Rise of the renter delays the dream of homeownership
More Americans seek low-cost rentals instead of homeownership in the post-crash housing market. Affordability is the main challenge with 42 million US households paying more than 30 percent of their income on housing.
Even with homes very affordable now by many official measures, one of the most notable features of post-crash America is the rise of the renter.
People who have lost their good credit record, lost their confidence in the housing market, or lost secure jobs have been shifting from being owners to renters. Young people who in prior decades might have been buying first homes are living with parents or renting.
By 2010, a US Census measure of homeownership had fallen from record levels of near 70 percent of households to about 65 percent. Now it may be about a percentage point lower than that, estimates Patrick Newport, an economist at IHS Global Insight. And even many home buyers could justly be called renters for now, he adds, because sunken home values have erased any buildup of equity when they make their monthly payments.
The pendulum shift is partly a reversion to the norm. But it also hints at a hard reality of housing: Affordability is still a big challenge – even at a time of rock-bottom interest rates.
Some 42 million US households (37 percent) pay more than 30 percent of income toward housing, according to census data compiled by Harvard University's Joint Center for Housing Studies. And more than 20 million pay more than half their income, up by 6.4 million households since 2001. That's a severe burden that can leave families strapped for money for other necessities like food and transportation.
Meanwhile, the cost of renting has been going steadily up along with the rise in demand for apartment units. So, even as economists talk of now being a great time to buy, low-cost rentals would be even more welcome to many Americans.
"In the short term, they need a safe, affordable place to live," says Nellie Gorbea, executive director of HousingWorks RI, a research and advocacy group in Rhode Island. In the long term, she adds, ownership still represents "the path to the American dream."
Many investors are buying up houses and converting them into rentals, and government policymakers say it makes sense to encourage this. Ms. Gorbea says investing in affordable rental units could help working families with low incomes, while also helping to revive residential construction jobs in her state.
Still, ownership hasn't lost its appeal. Tyler Sylvester, a young student with two years to go for a culinary degree at Johnson and Wales University near Providence, R.I., says without hesitation that he aspires to own rather than rent.
Living in the nearby city of Pawtucket, R.I., Dwayne Adams and Tracey O'Brien feel the same way. As they raise three children and prepare for the arrival of another, the question is more how they'll afford it. They say it might take some years of saving and a stronger economy to pave the way for things like a down payment, loan approval, and a more secure stream of income than they have from their jobs today.