The rent is too expensive. In fact, it is up 26% since the beginning of 2020. The number of tenants with unaffordable rents and utilities, those to which they devote 30% or more of their income, is at an all-time high. Half of the country’s renters are in this situation because rents have risen more than income for decades and the pandemic came to complicate the accounts even more. These are some of the findings included in the annual report of the Harvard Joint Center for Housing Studies, which also points out that the alternative, buying a home, is increasingly expensive, preventing millions of people from do it.
Home prices are 47% higher than they were four years ago. Average prices (those halfway between the highest and lowest) are equivalent to five times the median household income. In the nineties it was three times. To this we must add the costs of mortgages with rates that have exceeded 7% and home insurance that has continued to become more expensive.
The conclusion of this Harvard think tank is that to solve this crisis—in addition to the record number of people who are homeless, suffering from inadequate housing and the threat of climate change—it requires the joint work of private sectors, without profit motive and public authorities at all levels of Government.
The current panorama of price increases has forced those who would like to buy their first home and do not have the savings from having sold another to take a step back to cover the initial payment and other expenses. Last May, the Secretary of the Treasury, Janet Yellen, admitted that it is “almost impossible to buy a first home” and the president of the Federal Reserve, Jay Powell, agreed with her that the situation is a “very big challenge.” ”.
Furthermore, the property rate has barely moved 0.1% in 2023 to remain at 65.9%. It is the smallest increase since 2016 and precisely because of the costs, there is no progress in reducing the racial disparity in property. In the first quarter of the year, the ownership rate among white households was 74%, while for Hispanics it was 49.9% and for blacks it was 46.6%.
“Whether due to high initial payments or monthly mortgage payments, the costs of buying a home have left ownership out of reach for all but the most privileged households,” explains Daniel McCue, one of the researchers associated with the center. from Harvard.
From 2019 to 2022, the number of homeowners facing costs that have become unaffordable has risen by three million, reaching 20 million households. Those who bear the brunt are low-income households and those of people over 65 who usually live on their pensions.
Why are prices rising?
There is a lack of supply of homes for sale for the demand there is and that opens the market to price wars. The greatest supply comes from the market for existing homes, but owners with mortgages much cheaper than the current ones have decided not to sell. They have no incentive. As a result, in March 2024 there were only 1.11 million homes for sale, 34% less than in the same period in 2019.
The drop in sales and price increases is due to the fact that housing inventory has declined in 94 of the 100 largest cities in the first quarter of this year. In 2023, only 4.1 million second-hand homes were sold, the lowest level in 30 years.
What other costs do you have to assume when buying a house?
Insurance premiums have risen an average of 21% between May 2022 and the same month in 2023, according to Harvard. The trend indicates that it has continued to rise until now.
Property taxes are also on the rise, which also takes a toll on landlords. Those who rent their properties saw their operating expenses increase by 7.1% last year and not only due to the effect of inflation in materials and services, but also due to an increase in insurance at the national level for these owners, of 27, 7%. And this is a problem that feeds others. Rising costs, in addition to rising capital prices, make it very difficult to finance multifamily rental projects. And with the shortage comes increases for tenants.
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