Researchers at Rutgers University–Newark have answered a question asked by many in New Jersey and nationwide: Why is the rent so damned high?

That’s the title of areport that explores the sharp rise of housing costs in recent years, increasing 30 percent between 2021 and 2023, according to Katharine Nelson, associate director of Rutgers Center on Law, Inequality and Metropolitan Equity (CLiME).

Although pundits have focused on demand outstripping the stock of available housing, Nelson’s team discovered that’s only part of the problem.

The report found that four forces have converged to make housing unaffordable: stagnant wages, widening income inequality, consolidation among developers and landlords, and a severe shortage of homes affordable to low-income renters and first-time buyers.

“What we kept bumping up against is what you see in the news and experts focusing on the supply-side,’’ she said. “Yes, it’s a problem. But there is no single individual solution to the rental affordability crisis. We need to attack this on many fronts at once. That means building more homes, certainly. But the homes we are producing must be homes we need - very low rent units and starter homes,’’ said Nelson.

“At the same time, we need to address the consolidation of landlords and homebuilders which are driving up prices, and find creative ways to assist very low income households as federal subsidies disappear. And, we need to do all that while also preserving the affordable housing we still have,’’ she added.

The report, which is based on an extensive academic literature review across urban planning, economics, sociology, and public policy, reveals the crisis has been decades in the making. But things have grown worse since the pandemic because inflation has also been on the rise.

One cost-driver is the fact that the government defines affordable housing prices as 50 percent or 60 percent of occupant income, which is a bigger strain on those who earn less .“Units that are affordable to very low-income renters — viable at 30 percent of their median income or below — are what’s missing,” Nelson said.

The report also details how the consolidation of real estate ownership has reshaped the rental market. Studies show that corporate owners–groups of investors who are enriched by returns from rent collection–set higher rents than individual landlords.

The report also found that housing shortages are especially severe in suburban areas, driven by decades of underbuilding smaller, entry-level homes. “It’s a huge part of the crisis,’’ said Nelson.

Why is the Rent So Damned High? proposes measures to make housing more affordable, including subsidizing low-income renters and the construction of starter homes.

With federal policy changes underway, she stressed the urgency of state and local action. “Changes are happening at a federal level, and it’s incumbent upon the state and local levels to figure out how to respond in ways that will address the affordability crisis,” Nelson said.

Here are some of the report’s findings:

Rents Rising Faster Than Incomes

Over the past 40 years, rents have risen three times faster than incomes, and are now four times higher than in 1984, after adjusting for inflation. From 1980 through 2018, the lowest-wage workers experienced a 5 percent decline in real wages. As of 2023, nearly half of all U.S. renter households — about 22 million — were housing-cost burdened, paying more than 30 percent of their income on rent, while over 12 million spent more than 50 percent.

The Disappearing Supply of Affordable Rentals

Nationwide, there are only 35 affordable and available rental homes for every 100 extremely low-income renter households. Federal affordability standards typically target households earning 50 to 60 percent of area median income, leaving renters with much lower incomes unserved unless states provide additional funding.

Shortage of Starter Homes in the Suburbs

In the 1970s and 1980s, more than a third of new homes built were starter homes, at rates exceeding 400,000 per year. Since the Great Recession from 2007 to 2009, the U.S. has produced fewer than 100,000 starter homes annually. Suburbs account for roughly half of the national housing undersupply, in part due to restrictive zoning and the dominance of single-family detached housing.

Corporate Ownership and Consolidation of the Housing Industry

Individual landlords who own less than five units–as opposed to professional or corporate landlords who own many units– often set rents below market value by an average of $200 a month. Contributing factors include personal relationships with tenants that discourage them from raising rents.

Today, non-individual investors own more than half of all rental units nationwide. In 2000, non-individual investors owned one-third of 5–24 unit apartment buildings. By 2020, they owned two-thirds of those properties.

Exclusionary single-family zoning and the costs of materials and labor are widely understood to be driving up development costs. The role of homebuilder consolidation is less widely discussed, but also critical to understanding why housing prices are so high.