How Rising Mortgage Costs Are Pushing Millions of Homeowners Toward Financial Collapse and Homelessness
There is much ado about the heavy weight of American rent burden and how it threatens tens of millions of American tenants with the very real possibility of homelessness.
Rent burden is when a renter household spends more than 30% of their annual income on their housing. This has been an issue for quite some time. But here’s the cincher – American homeowners are also feeling the pinch, and approximately 3 out of 10 are in the same predicament.
Read on to learn how mortgages are leaving people on the brink of becoming homeless and what you can do to speak up for 30% of your peers.
It Used to be Cheaper to Own Your Home. This is No Longer the Typical Scenario.
All costs considered, owning a home has long been considered the more financially favorable option when compared to renting. Pre-2008, monthly mortgage rates were typically cheaper than average rental rates, not to mention that paying a mortgage means buying something you will, ideally, own outright. Paying rent in the days of ‘yore was considered akin to throwing your money away since the only thing renters get when they leave is the chance to fork over three full months’ worth of rent in one lump sum to some new landlord and then pay again for something they will never own.
This is the way all previous generations did the math. But things have changed and stayed a bit the same. Upon further investigation, the renting vs. buying argument was already flawed, but things have gotten much worse for homeowners in this new, post-pandemic economy.
As it turns out, according to Yahoo Finance, home ownership has always been the more expensive route, despite what your parents might have claimed. A decade ago, it cost about 14% more money to own a home than to rent one, when all expenses like maintenance, taxes, insurance, and out-of-pocket miscellaneous costs were tallied. In 2013, the number of homeowner households spending 30% or more of their salaries on their mortgages was half of what it is right now, so about 15% of homeowners were in this bind.
Fast forward to 2024, when mortgage rates are literally through the roof and breaking shameful affordability records every year. We find that owning a home is now 35% more expensive than renting one. So, the question becomes, why bother? And the answer seems to be they don’t have much choice.
Moneywise author Chris Clark says the quiet part out loud when stating that the cost burden “is spreading across the economic spectrum.”
Indeed, this economic wildfire has reached all corners of the country, and the result is exactly what you might expect: more people facing homelessness than ever before. At a time when many Americans should be considering spending a lot less than 30% of their incomes on rent due to extenuating circumstances like:
- Inflation
- Increased insurance premiums
- Higher costs for essentials like gas, clothing, and groceries
- Stagnant and, in some cases, decreasing wages
They are considering spending more, not because they’re financially irresponsible, but because the housing market options are nil.
Key Takeaway: The Supply Isn’t Meeting the Demand for Housing. That’s Because Housing Is Not a Human Right
If you think back to the pandemic in our not-so-distant past, you might remember a world where there was not enough toilet paper. People scrambled to buy or even hoard essentials such as soap, diapers, bottled water, and the list goes on.
In response to this harsh new reality, panic immediately set in. People recognized an urgent need, and the severity of the situation was immediately clear to most.
Why don’t we feel the same way about affordable housing? We’re not talking about a short-lived, local scarcity here but a national shortage of more than 7 million affordable homes. If we were short 7 million rolls of toilet paper, everyone would call their local legislators and demand emergency protections and stimulus checks. Have we been so trained to believe that housing isn’t a human need that we don’t even demand it anymore? If so, in ten years, where is everyone supposed to store their toilet paper if they have no place to live?
Renters are running out of options. Homeowners are running out of options. And taxpayers are running out of time to speak up.
“I believe one of the things that we should all be echoing and yelling the story of is that a lot of this election was about people not feeling like they were being heard on affordability, on the cost of their daily life. And the biggest cost in just about everybody’s daily life is housing. The rent is too high. The mortgage is too high, too,” Liz Ryan Murray said in a Next City panel discussion attended by Invisible People reporters. Murray serves as director of strategic campaigns at Public Advocates, a housing justice organization.
Ask Your Representatives Why Housing is Not a Constitutional Universal Right
Studies show that housing really is the key that unlocks the door to everything else – education, employment, healthcare, community wellness, lower crime rates, higher economic stability, etc. Yet, we still don’t have it drafted as a universal, constitutional human right anywhere in our legislation.
As a direct result of this inaction, we have created a country where renters and home buyers are steadily running out of options. If we don’t act now, a wave of mass homelessness inevitably awaits. Ask your local legislators why housing isn’t already a human right and what they’re doing to change that fact.