Homelessness Grows At Record Pace Even As Oversupply Plagues High-End Multifamily Market

The rising cost of housing is putting more Americans on the street than ever before.

The homeless population in the U.S. has increased by 11% this year compared to 2022, according to a preliminary data analysis by The Wall Street Journal. Though the U.S. Department of Housing and Urban Development plans to release finalized data later this year, anything close to the WSJ's preliminary figure would represent a record since HUD began its current method of data collection in 2007.

The previous biggest single-year jump in homelessness was 2.7% from 2018 to 2019, excluding the 2022 increase driven by a pandemic-affected undercount in 2021, the WSJ reports. The data collection method used by the WSJ and HUD, called a point-in-time count, routinely undercounts the true homeless population, but this year's preliminary figure counted at least 577,000 unhoused persons.

The single biggest driver of homelessness in the U.S. is rising housing costs, which persist even as inflation recedes from the rest of the economy. Shelter accounted for 90% of total inflation in July's consumer price index. Despite increased attention on the risk of homelessness for vulnerable populations, funding for support programs remains low.

Unhoused populations cluster in U.S. cities, but at varying rates. Denver's point-in-time count showed a 32% increase in homelessness, while Los Angeles recorded a 10% jump this year, the WSJ reports. New Orleans showed a 15% increase in homelessness, reversing improvements made in the first two years of the pandemic.

Despite affordable housing's scarcity, the overall supply of rental housing is increasing at a record pace, suppressing rent growth and imperiling some landlords that took out loans when the market was at its hottest. But that increased supply is vastly overweighted to the most expensive units, CoStar reports.

For at least seven consecutive quarters, over 70% of new U.S. apartment deliveries have been in the two most expensive rent tiers, CoStar reports. That trend is poised to continue this year, when over 500,000 more apartments are expected to deliver.

In those two most expensive tiers, rents decreased in the second quarter and vacancy rose to 9.1% after hitting a low of 6.5% in 2021, CoStar reports. In the Sun Belt, the reversal has been the most dramatic, with rents in the two most expensive tiers decreasing 4.5% in Austin, Texas, in Q2.