Many Americans are facing a difficult decision in light of the current housing market: Buy or rent?
Owning property was a big component of the American dream when the economy was strong following World War II. By the 1960s, “approximately 68 out of 100 Americans could afford a home, but now only around 43 out of 100,” according to The Zebra.
With low housing inventory, high mortgage rates and inflation, choosing to rent or buy seems more like choosing the lesser of two evils. According to Zillow, the average home price in the United States was $363,438 as of June 30, 2024, a 3.8% increase in value in the last year. Zillow also reported the average rent is $2,054 a month.
The reality of the American renter
On Tuesday, the White House released a new action, dubbed the Biden-Harris Housing Plan, seeking to “lower housing costs by limiting rent increases and building more homes.”
The goal of the housing plan focuses on three key actions:
- Have Congress create legislation that would require landlords to “cap rent increases on existing units at 5% or risk losing current valuable federal tax breaks.”
- Alter public land to make it suitable for the building of additional and affordable housing units.
- Along with building more affordable housing, also “rehabilitating distressed housing” and “revitalizing neighborhoods.”
In response to the press release, real estate company Redfin warned that the benefits would not outweigh the consequences for renters in the long run:
“The White House has proposed a national rent control policy, which sounds appealing in theory but would eventually increase costs for renters because it would exacerbate the supply shortage. If the policy were to go into effect now, it would impact some metros in the Northeast and Midwest — like Boston, Washington, D.C., Chicago and Minneapolis — that are seeing rents rapidly rise.”
Zillow reported that following the COVID-19 pandemic, rental prices increased by 32.8% overall, including 3.5% higher over the last year.
The median household spent as much as 30% of its income for rent last June, “The most affordable metro areas for rents are Minneapolis (20.4% of median income spent on typical rent), Salt Lake City (20.5%), St. Louis (20.9%), Austin (21.3%), and Raleigh (21.3%),” Zillow added.
Renters occupy a third of all households in the U.S. and are younger than the average homeowner, 42 versus 52, according to the National League of Cities. Even for places that are statistically more affordable, Jenna Louie, the chief innovation and strategy officer at Ivory Solutions, told the Deseret News that residents everywhere struggle.
“Rents — even those in the most affordable markets — remain out of reach for most Americans. It’s important to not only focus on building new rental housing but also to incentivize landlord adoption of innovative programs that support renters, such as improving credit scores by reporting on-time rent payments or loyalty and savings programs that can help renters save for down payments and build wealth,” she said via email.