Many young adults piled up huge student debt to get college degrees enabling them to pay off loans but face a slowly recovering job market. On the other side of the career spectrum, retirees worry that fixed incomes won’t be enough to deal with prices that aren’t fixed, much less with medical or retirement benefits a past employer eliminates.

Young or old, people who rent their homes often pay big chunks of their income, and it’s probably going to get worse, according to a new report by real-estate research and investment group Enterprise Community Partners (ECP) and Harvard University’s Joint Center for Housing Studies (JCHS).

It’s an early warning to tenants and communities alike.

“A significant share of the burden would be among older adults and Millennials,” says the report, which studied patterns in homeownership, projected population growth and household formation.

They conclude that the trend of fewer Americans buying homes will continue. In ECP’s eight scenarios, just one – factoring in incomes rising 1 percent better than inflation – does the number of “burdened renters” (paying half of their income for rents) fall, and that decline would be only 1.4 percent.

About half of renters spend more than 30 percent of their pay on housing, and one quarter spend 50 percent or more, but that’s predicted to accelerate.

Increased rent prices stem from high occupancy rates and sluggish development and the shortfall in affordable rental housing is growing, ECP said. The private sector is unable or unwilling to supply new units at affordable rents – underscored Nov. 18, when the Commerce Department said apartment construction in October slumped 25.5 percent, the biggest decline in 16 months.

Couple that with stagnant wages and it’s difficult to make ends meet, and times could get tighter in the next decade, said ECP, which said that the U.S. rental population will grow by some 4 million and the number of “severely burdened” tenants will balloon to more than 13 million.

“The affordability problem fundamentally reflects the simple fact that the cost of providing decent housing exceeds what low-income renters can afford to pay,” the report said.

Peoria’s director of community development Ross Black says the last count of rental units here, in 2013, was 20,453, compared to 18,203 in 2000. That’s a 12.3-percent increase, compared to the population growth over those 13 years of about 3 percent. But that hasn’t helped.

“In the last five years, rents have gone up 15 percent while income has only gone up 11 percent,” says Becky Peterson, president of the Peoria Area Association of Realtors. “You would think that with all the apartments that have gone up in the northern part of Peoria, that there would be enough to fill the need, but I think the issue is affordable rents.”

Being a landlord can be very profitable. The return on investment is typically more than 10 percent, according to ECP. But affordable units are less profitable, so they aren’t built or, if they exist, are just as likely to be demolished as renovated.

A Realtors rental-property database on Nov. 19 showed 51 apartment/condo vacancies in Peoria, ranging from efficiency units to 3-bedroom apartments, and the median (mid-point) rent was $900/month.

“I generally think we will see an increase in demand for rental-based housing,” concedes Peoria Assistant City Manager Christopher Setti, “but Peoria is a very affordable community in which to live.”

How we got here

The Great Recession caused median household wealth to drop 47 percent from 2007 to 2010; joblessness doubled; and skilled work vanished, cutting incomes and pushing many middle-class Americans into lower-paying jobs, leaving less money for basics like housing, ECP said.

Peoria Realtor Phil Harvey says, “Even before the Great Recession, rental housing production had been at modest levels. Starts of single-family and multi-family rentals held below 300,000 units annually on average from 1995 through 2004. (By comparison, homes built for sale exceeded 1 million units each year and topped out at 1.7 million in 2005.) When the owner market crashed and the recession took hold, rental starts fell from their already weak levels to about 230,000 units a year in 2005–8, and then to just over 100,000 units in 2009, the lowest production in more than 50 years.”

Black agrees and focuses on young adults.

“Purchasing a house became far more difficult with the collapse of the subprime lending market,” he says. “Younger people are staying in university longer, waiting longer to get married, and are more mobile. These factors taken together have created a demographic bubble of people who are putting off the purchase of a first house and therefore are creating more demand for rental units.”

Millennials, those born roughly between 1980 and 1995, have been unable to accumulate much wealth, so they’re unlikely to be ready to buy homes or have a cushion to soften the realities of high rents. But it’s bad for older Americans, too. About 30 percent of elderly renters already use more than half of their income on housing, ECP said, so their forecast means more rent-burdened seniors.

“There are reasons to worry,” says Chris Merrett of the Illinois Institute of Rural Affairs. “The first is the lingering impacts of the Great Recession and the hindered ability of Millennials to save up for housing. Second, there is an ongoing issue of wage levels. If 30 percent to 50 percent of wages are devoted to paying rent, it is not clear how conditions improve. Wage stagnation, plus increased demand for affordable housing, has driven up the cost of housing, including rental housing – making conditions untenable for many families.”

Dr. Joanne Thomas, President/CEO of Central Illinois Agency on Aging, adds, “Combining [affordability] with the challenge of healthy aging, I lean further in the direction of creating housing that makes use of home- and community-based care that ‘allows older adults with healthcare needs to avoid expensive stays in long-term facilities and readmissions into hospitals,’ [as AARP said in its “5 Essential Facts from Housing America’s Older Adults” report].

“Given the entrepreneurial opportunities in health care and among the best franchises, my unstudied opinion is that opportunities for entrepreneurs, more affordable rental housing, and attracting more residents all have potential,” she says.

The burden isn’t limited to low-income citizens, and the danger extends beyond urban centers.

“A study by the Housing Assistance Council argues that in rural places, there is a shortage of rural rental options,” says Merrett, “and that 50 percent of rural renters pay more than 50 percent of their income on rent. So there is a persistent housing problem in rural places. And there is an ongoing shortage of rural rental options for working-class families.”

Situation dire without action

Not advocating for government-imposed rent control, ECP’s report did suggest ideas for facilitating affordable housing, including changing regulations limiting higher-density developments or preventing “accessory dwelling units” (sometimes dubbed “mother-in-law” apartments); allowing smaller dwellings, including “micro apartments”; and reducing parking mandates that can increase the cost of construction.

Likewise, Daryl Carter, chair of the National Multifamily Housing Council, said greater attention needs to be focused on the types of units being built to ensure they meet the affordability and sizing needs of renter households. The ECP also suggested communities can relax zoning rules to allow more residential construction and tie affordable housing plans to development projects at the local-government level.

Others propose approaches such as “co-working models” – in Syracuse, N.Y., for instance, working Millennials share living space and working space as a way to reduce costs while maintaining a sense of community – and raising wages to give tenants a chance to keep up with housing costs.

“The critical question now is whether supply and demand are approaching balance,” Harvey says.

At the City, Black says, “The market will swing back and forth based on forces far beyond what the City can control. All the City can do is make it possible for rental and owner-occupied development to occur.

“Different segments of the population will be attracted to different types of amenities,” he continues. “Some will want a more urban setting, while others a more suburban setting. Trying to pre-guess the market is generally not advisable, but making it possible for different types and price levels of development in different areas of the City does make sense.”

The ECP conclusion was more sobering.

“Our analysis projects a fairly bleak picture of severe renter burdens across the United States for the coming decade,” the report said.