How Lack of Affordable Housing is More About Lending than Building

debt of homelessness

The Debt of Homelessness

By now, a lot of homeless advocates already know that lack of affordable housing is the leading cause of homelessness. From this standpoint, the answer to the homeless crisis and the affordable housing crisis seems pretty cut and dry. Build more affordable houses. In reality, though, it’s not quite that simple.

First of all, realistically speaking, there are already plenty of houses in the United States of America. They range from uber-expensive to virtually uninhabitable, from tiny homes to motor homes to mansions. They dot the landscape, little emblems of a broken nation’s former dream. Yet for many, living between walls of safety is a fantasy too unreachable to be real.

There’s a multi-faceted dilemma here. Endless factors make the houses that have already been constructed unaffordable to the people who need them the most. These factors include:

  • Inflated interest rates
  • Predatory lending schemes
  • Laws that protect landlords over renters
  • Post-foreclosure neglect
  • Decades of a failure to keep wages paced with rent and mortgage prices

These major setbacks often hit the poorest members of our society the hardest.

Let’s Talk about the Bankroll and the Bank’s Role in all of This

The banks play a significant role in why houses are becoming too expensive for the average family to afford. This is true for the renter and the homeowner alike, as predatory practices too often go unchecked and underreported. The mortgage market for millennials is not as optimistic as many financial analysts project, even with a seeming surge underway. The truth is millennials have virtually been squeezed out of the housing purchase market through a series of rather unfortunate events.

Many of these events are not related to building though. They have a whole lot more to do with lending.

It begins with the housing crash of 2008 when the largest price drop in the history of housing occurred as a shocking aftereffect of predatory lending practices and mass evictions. Adding insult to injury was, of course, the Great Recession, which happened at the same time and gave way to issues that follow us today such as wide-scale unemployment and stagnant wages.

In an effort to prevent yet another housing market crash, big banks and major corporations like Freddie Mac and Fannie Mae did a full lending 360. They literally went from one extreme to another, from lending money to just about anybody even if they didn’t qualify to enforcing the strictest lending practices this generation and the previous generation have ever seen.

With the price of education at an all-time high and the minimum employment wage at a dangerous low, millennials now carry the burden of the largest debt in history, which tops off in the ballpark of a collective $1 trillion.

A recent report released by the Urban Institute goes on to explain the many factors causing today’s youth to hold off on homeownership. Among them are:

  • Student debt
  • Delay in marriage which is often caused by debt and financial burden
  • Delay in starting families which can also be linked back to debt and financial uncertainty
  • An increase in ethnic diversity at a time when people who hail from minority backgrounds are even less likely to be awarded homeownership loans than in past years
  • The inability to afford a down payment for purchasing a house
  • Increased rent rates which make it difficult to set aside savings and more

When scrutinizing the price of education, the same report concluded that “if a person’s education debt went from $50,000 to $100,000, their chance of homeownership will decline by 15 percentage points.”

Given this new and difficult-to-navigate financial climate, when housing prices downturned, the wealthiest people in society profited because they were the only people in the position to purchase new homes. For this reason, individuals aged 23 to 38 were dubbed a “generation of renters” by the press. As such, they were forced into territory that was mostly unfamiliar to their parents, who likely purchased homes in their mid-20’s.

Eviction: An Unspoken Renter’s Dilemma

In a data analysis ranging 50 states and stretching seven years, The National Low Income Housing Coalition effectively concluded that homelessness was higher in regions comprised mostly of renters.

This statistic is important for the youth, the future, and for the complete understanding of what “lack of affordable housing” actually means.

Lenders have created an atmosphere where homeownership is near impossible for young people to achieve. We must also acknowledge their role in the subsequent eviction that all too often coincides with renting property.

This is particularly true when considering the role eviction plays in homelessness and the housing crisis.

How One Generation Saddled with Debt is Then Bombarded by Unjust Rental Policies

With long-term lending looking like a faraway fantasy, millennials who turn to renting as an alternative to buying a house are being swindled at every turn. Here are some fast facts about the rental market to help put things into perspective:

  • In the past two decades, median rent has doubled while the average hourly wage of 2019 is estimated to have the same purchasing power as 1978. This equates to decades of wage stagnation when inflation is taken into account.
  • Comparatively, monthly rental payments are the highest they’ve been in three decades.
  • National average rent increases run as high as .5% to .7% per month.
  • Rent takes up approximately 45% of the average millennials’ earnings. This leaves little room to save up and move onto greener pastures.

As these facts illustrate, it is easy to fall behind on rent and difficult to purchase a home. But that’s only the beginning. Even more shocking is the fact that renters who are completely up-to-date on their monthly payments can still be evicted.

Cash for Keys: What Happens to Renters when their Landlords Default on the Mortgage

Foreclosure is closing in on Americans with relentless force. But not all victims of foreclosure are homeowners. In fact, approximately one-third of people who lose their homes to foreclosure are renters who never owned the home to begin with.

A sneaky loophole allows tenants to be unexpectedly evicted from a home they’ve been paying rent for the entire time. If the landlord fails to pay the mortgage in full with a resulting foreclosure, the banks can simply claim they thought the property was vacant.

Many renters unexpectedly arrive home to find their locks have been changed and their property has been confiscated. Herein lies just one of many examples of how laws protect landlords and leave tenants vulnerable to homelessness.

Key Takeaway

The banks have let the upcoming generation down by lending just enough to create mass debt. Then they don’t lend enough when it’s time to make lucrative, life-sustaining purchases like housing. To that end, when we speak to our local representatives about affordable housing, we should remind them that the nation needs lenders even more than builders and that accessible, affordable rents and mortgages are part of the package we expect.

Cynthia Griffith

Cynthia Griffith


Cynthia Griffith is a freelance writer dedicated to social justice and environmental issues.

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