Story highlights In numerous cities, rents are becoming unaffordable for middle-class families

Robert Hickey: Part of the problem is demand for rental homes has skyrocketed

He says most new housing development is high-end, catering to high-earners

Hickey: One solution is to set a portion of new developments to be affordable

A decent, safe and affordable home is something all Americans need to thrive. While the lowest-income households continue to lack access to affordable rental homes, increasingly, middle-income households are also shut out.

Rents are consuming large shares of income. In Boston, for example, the median rent hit $2,458 in March, up 24% from three years ago. A household would need to earn at least $96,000 annually to afford this, based on the standard definition of affordability, in which one should pay no more than 30% of income for housing. Consider that in Boston an elementary school teacher makes approximately $58,000 per year and a registered nurse $73,000, and you get the picture that the middle class is getting squeezed. Similar median rents are now the reality in Los Angeles ($2,383) and Washington ($2,453).

Robert Hickey

The housing recovery is a few years old, and home prices have started to rebound. But why isn't the rental market fixing itself?

Demand for rental homes has skyrocketed

We are seeing a major demographic convergence on the rental market. Demand is fueled by an exploding population of 20- to 30-year-old millennials looking to rent their first homes, baby-boomer retirees choosing to downsize to apartments, former homeowners exiting foreclosure, and would-be homeowners who can't access mortgages in the tightened credit market. Everyone is eyeing the same locations: cities, transit-friendly suburbs, and town centers that are walkable and close to jobs.

We're not building enough housing in desirable places

Photos: Income inequality in America Photos: Income inequality in America Income inequality in America – In the early 20th century, industrial tycoons like the Rockefellers and Carnegies amassed fortunes in railroads, steel or oil. Here, a view of Cornelius Vanderbilt's residence in New York in 1908. Hide Caption 1 of 24 Photos: Income inequality in America Income inequality in America – Wealthy passengers aboard a ship near San Francisco, circa 1910s. In this era, the top earners accounted for roughly 18% of the national income. Hide Caption 2 of 24 Photos: Income inequality in America Income inequality in America – People gathered across from the New York Stock Exchange on "Black Thursday," October 24, 1929. The stock market crash of 1929, fueled by excessive speculation on Wall Street, set off the Great Depression. Hide Caption 3 of 24 Photos: Income inequality in America Income inequality in America – Thousands of unemployed people waited in line to register for federal relief jobs in New York in 1933. The unemployment rate rose to 25% that year. Hide Caption 4 of 24 Photos: Income inequality in America Income inequality in America – On September 12, 1935, Franklin D. Roosevelt and his staff met to find a solution to the economic crisis. FDR's New Deal policies tightened regulation of Wall Street, strengthened unions and set the top marginal tax rate for the rich at 90%. Hide Caption 5 of 24 Photos: Income inequality in America Income inequality in America – A nurse takes care of children of migratory farm workers in Arvin, California, in 1937. The unemployment rate hovered in the teens. FDR created large-scale public work programs to provide jobs for the poor and middle class. Hide Caption 6 of 24 Photos: Income inequality in America Income inequality in America – A plant in Toledo, Ohio, that made bombs. With the advent of World War II, demand for production of goods and services increased. By the mid-1940s, the unemployment rate dropped to less than 5%. Hide Caption 7 of 24 Photos: Income inequality in America Income inequality in America – Labor unions benefited from FDR's policies and grew in power midcentury. Transit workers protested in New York on April 17, 1950. The Transport Workers Union threatened a strike if even one worker was punished for demonstrating. Hide Caption 8 of 24 Photos: Income inequality in America Income inequality in America – Truck supervisor Bernard Levey with his family in front of their new home in 1950. The post-war period was a prosperous time for middle-class Americans. Hide Caption 9 of 24 Photos: Income inequality in America Income inequality in America – From the 1950s to the 1970s, income inequality fell. Some economists call this period "The Great Compression." The median income at the time allowed a single earner to purchase a modest house and a car, support a wife and three children. Hide Caption 10 of 24 Photos: Income inequality in America Income inequality in America – A worker at the Department of Motor Vehicles in Sacramento, California, in 1966. The feminist movement fought for equal pay for women, who were earning about 60 cents for every dollar earned by men. Hide Caption 11 of 24 Photos: Income inequality in America Income inequality in America – In the 1970s, income inequality began to rise. The economy experienced wage and inflation problems, along with an oil crisis that caused a gasoline shortage. Here, a gas station in New York. Hide Caption 12 of 24 Photos: Income inequality in America Income inequality in America – Post-1979 has been called the "Great Divergence." Some say that President Ronald Reagan's policy of supply-side economics, which reduced taxes for the rich, was a contributing factor. Hide Caption 13 of 24 Photos: Income inequality in America Income inequality in America – Real estate tycoon Donald Trump with his Rolls Royce at his Mar-a-Largo property in Palm Beach, Florida. Hide Caption 14 of 24 Photos: Income inequality in America Income inequality in America – The 138-meter (453-foot) yacht "Rising Sun" was purchased by Larry Ellison of Oracle, who has been one of the nation's highest-paid executives. From the 1990s on, CEO compensation greatly outpaced the average compensation of workers. Hide Caption 15 of 24 Photos: Income inequality in America Income inequality in America – Home construction in Inverness, Illinois, in 2006. Risky mortgage lending was packaged by banks that sought to make big profits. The collapse of housing bubble instigated a credit crisis that triggered the global financial meltdown of 2007. Hide Caption 16 of 24 Photos: Income inequality in America Income inequality in America – By 2007, the top 1% accounted for 24% of national income. Bernard Madoff, whose Ponzi scheme is one of largest financial frauds in history, made billions off hapless investors. Here, shoes that once belonged to Madoff. Hide Caption 17 of 24 Photos: Income inequality in America Income inequality in America – Lehman Brothers, which collapsed in September 2008, filed for the largest bankruptcy in U.S. history. Major financial institutions were bailed out by the government with a massive amount of taxpayer money. Hide Caption 18 of 24 Photos: Income inequality in America Income inequality in America – John Thain, former CEO of Merrill Lynch, doled out more than $4 billion in bonuses to employees. Despite the worst economic crisis since the Great Depression, Wall Street handed out $18.4 billion in bonuses for 2008, which is the "sixth-largest haul on record." Hide Caption 19 of 24 Photos: Income inequality in America Income inequality in America – A job fair in March 2009. Unemployment rose to 10% during the Great Recession. Hide Caption 20 of 24 Photos: Income inequality in America Income inequality in America – In September 2011, the Occupy Wall Street movement sprang up. The average income, adjusted for inflation, grew $59 from 1966 to 2011 for the bottom 90% of Americans. Hide Caption 21 of 24 Photos: Income inequality in America Income inequality in America – Occupy Oakland protesters in California. In 2012, the income of the top 1% increased nearly 20% compared with a 1% increase for 99% of Americans. Hide Caption 22 of 24 Photos: Income inequality in America Income inequality in America – A suite at the Four Seasons Hotel in New York City costs $45,000 a night. Middle class Americans had a median household income of a little over $51,000 in 2013. Hide Caption 23 of 24 Photos: Income inequality in America Income inequality in America – Today, the top 1% controls about 40% of national wealth. At a hearing in Washington D.C. about Wall Street and the financial crisis, protesters hold a placard depicting Goldman Sachs CEO Lloyd Blankfein, who once famously said, "I'm doing God's work."

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The pace of new residential construction has been insufficient to make up for the years when it was at a virtual standstill. We're simply not building enough rental housing -- affordable or otherwise -- in the places people want to live.

For example, in San Francisco, one of the fastest growing job markets in the country, there has been an average of about 1,500 units built annually, a level far below what is needed by the growing workforce. Last year alone, the city added 47,000 jobs.

Most new housing is high-end

In many cities, demand is so great that there are easily enough high-income renters to support prices well out of reach for the middle class, not to mention lower-wage employees and seniors. And we can expect the imbalance between supply and demand to keep rents high for well beyond the short term.

Moderately priced housing, even if it is profitable, is not as profitable as luxury housing, so the market alone will not build it.

How to fix the problem?

Local governments have preciously few housing resources these days. What they have is rightly targeted at those with the greatest housing needs: our lowest income households. But here are two ideas that would help make more housing affordable for the middle class.

Solution 1: Link growth with affordability

We need to loosen zoning restrictions to allow more rental housing to be built where it's needed most. There is room and adequate infrastructure to support sensible growth in many of our cities, transit-served suburbs and small town centers, where we should be relaxing height limits, reducing parking requirements, and permitting more modest-sized apartments and micro-units.

But given the huge demand and limited immediate availability of land, we cannot just build more housing and solve the problem, at least not in the short term. Consider Washington's recent experience. Median rents increased by 18% between 2010 and 2013 even as the city added more than 11,000 housing units. We need to keep growing, but we also need to make sure that more of what we build is affordable.

When developers are allowed to build to heights or density greater than that ordinarily permitted by law, they should be required to share a portion of that new value by including some affordable housing for low- and middle-income renters.

This is how places like Fairfax County and Arlington County, Virginia are building out their transit station areas and streetcar corridors. Developers and residents are both on board, because it's a win-win deal. Developers profit from the enormous new potential unlocked by the zoning changes, while communities benefit from the addition of mid- and lower-priced homes that meet local needs and are close to transit. Hundreds of cities and counties nationwide have adopted similar "inclusionary housing" policies.

Solution 2: Help more qualified home buyers

We need to open a release valve on the rental market by letting more qualified, middle-income households buy a home. The National Housing Conference has assembled a broad coalition to advocate replacing the temporary patchwork we have now with a reliable system to help people buy a home. Housing finance reform based on sound principles would help homeowners and ease pressure on the rental market.

These housing solutions are doable, capable of winning bipartisan support and urgently needed.

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