I spent Tuesday morning at a conference by Harvard’s Joint Center for Housing Studies. They released a survey showing one in four renters, low and middle income, are spending more than half their income on rent and utilities. That’s about 10 million households.

As rental demand surges, and supply dwindles, rents are going up, and wages are not rising to meet the new rental normal.

“These affordability problems are marching up the income scale,” notes JCHS’s Eric Belsky. “It means more people have less money to spend on household necessities such as food, health care, and savings.”

This study came out about an hour before the folks at S&P/Case Shiller informed us that home prices are now a “hair’s breadth” away from the dreaded double-dip. If prices are so low, you would think some of those renters might be prompted to buy, but noooo. Tight credit and a complete lack of confidence in the investment value of a home are keeping all those potential buyers on the rent rolls.

So now we have a new conundrum. You can’t/don’t want to buy, but you’re going to pay an arm and a leg to rent. This point is not lost on the Secretary of Housing and Urban Development, Shaun Donovan, whom I interviewed this morning at the conference.

“The longer term view is that we have to have a more balanced housing policy nationally. We focused on home ownership. We have to continue to do that, but we can’t forget about rental housing,” said Donovan, noting several programs the government has pursued to prevent homelessness. He did not give any specifics, however, on what the administration might do for renters.

The issue presents an interesting opportunity, at least in my view. The biggest barrier to housing’s recovery right now is the vast supply of foreclosed and about-to-be foreclosed homes… the dreaded “shadow inventory.” Much of that inventory is owned by the government, through Fannie Mae, Freddie Mac and the FHA. The biggest problem in the rental market right now is dwindling supply.

Do you see where I’m going here?

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