates of 57 percent or higher. Thirty percent of renters there spend more than half their income on rent," Apartment List reported.
Anyone looking for an inexpensive rental market should try North and South Dakota. According to the report, the Dakotas are the only two states in the country where less than 40 percent of renters were cost-burdened.
If relocating to either of those two states doesn't work for you, the question then becomes: How do renters find the scarce bargains out there? One method is to look for landlord subsidy programs, in which the subsidies are passed on to the renters to make their rents more affordable.
The state of New Jersey has one such program. The subsidies in the Garden State came in the wake of Hurricane Sandy, which caused massive damage in many areas. The state earmarked $18 million of Sandy disaster money to a Landlord Incentive Program. According to the program's website, it is "designed to make it financially possible for rental property owners of all sizes to provide safe, suitable and affordable housing for low- and moderate-income residents who have found it difficult to locate housing after Superstorm Sandy."
The program provides landlords with a steady revenue stream in order to "encourage them to rent their vacant apartments to families of limited financial means with the guarantee of receiving fair market value rent. Rental property owners will receive roughly the difference between 30 percent of the tenant's monthly income and federal fair market rents each month."
It's sort of a local version of the federal Section 8 program -- Washington's main method for helping low-income families find decent housing. Section 8 is another way people can search for more affordable rentals.
Under Section 8, participants are free to choose any type of housing, including single-family homes, townhouses and apartments. Funds for the program come from the Department of Housing and Urban Development, but are administered locally by public housing agencies.
-- Freelance writer Mark Fogarty contributed to this column.