Home Ownership Inaccessibility for Upcoming Generations in the United States

Sep 26

House, piggy bank, magnifying glass, and blueprints on a table.

By Kendall A. Isom
Published Fall 2024
*Special thanks to Genevieve Cole for editing and research contributions.*

Summary+

Affording adequate shelter is an important human need, but it is also a significant aspect of the American Dream to be able to own a home. Housing inaccessibility poses a significant challenge for younger generations in America, including Millennials and Generation Z, compared to their parent and grandparent generations such as Baby Boomers and Generation X. This challenge is primarily driven by contributing factors such as wage stagnation, an increased cost of living, and a housing shortage. These factors collectively contribute to consequences including younger individuals being unable to afford homes, exacerbating wealth inequality, and hindering one’s ability to retire comfortably. Furthermore, housing insecurity puts upcoming generations at risk of eviction and homelessness, while also adversely affecting their mental and physical health. To address this issue, improving accessibility to Down Payment Assistance programs and Rent-to-Own Programs can provide crucial support, helping younger generations overcome financial barriers and achieve homeownership, thus promoting stability and well-being in their lives and future legacy.

Key Takeaways+

The combination of wage stagnation and increasing costs of living is making homeownership more difficult to achieve.
74% of Americans consider owning a home as the most-cited element of the American dream.¹
New census data shows how big this trend is, with nearly half of 18 to 29-year-olds now living with their parents, the highest it has been since the Great Depression era (1929–41).²
Generally, there was a surplus of housing supply in the 2000s followed by a growing deficit in the 2010s, succeeding the Great Recession in 2008. As of 2022, America is short around 3.2 million homes, a significant reason as to why prices are still high.³

Key Terms+

Baby Boomer Generation—People born between 1946 and 1964.⁴

Collective Bargaining—The process in which working people, through their unions, negotiate contracts with their employers to determine their terms of employment, including pay, benefits, hours, leave, job health and safety policies, ways to balance work and family, and more.⁵

Compensation—Wages plus benefits; Compensation measures the total income—both wages and salaries and supplements to wages and salaries—earned by employees in return for contributing to production during an accounting period.⁶

Generation X—Those born during the years between 1965 and 1980.⁷

Generation Z—Those born during the years between 1997 and 2012.⁸

Homeownership Rate—The proportion of households that are owner-occupied. It is calculated by dividing the number of owner-occupied households by the total number of occupied housing units.⁹

Housing Shortage—A deficiency or lack in the number of houses needed to accommodate the population of an area.¹⁰

Millennials—Those born during the years between 1981 and 1996, also known as Generation Y.¹¹

Moratorium—A legally authorized period to delay payment of money due or the performance of some other legal obligation.¹²

Mortgage—A type of loan used to purchase or maintain a home, plot of land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest.¹³

Productivity—A measure of economic performance that compares the number of goods and services produced (output) with the number of inputs used to produce those goods and services.¹⁴

Recession—A significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.¹⁵

Wealth—Also called net worth, the value of assets owned by a family or an individual (such as a home or a savings account) minus outstanding debt (such as a mortgage or student loan). It refers to an amount that has been accumulated over a lifetime or more (since it may be passed across generations).¹⁶

Context

Q: What is homeownership inaccessibility, and why does it matter?

A: Homeownership inaccessibility refers to the inability to afford or be approved through all the necessary steps to qualify and afford a home. The process can differ among lenders, but there are consistently six boxes to check off when applying for a home loan: acquiring the down payment, picking a lender, checking the credit score, checking the debt-to-income ratio, setting aside closing costs, and applying for pre-approval of a mortgage.¹⁷

Data from the Decennial Census, the American Community Survey, and the US Department of Housing and Urban Development show that the average home price to the average income ratio has gone up from 6.1 in 2000 to 8.5 in 2021, making homeownership access more challenging even for those who earn moderate incomes.¹⁸ To clarify this data, that would mean in the year 2000, for every dollar the average person earned a house cost about $6.10. But in 2021, that ratio increased, meaning houses became more expensive compared to people's incomes. Now, for every dollar the average person earns a house costs about $8.50. Low interest rates before the 2021 hike, or rise in interest rates for consumers and businesses to borrow money, lowered borrowers’ monthly payments but higher home prices have increased the size of the down payments required. Essentially, both high home prices and high interest rates are creating financial burdens that affect mortgage affordability.¹⁹

As an individual pays off their mortgage, the equity in their home grows (meaning the individual’s net worth increases). Owning a home is a powerful way to build wealth because it is automatic—the value of homeownership happens as one makes monthly rent payments towards their mortgage, storing equity in credit with each payment.²⁰ According to the 2019 Survey of Consumer Finances, the median homeowner has 40 times the household wealth of a renter.²² In other words, owning a home or paying a mortgage acts as a forced savings mechanism through home value appreciation. Without access to homeownership, upcoming generations may face greater financial insecurity and an inability to build long-term wealth; additionally, the lack of affordable housing options in many metropolitan areas has resulted in longer commutes, higher transportation costs, and increased economic inequality. These challenges can lead to decreased economic mobility and a widening wealth gap between generations.²³

Q: Which generations face financial disparities in home ownership in the United States?

A: Research shows that upcoming generations born after 1981, such as Millennials and Generation Z, are facing homeownership inaccessibility at higher rates than preceding generations. One study reviewed changes in market-level housing affordability that are associated with the increase in young adult coresidence over the first two decades of the 21st century. This research discovered that around one-fourth of the 9 percentage point rise in young adults living with their parents from 2000 to 2021 was due to housing becoming less affordable, higher unemployment rates, and delays in marriage and having kids.²⁴ New census data shows how prevalent this trend is, with nearly half of 18 to 29-year-olds now living with their parents, the highest it has been since the Great Depression era (1929–41). After the economic boom following the end of World War II, the number of young adults living with their parents dropped to a low of 27% in 1960. Since then, this figure has been steadily increasing, reaching 40% in 2000, 47% in 2019, and 49% in 2021.²⁵ Essentially, the portion of income spent on rent increased gradually from 2000 to 2021. In 2000, people spent about 16.4% of their income on rent, and by 2021, that percentage increased to 18.5%. At the same time, the median house value compared to household income also went up. In 2000, the typical house was worth about 2.9 times the median household income, but by 2021, it had risen to 3.9 times that income.²⁶ A significant decline in the real homeownership rate means more of today’s young adults will not be able to build wealth through housing equity the way older generations did.²⁷

Significant demographic differences exist between generations born after 1981, such as Millennials and Generation Z, and older generations, like the Baby Boomer Generation, that influence behavior surrounding living arrangements and homeownership accessibility. These demographic differences not only include age but also race and ethnicity, gender, personal income, marital status, employment status, current education enrollment, and educational attainment. Different demographic groups within the upcoming generations born after 1981 display varying rates of homeownership inaccessibility.

Generations of people standing on pillars

Housing discrimination against racial and ethnic minorities has deep historical roots in the United States, dating back to policies like the Homestead Act of 1862.²⁸ The Federal Housing Authority further perpetuated discrimination through underwriting guidelines that targeted minority groups for exclusion from mortgage loans, a practice known as redlining.²⁹ Despite the Civil Rights Act of 1968 outlawing housing discrimination, discriminatory practices persisted, with realtors and lenders continuing to deny services or charge higher rates to minorities.³⁰ Throughout the 1970s and 1980s, realtors actively discouraged minorities from purchasing homes in predominantly white neighborhoods, further exacerbating segregation.³¹ Even as overt discrimination declined, subtler forms persisted, such as steering minorities away from desirable neighborhoods.³² Limited housing options forced minorities into older or less appealing homes, increasing exposure to health hazards like lead-based paint.³³ In the 1990s, racial and ethnic minorities saw increased homeownership rates, despite facing stricter credit requirements and information disparities, due to the proliferation of subprime loans. However, these loans came with higher fees and interest rates, disproportionately affecting minorities, even those with good credit scores. Statistics reveal the extent of this disparity, with only 2.6% of whites receiving high-cost loans compared to 13.5% and 12.8% of Latinos and African Americans, respectively, among those with the highest credit scores.³⁴ These discriminatory practices not only perpetuate inequality but also contribute to long-term health and economic disparities among minority populations. According to data from the Census Bureau, homeownership in the US varies significantly by race and ethnicity. In the 4th quarter of 2023, the homeownership rate among non-Hispanic white Americans was 73.8%, followed by Asian Americans (63%), Hispanic Americans (49.8%), and black Americans (45.9%).³⁵ The 27.8 percentage point gap between the white and black homeownership rates in 2023 was greater than it was in 1960 when discrimination was legal in home selling and financing.,³⁶^,³⁷ The Current Population Survey’s Annual Social and Economic Supplement as of 2023 supplies statistics on the long-term consequences of these discriminatory practices.³⁸ Just one-third (33%) of black Millennials own their home, compared to two-thirds (65%) of white Millennials, making that age group the largest gap of any generation, but black Americans are much less likely to own their home than white Americans at every age. White adult Gen Zers are nearly twice as likely as black adult Gen Zers to own their home, with respective homeownership rates of 30% and 16%.³⁹ The racial homeownership gap is smaller for older generations, but it is still substantial. Just over half (52%) of black Gen Xers own their home, compared to 80% of white Gen Xers. Baby Boomers have the smallest percent gap, but white boomers are still much more likely to own their home: 60% of black boomers own their home, compared to 85% of white boomers.⁴⁰

Recent US Census Bureau data reveals a narrowing gap in homeownership between single women and single men.⁴¹ In 2022, single women owned 58% of the nearly 35.2 million homes owned by unmarried Americans, while single men owned 42%. This disparity marks a decrease from 2000 when single women owned 64% of the almost 25 million homes, and single men owned 36%.⁴² Notably, the higher homeownership among single women is largely attributed to their greater numbers rather than economic dominance, especially evident among older Americans where around 70% of single household heads aged 65 and older own homes, compared to 44% among those aged 35–44. Accordingly, 6 million more women were household heads among unmarried people aged 65 or older, partly influenced by women's longer life expectancy.⁴³

Bar graph of affordability barriers to Gen Z and Millennial Homeownership

The likelihood of owning a home can be influenced by marital status, but Millennials and Generation Z are delaying marriage or opting not to marry at higher rates than those of Generation X and Baby Boomers.⁴⁴ To examine how economic downturns impact households' ability to maintain homeownership, the AEI Housing Center analyzed the performance of millions of loans originating just prior to significant stress events, such as the Great Recession and the COVID-19 pandemic.⁴⁵ The findings indicate that having a second borrower (often a spouse) on the mortgage significantly reduces the risk of mortgage default following such stressful events. Regardless of credit scores, down payments, or debt-to-income ratios, households with two borrowers experienced lower default rates, underscoring the role of marriage as a protective factor against defaults during economic crises.⁴⁶

Homeownership rates among young householders differ by educational attainment, largely because higher education usually results in higher earnings critical for obtaining home loans and purchasing first homes.⁴⁷ Drawn from the US Decennial Censuses and the American Community Surveys, the homeownership rate among college graduates rose by 10 percentage points from 74% to 84% between 1960 and 2020.⁴⁸ Individuals with some college education also experienced a 5 percentage point increase, while high school graduates saw a 4 percentage point rise over the same period. However, among high school dropouts, the homeownership rate initially climbed from 67% to 71% between 1960 and 1990, only to steadily decline over the past 3 decades, dropping by 7 percentage points to 64% in 2020.⁴⁹ This decline among high school dropouts has contributed to the overall slowdown in the aggregate homeownership rate observed in recent decades. The convergence of demographic differences among generations born after 1981, such as Millennials and Generation Z, has significantly impacted living arrangements, reflecting new challenges to homeownership accessibility when compared to previous generations.

Q: What sets America apart regarding homeownership inaccessibility?

A: Among nations with similar development statuses, homeownership inaccessibility seems to stand out in American markets because the process of buying and owning a home differs across countries and cultural, economic, and social factors. In places like Germany and Switzerland, fewer people own homes compared to other countries.⁵⁰ These nations have strong public pensions and private savings plans. In Germany, laws protect renters from big jumps in rent prices.⁵¹ In Switzerland, people are taxed the value of their homes, which makes owning more expensive than renting. This tax is why fewer people in Switzerland own homes, even though there are tax breaks for mortgage interest.⁵² On the other hand, in China the vast majority of households, exceeding 80%, are homeowners, with more than 20% of urban households possessing multiple properties.⁵³ Other Asian countries' homeownership rate include Singapore (89.3%), Japan (62.7%), South Korea (56.2%), and Hong Kong (51.5%).⁵⁴ The homeownership rates in African countries are hard to adequately report with little data, but the data that is accessible shows that the rates are below the global average. Nigeria had 30% home ownership in 2019, which slipped to 25% in 2022.⁵⁵ The metric of homeownership rate is not necessarily a good indicator of the standard of living as most advanced countries like Germany, South Korea, Japan, and Austria had rates around or above 50%, and can vary by government structures and shelter options.

In a wider range of countries, some of which lack data for certain years, the United States homeownership rate in 1990 was slightly under the middle and average of the 26 countries providing data.⁵⁶ However, by 2015, the US ranked 35th out of 44 countries with dependable data, falling nearly 10 percentage points below the average homeownership rate of 73.9%.⁵⁷ Despite the difficulties in comparing homeownership rates across nations, US homeownership rates do appear to be decreasing when compared to other countries, with especially historically low rates among Americans aged 44 and below. Bankrate’s poll of 2,545 US adults found that 74% of Americans consider owning a home as the key element of the American dream.⁵⁸ The current credit conditions in the US make it difficult for individuals with less-than-perfect credit to secure a mortgage, contributing to the loss of around 6.3 million mortgages between 2009 and 2015.⁵⁹

Variation in home ownership appears among different US states, as seen in 2015 data, ranging from about 75% in Michigan to 51% in New York.⁶⁰ On average, however, in the US, the homeownership rate is 66%. It is important to consider that home ownership accessibility incorporates both the affordability of an average home based on income and the cost of living. Despite the Euro, on average, declining in value against the American dollar, the cost of living in the United States is significantly higher than across Europe on average.⁶¹ Basic expenses for a single adult with no children in the US are around $2,500 per month, compared to an approximate average of $1,750 per month in Europe.⁶²

Q: When did inaccessibility to buying a home become a prominent issue?

A: In the 1950s, the United States experienced a surge in homeownership due to various factors, including government interventions favoring single-family homes and the availability of land for development. These interventions, such as the Federal Housing Authority (FHA) and Veterans Administration (VA) home loan programs, facilitated the increase in homeownership rates from around 40% after World War II to 60% by the end of the 20th century. These programs, particularly the GI Bill, provided returning servicemen with access to education and housing finance, driving a significant portion of home loans in the postwar period.⁶³

The availability of cheap and easily accessible financing, backed by the US Treasury, revolutionized the mortgage market, allowing buyers to access loans with low down payments and extended repayment periods. This availability, coupled with federal investment in highways, fueled suburban growth and reshaped the housing landscape, with suburban development outpacing urban construction. However, these policies were not equally beneficial to all Americans. African Americans and other people of color were systematically excluded from homeownership opportunities through discriminatory practices such as redlining, as described earlier. This exclusion contributed to a persistent wealth gap between white and black Americans, with white homeowners experiencing substantial increases in wealth compared to renters of color.⁶⁴

The legacy of the postwar housing boom continues to influence contemporary housing challenges, including urban sprawl, housing affordability, racial discrimination, and income inequality. Despite the government's promotion of homeownership, access to housing opportunities remains unequal, highlighting the need for inclusive housing policies. The typical recession before 2007 lasted about 11 months, and the Great Recession in 2008 lasted 18 months, the longest recession in American history.⁶⁵ In the rebound from the 2008 recession, banks tightened lending standards and home prices rose. This tightening occurred as Millennials entered their household formation years, which kept them from buying homes at the same rate as previous generations.⁶⁶ The recession following the global pandemic of the coronavirus lasted 2 months in 2020, but it also resulted in a spike in inflation nationwide.⁶⁷ Prices have grown by 20% overall since 2020, with energy prices the most volatile.⁶⁸ As Millennials and Generation Z faced challenges associated with entering the workforce and adolescence during the longest recession catalyzed by the COVID-19 global pandemic, the combination of these factors exacerbated the inaccessibility of homeownership for this generational demographic.⁶⁹

Contributing Factors

Wage Stagnation

Adults enter the workforce in order to earn money to afford living expenses, but in recent years, wages have not increased enough to compensate for advancing costs of living, creating roadblocks to homeownership for younger generations. Since the mid-late 1970s, inflation-adjusted pay for most US workers has largely stagnated, while pay for the country's highest earners has skyrocketed.⁷⁰ Between 1979 and 2022, annual earnings for the top 1% and top 0.1% skyrocketed by 171.7% and 344.4% respectively, while earnings for the bottom 90% grew 33%. On an annual basis, the bottom 90% of wages grew less than 0.7% per year, compared with 2.4% and 3.5% annual wage growth for the top 1% and top 0.1%, respectively.⁷¹ It is worth noting that these vastly unequal growth rates are on top of the already vast inequality that existed in 1979. Back then, the top 1% earned average wages ($290,000) more than 9 times as much as the bottom 90% ($30,730). In 2022, the top 1% earned average wages ($786,000) 19 times as much as the bottom 90% ($40,845).⁷² In the years just before the Great Recession in 2008, average hourly earnings increased approximately 4% year-over-year.⁷³ In contrast, during the high-inflation years of the 1970s and early 1980s, average wages commonly increased 7%, 8%, or even 9% year-over-year.⁷⁴ Since the beginning of 2013, average hourly earnings for non-management private-sector workers have ranged between 2–3%.⁷⁵ This comparison shows that despite inflation increasing since 1980, wages have not adjusted accordingly.

The issue of wage stagnation occurs mostly as a result of legislative, regulatory, and corporate policies deliberately implemented to constrain labor costs.⁷⁶ For example, the federal minimum wage is set by the Fair Labor Standards Act (FLSA) and enforced by the US Department of Labor (DOL). As of 2024, the federal minimum wage was $7.25 per hour and was last updated by Congress in July 2009.⁷⁷ However, many states also have their own minimum wage laws. On January 1, 2024, the minimum wage increased in 22 states and 43 cities and counties. In 47 of those jurisdictions, the wage floor reached or exceeded $15 per hour for some or all employees, including 1 state and 26 localities where the wage floor will reach or exceed $17 per hour for some of all employers.⁷⁸ However, if the federal minimum wage grew at the same rate as US productivity since 1979, the minimum wage would be approximately $21.50 per hour today.⁷⁹

Contributing factors of these labor constraints—including excessive unemployment, eroded collective bargaining, and corporate-driven globalization—account for more than half of the gap between net productivity and median hourly compensation.⁸⁰ Within the 40 years between 1979 and 2019, economy-wide productivity (the amount of income generated in an average hour of work, net of depreciation) grew by 59.7%, while the compensation of the median US worker rose by only 13.7%—a 46 percentage point discrepancy between the growth in value of what American workers produced and what the typical worker was paid.⁸¹ This disparity illustrates how American income is not enough to afford the current housing market prices.⁸²

Between the 1980s and 2020s, the bottom 90% of US workers experienced wage growth slower than the economy-wide average, while top wage earners (mostly in finance and corporate management) and owners of capital reaped large rewards made possible only by this anemic wage growth for the bottom 90%.⁸³ After adjusting for inflation, the average hourly wage as of 2023 had about the same purchasing power as it did in 1978, with bumpy and inconsistent growth since then. In other words, the average hourly earnings peaked more than 45 years ago; the $4.03 per hour rate recorded in January of 1973 had the same purchasing power that $23.68 would have in 2024.⁸⁴ Higher earnings account for 22% of transitions out of poverty, so the lack of purchasing power increase is not sustainable for the majority of Americans and can push people into a cycle of poverty.⁸⁵ Wage stagnation reinforces a pattern of wealth inequality across many demographics, limiting the generational accumulation of wealth.

Cost of Living

The rising cost of living compounds the challenge of wage stagnation, further inhibiting home ownership accessibility for younger generations. Over the last three decades, American families have experienced a rise in the costs of many necessities, making it difficult for them to attain economic security. Necessities like healthcare, education, and housing have seen inflation rates outpace income growth. The inflation rate change for US consumer prices over the past 62 years ranged between -0.4% and 13.5%. For 2022, the inflation rate was calculated to be 8.0%.⁸⁶ During the observation period from 1960 to 2022, the average inflation rate was 3.8% per year—an overall price increase of 903.96%. An item that cost $100 in 1960 cost $1,003.96 at the beginning of 2023.⁸⁷ As a result, young individuals allocated a significant portion of their income to essential expenses, leaving little room for savings or investments. According to the latest Youth & Money in the USA poll by CNBC and Generation Lab, 61% of younger Americans were not saving for retirement each month, as higher expenses have limited one’s ability to put money aside for savings and investments. The survey polled 1,013 people aged 18–34 in the US in January 2024, and only 11% reported they had enough savings to cover the cost of living for more than a year if they had no income, while 48% could cover more than two months’ worth of expenses.⁸⁸

Living expense increases since the pandemic

For example, the national student loan balance, including federal and private debt, rose steadily from 1960 to the present. Between 2006 and 2023, the total federal student loan debt balance increased by 267.1%, which is an annual rate of 15.7%, or a quarterly rate of 3.82%.⁸⁹ As of 2024, it approached $1.7 trillion, averaging $38,000 in debt per person, whereas in 2006, the total federal student loan balance was $480 billion, or 27.2% of the current balance.⁹⁰ To put this increase into context, the average debt per person has grown by 13.5% just since 2018.⁹¹ The Federal Reserve data shows people under the age of 30 are more likely to have student loan debt compared with older adults.⁹² High student loan debt makes it challenging for individuals to save for a down payment, as a recent NAR study on student loan debt found that 51% of all student loan holders say their debt delayed them from purchasing a home.⁹³

Other costs that have increased tenfold in the last 50 years include healthcare. Health spending totaled about $74.1 billion in 1970. By 2000, health expenditures had reached about $1.4 trillion, and in 2022, the amount spent on health tripled to $4.5 trillion.⁹⁴ Even adjusting for inflation between 2000 and 2022, there was still only $2.3 trillion in 2000 for health expenditures, meaning the health expenditures doubled over those two decades. With rising costs, a pattern emerges of economic recessions that impact the financial success of many generations. The cycle of high living costs and stagnant wages creates an uphill battle for financial stability, therefore placing more roadblocks in front of younger generations to save and afford a home. Researchers estimate that around 80% of families’ budgets were dedicated to spending on more prevalent needs such as housing and health care, which increased by more than 7 percentage points between 1984 and 2014.⁹⁵ This increase contributed to crowding out spending on other categories like leisure, longer-term investments in education, and saving for retirement. Data from the White House article entitled “The Cost of Living in America: Helping Families Move Ahead,” references a 2019 Pew survey that found approximately 35% of middle-income families frequently worry about paying their bills; similarly, 37% worry about the cost of health care for themselves and their families.⁹⁶

Cost of living refers to the average amount one can expect to spend on essential expenses while maintaining a reasonable lifestyle in a particular location, including housing costs. Since the 1960s, home prices have risen 2.4 times faster than inflation, according to Clever Real Estate, which conducted a comprehensive analysis of national, statewide, and citywide home prices over time based on data from the Federal Reserve, the Bureau of Labor Statistics, and the Zillow Home Value Index.⁹⁷ If home prices had merely kept pace with inflation, the median home would cost only $177,500 in 2024—compared to the $431,000 it actually costs.⁹⁸ In fact, homes were nearly twice as expensive for Millennials as they were for Baby Boomers in their 30s, when adjusting for the typical income. When Baby Boomers were in their 30s, around 1985, the median home was 3.5 times more expensive than the median household income.⁹⁹ The median household income was $23,620, and the median home price was $83,200. In 2022, when most Millennials were in their thirties, the median home price was 6.3 times more expensive than the median household income. The median household income was $74,580, and the median home price was $468,000. By 2050, the median home could cost 8.4 times the median household income if the current trajectory continues, which makes it more difficult for upcoming generations such as Generation Z and Generation Alpha to afford homeownership.¹⁰⁰

The US Department of Housing and Urban Development defines “affordable housing” as housing on which the occupant is paying no more than 30% of gross income for housing costs, including utilities.¹⁰¹ To test this definition with the affordability of housing in America, we would divide the national average salary by the average cost of monthly housing expenses including utilities. The national average salary in the US in the last quarter of 2023 was $59,384, according to the US Bureau of Labor Statistics, approximately $4,949 monthly.¹⁰² The national average monthly spending on housing costs—by far the largest expense for Americans—gathered by the US Bureau of Labor Statistics in 2022 rounded to about $2,025 including utilities.¹⁰³ These numbers suggest that the average American shelter costs 40% of one’s monthly income, rendering that shelter unaffordable as it is currently. In the United States, the cost of living can vary across states, and urban areas typically have higher costs of living as opposed to rural areas.¹⁰⁴ In light of rising expenses associated with housing, compounded by concerns about the capacity to subsidize both expected and unexpected living costs, the desire for accessible homeownership is often deterred in favor of more pressing financial exigencies.

Housing Shortage

In the last century, there has been fluctuation in the housing supply in America, and homeownership accessibility rates have experienced similar fluctuation. Understanding this fluctuation clarifies the relationship between the older generations, and the current housing market. Following World War II, Americans feared a lull in the economy, having just survived the Great Depression and a moratorium in housing construction during the war, reinforcing a housing shortage in the 1940s. However, a housing boom, stimulated in part by easily affordable mortgages for returning members of the military, added to the expansion of the post-war economy. The nation's gross national product rose from about $200 billion in 1940 to $300 billion in 1950 and to more than $500 billion in 1960, contributing to a strengthening global economy. At the same time, the jump in post-war births, known as the “baby boom,” increased the number of consumers, hence the title of the Baby Boomer Generation. More and more Americans joined the middle class as the economy adjusted for this population growth.¹⁰⁵ These generations are now the parents and grandparents of Millennials and Generation Z, who face different social changes and economic circumstances.

Giant hand stealing house from two people

The National Association of Home Builders released an article in January 2020, recounting the history of home construction from the 1960s to the 2010s. Following the decline subsequent to the surge in single-family home construction driven by the Baby Boomer Generation in the 1970s, the rate of single-family construction per capita remained remarkably consistent, despite annual fluctuations. From 1980 through the late 2000s, single-family construction averaged slightly above 41,000 starts (new builds) per million people. However, the 2010s deviated from this trend, with single-family construction hovering around half of this rate due to the effects of the Great Recession on both demand and supply.¹⁰⁶ The significant downturn in home building during the Great Recession had a profound effect on the labor force within the industry. Between 2005 and 2010, the sector experienced a net reduction of 1.5 million jobs. Since hitting its lowest point in 2011, employment in this sector has gradually rebounded, adding nearly 940,000 net jobs. The change in number of jobs underscores the crucial role the housing industry plays in the broader US economy.¹⁰⁷ The reduction in construction jobs during the Great Recession contributed to the lull of new housing, and the industry has not been fully restored to close the gap of the housing shortage. The lingering uncertainty stemming from the Great Recession, coupled with decreased demand attributed to the smaller Generation X cohort, significantly impacted home building. Notably, the diminished demand, especially observable in the initial years of the decade, coincided with a period of substantial price escalation.¹⁰⁸ Concurrently, the constrained production levels coincided with declining vacancy rates, diminishing housing affordability, and escalating building expenses. These challenges on the supply side hindered home construction throughout the 2010s, contributing to a net housing shortfall in the United States.¹⁰⁹

Consider population growth over the last decade. The US population expanded by more than 20 million during the 2010s. While this expansion represents a slower rate of growth than that of the 2000s (with a gain of more than 24 million), this increase still marks a solid level of demand for new home construction with a gain of approximately 10 million households.¹¹⁰ Considering the historical trends in home construction and population fluctuation can contextualize why Millennial and Generation Z Americans are feeling discouraged about being able to afford rent or down payments and mortgages due to the housing shortage. When the supply of homes falls far short of the demand, prices push up to unaffordable levels and exacerbate the housing shortage.¹¹¹ The March 2023 Bankrate survey polled 2,529 adults, including 1,397 homeowners. Among the non-homeowners, 73% said affordability was the main reason they had not yet purchased a home.¹¹² Generation Z largely reported that their income was not high enough yet, while Millennials primarily blamed rising home prices.¹¹³ Among those aspiring to own, older Millennials (ages 34–42) pointed to being unable to afford the down payment and closing costs (53%) more than any other reason or any other age group. Younger Millennials pointed to the array of affordability issues: not having enough income (49%), home prices being too high (47%), and not being able to afford the down payment and closing costs (42%). Gen Z cites not enough income (48%) or just not being ready yet (43%).¹¹⁴ The demand for housing has increased dramatically in recent years due to factors such as population growth, a strong economy, and low interest rates, however, the supply of new homes has not kept up with the demand, resulting in a housing shortage.¹¹⁵ Generally, there was a surplus of housing supply in the 2000s followed by a growing deficit in the 2010s, succeeding the Great Recession in 2008. As of 2022, America was short around 3.2 million homes, a significant reason as to why prices are still high.¹¹⁶

In reflecting on the historical trajectory of housing supply in America, it is evident how past fluctuations have shaped present-day challenges, particularly for younger generations like Millennials and Generation Z. The post-World War II housing boom, fueled by factors such as accessible mortgages and a burgeoning economy, laid the foundation for the prosperous middle class that many of today's younger demographics descend from. However, the narrative shifted in the aftermath of the Great Recession, where a substantial decline in home building had reverberating effects on employment and affordability.

Consequences

Retirement Trap and Wealth Immobility

Homeownership can serve as a way for individuals to build savings and equity, but barriers to this personal investment can damage younger Americans’ abilities to enjoy retirement benefits at the Normal Retirement Age (NRA). Ideally, in affordable housing markets, a member of the workforce might plan to go through the process to purchase a home and pay off the mortgage by the time they retire. By then, one may plan to sell the home and buy another without debt. However, this strategy can be difficult in areas where home prices are rising rapidly. If an individual is unable to purchase a home during their early working years, they may have to rent for longer. Buying a home later in life could mean less time to pay off the mortgage before one retires. Renting for long periods can lower one’s chances to build equity that they can access later in retirement.¹¹⁷ If a significant portion of one’s income is tied up in their home, there could be less to “stash away” for retirement. When barriers to homeownership limit wealth accumulation earlier in life, the widening wealth gap between differing American generations is reinforced. Americans are “feeling gloomy” about their prospects of achieving a higher standard of living, with about half saying it is becoming harder for them to move up the economic ladder, according to a new poll from the University of Chicago and AP-NORC.¹¹⁸ Additionally, about 54% of respondents said they do not think younger generations will top their parents' standard of living.¹¹⁹

A report entitled Millennials and Retirement: Already Falling Short, supported by research from the National Institute on Retirement Security (NIRS), demonstrated there is a perceived grim outlook on the future of retirement for Millennials.¹² Specifically, this research finds that 66% of working Millennials had nothing saved for retirement. Millennials faced higher life expectancy, lower income replacement from Social Security, and were less likely to have a traditional defined benefit pension.¹²¹ These factors mean that Millennials must save significantly more than previous generations to maintain their standard of living in retirement.

If Millennials are already set back in setting aside savings in general, their lack of savings slows down opportunities for homeownership and retirement, and could be stuck in a pattern of renting and therefore working longer in life. The Normal Retirement Age in the United States varies from 65 years old to 67 years old according to the Social Security Administration.¹²² There are existing proposals to increase the retirement ages federally, which is envisioned to help alleviate the financing problem by increasing the amount individuals pay into the Social Security trust fund and reducing the amount of benefits one draws out.

When asked if the nation faces a retirement crisis, 79% of Americans agree there indeed is a retirement crisis, up from 67% in 2020.¹²³ More than half of Americans (55%) are concerned that they cannot achieve financial security in retirement.¹²⁴ Additional research shows that Americans are worried about long-term care costs in retirement. Eighty-seven percent are concerned generally about rising costs, while 80% are worried about the rising cost of long-term nursing care.¹²⁵ A large share of Americans (66%) are worried about rising healthcare costs in retirement, 75% are concerned about rising housing costs in retirement, and 66% are worried about increasing costs to get help with everyday chores like cleaning and cooking.¹²⁶ According to the Boston College Center for Retirement Research (CRR), half of American households will not have enough income to maintain their standard of living in retirement even if they work to age 65 and annuitize all financial assets, including securing a reverse mortgage on their home.¹²⁷

This wealth immobility has broader implications for societal well-being. As younger generations struggle to accumulate wealth, the prospect of upward mobility decreases.¹²⁸ Against a backdrop of growing wealth inequality, we observe limited movement in relative wealth during prime years of wealth accumulation. A ten-percentile rise in wealth during one’s early thirties typically leads to a 5.9 percentile increase in wealth by the late fifties.¹²⁹ Notably, mobility is constrained both at the top and bottom ends of the wealth spectrum: half of those in the bottom wealth quintile during their early thirties remain there in their late fifties, while an equal proportion of those beginning in the top quintile remain there.¹³⁰ Economic inequality, whether measured through the gaps in income or wealth between richer and poorer households, continues to widen.¹³¹ The difference in wealth between wealthy individuals and those who have limited financial resources becomes larger over time. This ongoing disparity contributes to sustaining inequality in society, both socially and economically.¹³² Homeownership, a traditional avenue for wealth accumulation, becomes a distant goal, further entrenching disparities across demographics.

Eviction or Homelessness

The fact that the housing market is already statistically harder to afford as of 2023 than years prior can exacerbate the ever-present issue of the homeless population. Homelessness increased in 41 states between 2022 and 2023, with New Hampshire, New Mexico, and New York having the highest percentage increases.¹³³ Individuals and families who lack affordable housing may experience difficulty paying bills in full or on time, and could be at risk of eviction or even homelessness.¹³⁴ In 2023, 57,563 family households experienced homelessness nationwide. These family units accounted for 186,084 individuals—a 16% increase from 2022.¹³⁵ The Department of Housing and Urban Development (HUD) counted 653,104 homeless Americans in 2023, a 12.1% increase from 2022.¹³⁶ The number of homeless people in 2023 was the highest that was measured in the 18-year history of the survey and the highest national homeless rate (0.19% of the national population) since 2012. The number of Americans experiencing homelessness has now grown in every measured year since 2016, after declining annually from 2012 to 2015.¹³⁷ If this percentage increase remains constant for the next 10 years, it would result in over 2,197,466 homeless people in the United States. To put this number into context, it would be equivalent to every citizen living in Houston, Texas, becoming homeless over the next 10 years.¹³⁸ Considering that more individuals and families will be headed by Millennials and Generation Z, these specific generations are at risk of contributing to this projected increase in homelessness in America, as the youngest members of Generation Z will be 18 in 2030. Because Generation Z and the Millennials will be between the ages of 19–49 and Generation Z will be expected to leave their parent’s home upon reaching adulthood, these generations will make up the majority of family households needing financial support in the next decade.¹³⁹

Line graph showing amount of homeless Americans by year

Of the 111,620 unhoused children in the US, 10,548 are living outside of shelters, and more than 3,000 are totally on their own without guardians.¹⁴⁰ Beyond the children under 18, another 34,147 young adults aged 18–24 live alone and unhoused. It is estimated that this number may be low, as homeless children and youths are notoriously undercounted.¹⁴¹

No single cause has driven the trend of increased American homelessness, though experts cite several prominent factors. An unequal financial recovery, a shortage of affordable housing, limited access to critical healthcare, the cessation of COVID-era aid programs, and an immigration influx all bear a share of the blame.¹⁴² It is worth noting that the national rise in homelessness has affected nearly every cross-section of society, meaning the numbers have risen for all types of population centers and across genders, ethnicities, and age groups. This trend shows that the issue of unaffordable shelter is universal, and children whose parents are not homeowners are more likely to not become homeowners in adulthood.¹⁴³

The US has one of the highest eviction rates among the developed countries.¹⁴⁴ In the US, an average of 2.7 million renter households faced an eviction filing each year from 2000 to 2018, resulting in nearly 1 million legal evictions per year. Moreover, growing evidence shows that informal evictions (including lockouts, threats, and other landlord-related forced moves) are at least as common as legal evictions.¹⁴⁵ Eviction rates in many cities throughout the United States are amplified by the problems of unaffordable and maintained housing. Housing commodification, by which the primary function of houses became an accumulating profit rather than providing a place to live, in many residential markets throughout the world is raising rent prices and effectively displacing working-class people from their neighborhoods in favor of the wealthy.,¹⁴⁶^,¹⁴⁷ Housing and real estate markets worldwide have been transformed by global capital markets and financial excess. Known as the financialization of housing, the phenomenon occurs when housing is treated as a commodity—a vehicle for wealth and investment—rather than a social good.¹⁴⁸ Financialized housing markets create gentrification and the appropriation of public value for private wealth. Improved services, schools, or parks in an impoverished neighborhood attract investment, which then drives low-income residents out. For example, the transformation of an old railway line in West Chelsea in Manhattan into a public walkway and park attracted wealthy investors to a mixed-income neighborhood, radically transforming it with luxury housing units costing in the multi-millions, and displacing longer-term residents.¹⁴⁹ Another example can be found in The Blackstone Group, the world’s largest real estate private equity firm. This firm, while managing $102 billion worth of property, spent $10 billion to purchase repossessed properties in the United States of America at courthouses and in online auctions following the 2008 financial crisis, emerging as the largest rental landlord in the country.¹⁵⁰ Other major institutional players invested $20 billion to purchase approximately 200,000 single-family homes in the United States between 2012 and mid-2013.¹⁵¹ The new corporate interest in developing rental properties from homes sold in foreclosures has also raised concerns that there is a greater incentive to pursue foreclosures rather than modify a loan agreement to avoid an unnecessary eviction.¹⁵² Although there are benefits of gentrification—including enhanced infrastructure, neighborhood revitalization, economic growth, and reduced crime rates—a consequence is that long-term residents are often displaced.¹⁵³

Life after eviction presents new challenges. Many evictions result in immediate homelessness that can last for an indefinite amount of time.¹⁵⁴ The subsequent and often desperate search for housing leads to a residence and neighborhood of lower quality than the one they were forced out of in many cases. Landlords are less likely to rent to those with evictions on their records, and it can be difficult to receive credit and qualify for affordable housing programs after an eviction.¹⁵⁵

Negative Impacts on Health

Housing problems negatively affect mental and physical health. Studies show that a lack of homeownership in younger generations causes an increase in stress, anxiety, and depression. First, shelter is a fundamental need that humans require to physically and emotionally flourish. When individuals cannot find or afford a place to call our own, it can symbolize feelings of insecurity and powerlessness. This pressure can then lead to negative emotions such as fear, anger, resentment, and loneliness.¹⁵⁶ Secondly, situations where people have been displaced from their homes often result in severe financial hardship. This poverty creates barriers to obtaining quality medical care and other necessary services, which further increases stress levels. Lastly, displacement also disrupts social networks, which may lead individuals into isolation and increase rates of depression symptoms.¹⁵⁷

Health issues correlating with housing insecurity can include psychological distress and depression, developmental delays in children, and malnutrition. These levels of distress can potentially lead to suicide.¹⁵⁸ The stress caused by eviction and housing instability can also lead to child neglect and maltreatment.¹⁵⁹ Improving access to more stable housing can help alleviate some less severe mental health challenges. Focusing on one study on housing assistance in New Haven, Connecticut, found that people who received rental assistance reported significantly less psychological distress than those on waiting lists, suggesting rental assistance can help support mental health among people earning lower incomes.¹⁶⁰ Another study looking at a small sample of children ages 2 to 17 found that children living in public housing had better mental health outcomes than those on a waiting list.¹⁶¹ Additional research revealed that housing assistance helped reduce anxiety and improve variables that influence mental health, specifically anxiety and stress.¹⁶² Families that cannot afford their housing may have to move more frequently, which can lead to more psychological stress and depression, particularly in children.¹⁶³

One determinant of health is access to safe, stable, and affordable housing. As pediatrician Dr. Meagan Sandel has said, “A stable, affordable home can act like a vaccine, providing multiple long-lasting benefits on both the individual level and the community level.”¹⁶⁴ Conversely, a lack of access to safe, stable, and affordable housing is harmful to health. Multiple housing factors, such as poor ventilation, pests, crowding, forced moves, and neighborhood environment, are associated with infectious and chronic diseases.¹⁶⁵ Research has found that chronic diseases like HIV, cardiovascular disease, and chronic obstructive lung disease are more common among homeless people than the general population.¹⁶⁶ People who are homeless also have an increased risk of premature death.¹⁶⁷ A study in Boston found that for 25 to 44-year-olds, the mortality rate was 9 times higher for men who are homeless and 10 times higher for women who are homeless compared to the general population of Massachusetts—and the mortality rate for 45 to 65-year-olds was 5 times higher for people who are homeless.¹⁶⁸ The health effects of homelessness can begin early in life, as pregnant women who are homeless are more likely to deliver preterm and low birthweight babies.¹⁶⁹ Investigations into the correlation between eviction (including both rent-related and foreclosure cases) and physical health tend to corroborate the notion that involuntary housing displacement constitutes a distinct stress factor impacting physical well-being and physiological processes. Utilizing Census tract data, studies have established associations between heightened eviction rates and incidences of sexually transmitted infections, infant mortality, and low birth weight.,¹⁷⁰^,¹⁷¹ The linkages between health and housing affect both mental and physical health. For example, a growing body of evidence demonstrates that being evicted is associated with elevated levels of stress and worsened mental health outcomes.¹⁷² In addition, living in unaffordable housing is associated with poorer self-rated health, hypertension, and mental health. Mental and physical health challenges can be a contributing variable to housing instability and homelessness, each issue reinforcing the other.¹⁷³

In addition to the direct health effects of housing instability, frequent moves may prevent individuals and families from building long-lasting attachments to neighborhoods. Neighborhood characteristics can strongly influence health. For example, people living in lower-income areas rate their own health lower than those living in higher-income neighborhoods.¹⁷⁴ The Moving to Opportunity (MTO) program provided very low-income families with rental assistance and housing counseling to move from high-poverty to low-poverty neighborhoods.¹⁷⁵ Research on the effects of the MTO program showed that people who moved from high-poverty to low-poverty neighborhoods before the age of 13 were more likely to attend college, had higher incomes, were less likely to be single parents, and lived in better neighborhoods as adults.¹⁷⁶ Adult women given vouchers through MTO had a lower prevalence of extreme obesity and diabetes after 10–16 years compared to those not given vouchers.¹⁷⁷

The intricate relationship between housing and health underscores the profound impact housing problems can have on mental and physical well-being, particularly among younger generations grappling with housing instability. Access to safe, stable, and affordable housing is not merely a matter of shelter but a fundamental determinant of health, shaping both individual and community outcomes. The adverse health effects of housing instability, including chronic diseases and premature mortality, highlight the urgency of addressing housing inequities to promote better health outcomes. Furthermore, interventions like housing assistance programs demonstrate the potential to mitigate some of the mental and physical health challenges associated with housing instability, emphasizing the critical role of stable housing in fostering healthier communities and individuals.

Practices

Down Payment Assistance (DPA)

Programs exist to help assist those who are working towards homeownership, especially the requirement of a down payment. During the second quarter of 2023, the nationwide average down payment for a house was 14.4% of the purchase price—an average median of $34,248.¹⁷⁸ A down payment assistance (DPA) program offers loans and grants that can help cover part of all of a home buyer’s down payment and closing costs.¹⁷⁹ These grants and programs aim to give first-time home buyers cash grants, lower mortgage rates, or tax incentives to purchase their first home.¹⁸⁰ There are many different types of alternative financing for housing in the United States, so understanding the origin of each program is difficult. However, when the Federal Housing Administration (FHA) was created in 1934 it sparked a ripple of housing finance with a mutual mortgage insurance system that reduced the investment risk for lenders and enabled them to make longer-term, higher-leverage loans at lower interest rates.¹⁸¹ New federal and state laws to stabilize and restructure the commercial banking system, plus the establishment of the Federal Deposit Insurance Corporation (FDIC) in 1933, eventually enabled commercial banks to participate in the FHA program and become major lenders of long-term home mortgages.¹⁸² Although DPA programs vary by location, there are more than 2,000 of these programs available nationwide, with many being run by state, county, and city governments.¹⁸³

Impact

Government DPA has become more important over the past decade according to the Federal Housing Administration (FHA) annual report for 2023, which shows that use of DPAs have tripled since 2010 from just 5% to 15%.¹⁸⁴ For first-time homebuyers without family wealth, DPA from government sources is critical. In 2010, $10,400 would have covered a 5% down payment on the median home purchase, whereas now, a borrower would need $22,240 for the same 5% down payment.¹⁸⁵ The current state of government DPA programs show that as of June 2023, there were 1,676 funded DPA programs in the US; most are state-based programs, but 25 of those programs operated across multiple states or nationally.¹⁸⁶ Nearly 90% of programs have second mortgages, most of which have a 0% interest rate, and the borrower is not required to begin paying the second mortgage right away. With the mean waiting period rounding to about 10 years, the payment may be forgiven before the borrower begins making any payments on the second mortgage.¹⁸⁷ This forgiveness can alleviate a lot of the stress that comes with being able to afford a home. As evidenced by the Federal Housing Administration's report, government Down Payment Assistance (DPA) programs have emerged as indispensable resources for prospective homebuyers, particularly those without substantial family wealth. As housing affordability continues to challenge many Americans, the availability and accessibility of government DPA programs play a crucial role in promoting equitable homeownership opportunities and fostering financial stability for individuals and families across the United States.

Gaps

Though Down Payment Assistance is an option that can help a lot of new prospects for homeownership, it may be difficult to qualify for a down payment program. As an example, the Down Payment and Closing-Cost Assistance program in Provo City, Utah, states that the applicant must be qualified with the bank or other financial institution for the first mortgage, must not have owned a home in the last three years, must have a mid-credit score above 650 with no unsatisfied judgments or collections, and must meet debt capacity requirement.¹⁸⁸ It is difficult for those struggling to afford a downpayment and closing costs on a home to hit all qualifying criteria, especially if they have been victims of unfair eviction in the past or are struggling with debt.

Pen, paperwork, teacup, and model home on a desk

Obtaining a DPA can take anywhere from a few weeks to a few months, depending on the program and eligibility of the applicant.¹⁸⁹ With the housing market having less supply and more demand, anything that slows down a first-time homebuyer like waiting for approval can be a disadvantage of down payment assistance programs. Proposals for improvement can include—but are not limited to—expanding the qualifications for different DPA programs. Applicants with lower credit scores, a history of homelessness or chronic displacement, and dependents should be given more opportunities for assistance. The more programs with more range in their qualifications can decrease the waiting time and allow for more individuals and families to obtain housing without the stress of being approved.

Rent-to-Own Programs

Rent-to-own arrangements offer renters the option to eventually buy the property they are currently leasing after a set duration. Traditionally, people in the United States use a mortgage from a bank or another financial institution to finance a home purchase. The big difference between the two is that when a person qualifies for a mortgage to buy a house, the title transfers to them, and the lender takes a lien against the property.¹⁹⁰ If you later default on your mortgage payments, the lender can foreclose on your property. However, the title stays with the seller when you rent to own. Rent-to-own programs provide Americans with the chance to get their finances in order, improve their credit scores, and save money for a down payment while securing the house they would like to own.¹⁹¹ There is usually the option to use money or a percentage of the rent toward the purchase price, which provides an opportunity to build some equity.

There are two common types of rent-to-own agreements: lease option and lease purchase. Both contracts allow someone to lease a home for 1–3 years and then buy it at the end of the term.¹⁹² A lease option gives the option to buy the home at a later date but carries no legal obligation. A lease purchase is a commitment to buy at a mutually agreed-upon time and could result in legal proceedings if reneged upon. During the lease period, a portion of one’s rental payments contributes towards the eventual purchase. The contract typically outlines the agreed-upon purchase price for the property at the lease's conclusion. When it is time to transfer ownership from seller to buyer, the buyer has a down payment ready to go, plus several years of steady payments to show to a potential mortgage lender.¹⁹³ The aim is to allow first-time homebuyers to gain equity through every monthly rent payment, lock in savings with the purchase price set in the contract, and give a chance to improve credit scores. Rent-to-own contracts for residences grew in popularity in the mid-20th century, with a history of social unrest when lenders would not work with African Americans.¹⁹⁴ Over the years, many investors and landlords offering lease options have faced criticism and lawsuits accusing them of ensnaring minorities and low-income people in unfair deals.¹⁹⁵ Ultimately, companies offer rent-to-own lease options in order to expand the market of buyers.

Impact

Although data proving the long-term benefits of rent-to-own programs is lacking, evidence shows the growth of the industry. Young and upcoming homeowners are turning to alternative home financing options such as rent-to-own; researchers estimate that 36 million buyers have purchased homes with alternative financing and that households earning less than $50,000 annually were most likely to use different forms of financing.¹⁹⁶ In 2021, the US rent-to-own market was valued at $10.48 billion and is projected to reach $15.53 billion by 2027.¹⁹⁷ The rent-to-own industry is anticipated to showcase a positive outlook during the forecasted years as primary and subprime lenders tighten credit measures.¹⁹⁸

Gaps

While there are advantages to entering a rent-to-own agreement, there are also risks in these types of agreements. In exchange for the opportunity to buy the property, renters agree to pay higher-than-normal rent along with a one-time, non-refundable option fee ranging from 3–7% of the property's total price. For instance, for a $300,000 home, a five-option fee would amount to $15,000.¹⁹⁹ This fee could entirely contradict the purpose of the agreement and even set an individual back in building equity or being able to qualify for a mortgage in the future.²⁰⁰ To ensure that rent-to-own models effectively facilitate access to homeownership and mitigate potential predatory risks, it is imperative to enforce ethical corporate practices among rent-to-own companies. These practices include measures such as providing access to third-party counseling for buyers, adhering to fair contract terms, and ensuring transparency regarding conversion rates, contract terms, and monthly payment increases. Additionally, state and federal regulations must be enacted to safeguard buyers from unscrupulous actors. These regulations may entail requirements for sellers to record contracts with county registrars, state agencies to compile and publicly disclose contract data, and sellers to transfer home titles upon the buyer's execution of their option. Ultimately, establishing robust corporate practices and implementing stringent regulatory oversight is crucial to establishing alternative financing, like Rent-to-Own programs, as a viable pathway to homeownership.²⁰¹

Preferred Citation: Isom, Kendall. “Home Ownership Inaccessibility for Upcoming Generations in the United States.” Ballard Brief. September 2024. www.ballardbrief.byu.edu.

Viewpoints published by Ballard Brief are not necessarily endorsed by BYU or The Church of Jesus Christ of Latter-day Saints

Footnotes

United States

Kendall A. Isom

Kendall is an American Studies undergraduate with a double minor in Global and Community Impact and Art History. She enjoys researching issues focused on the United States of America and is determined to understand our cultures more and help those around us.

Home Ownership Inaccessibility for Upcoming Generations in the United States

Summary+

Key Takeaways+

Key Terms+

Context

Q: What is homeownership inaccessibility, and why does it matter?

Q: Which generations face financial disparities in home ownership in the United States?

Q: What sets America apart regarding homeownership inaccessibility?

Q: When did inaccessibility to buying a home become a prominent issue?

Contributing Factors

Wage Stagnation

Cost of Living

Housing Shortage

Consequences

Retirement Trap and Wealth Immobility

Eviction or Homelessness

Negative Impacts on Health

Practices

Down Payment Assistance (DPA)

Impact

Gaps

Rent-to-Own Programs

Impact

Gaps

Barriers to Family Planning for Women in West Africa

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