Throughout American history, homeownership has been cherished as a symbol of wealth, community, and achievement. Additionally, affordable rental units are crucial as they provide stable housing and alleviate financial burden. However, today, the goal of owning a home and even finding affordable housing options is becoming increasingly elusive for millions nationwide. An alarming shortage of homes and affordable rental options has rendered this dream increasingly unattainable for hardworking individuals and families, exacerbating economic disparities and even leading to a rise in homelessness. The nation faces a severe deficit of 5.5 million homes and an acute scarcity of 7 million affordable rental options for low-income households, disproportionately impacting marginalized communities.
Rising housing costs are reaching a critical point, affecting the lives of millions of hardworking individuals and families. A distressing 45.7 percent of renters are cost-burdened, with nearly half considered extremely cost-burdened. Cost burden is defined as a household paying 30 percent or more of income toward housing-related expenses. Extreme cost burden is a household paying 50 percent or more income toward housing related expenses. Among the most vulnerable, Black households experience the highest cost burden rate at 54 percent, followed closely by Hispanic households at 52 percent. This alarming trend extends to mortgage applications, where Black applicants are disproportionately more likely to face denial. Housing cost burden is critical as it has a major impact on financial stability and general wellbeing and can force individuals and families with limited resources to make extremely difficult financial decisions.
The rapid decline in housing listings in recent years significantly contributes to the nationwide surge in median home prices. Coupled with U.S. rent increases consistently outpacing income growth, the housing crisis has culminated in a concerning rise in homelessness, affecting those already marginalized by economic disparities.
Various economic factors have all resulted in a trend towards higher home and rental prices, from restrictive zoning laws inhibiting home construction to the escalating costs of building new properties. Population growth, urbanization, economic expansion, and wage hikes have further strained the supply and demand dynamics. Adding to the complexity, a surge in institutional investor activity and property ownership has exacerbated the situation, making homeownership and affordable rental options seem unattainable for many aspiring Americans.
As housing prices continue to soar, these unrelenting trends are compelling young adults to alter their consumer behaviors drastically. Today, 52 percent of 18 to 29-year-olds are living with their parents, more than at any point since the Great Depression. In addition, 68 percent of parents with young adult children have or are making financial sacrifices for their children, often dipping into precious retirement savings to do so.
The affordable housing crisis is even more pronounced in urban areas where the bulk of preferred economic opportunities are. Atlanta, for instance, is experiencing a severe increase in housing costs. Median listing prices in the Atlanta metropolitan area have risen 63 percent over the last five years, compared with a 28 percent increase in per capita personal income. Median rent for a two-bedroom apartment in Atlanta rose 77 percent from 2019 to 2022. Atlanta hourly wages experienced just a 13 percent increase in the same period.
The national statistics are reflective of the same trends – while renting may be month-to-month more affordable than the costs associated with homeownership, it does not offer a path to building generational wealth. The median net worth of homeowners is approximately $255,000 and the median net worth of renters is roughly $6,000, a stark difference. Additionally, home equity offers more affordable access to capital in the event of a personal financial crisis, business start-up expenses, college tuition, or other long term financial investments through a collateralized loan.
Prices rising at a historic pace have made America's housing situation unsustainable, making the goal of homeownership a virtual pipe dream for many. Even the cost of renting is exorbitantly high compared to just a few years ago. It is imperative for governments and policymakers to provide affordable options for low-income households and dismantle systemic barriers that disproportionately affect marginalized communities. Only through collaborative efforts can we ensure that homeownership remains within reach for all, preserving a better quality of life for generations to come.
Patrick Darcy, Fellow | Pdarcy@econsultsolutions.com
Patrick Darcy is a fellow supporting ESI's thought leadership initiative, ESI Center for the Future of Cities. He is a recent graduate from Temple University where he graduated with a BBA in Economics, and is currently working towards his MS in Financial Analysis with an anticipated graduation date of 2024.
Samriddhi Khare, Fellow | skhare@econsultsolutions.com
Samriddhi Khare is a fellow supporting ESI's thought leadership initiative, ESI Center for the Future of Cities. She currently attends the University of Pennsylvania and will be graduating in 2024. Samriddhi will receive her Master's in City Planning with concentrations in smart cities and technology.
