{"id":33171,"date":"2021-09-29T15:33:16","date_gmt":"2021-09-29T19:33:16","guid":{"rendered":"https:\/\/test.greenmoney.com\/2025\/?p=33171"},"modified":"2021-10-01T19:58:44","modified_gmt":"2021-10-01T23:58:44","slug":"addressing-housing-affordability-with-access-to-homeownership","status":"publish","type":"post","link":"https:\/\/test.greenmoney.com\/2025\/addressing-housing-affordability-with-access-to-homeownership\/","title":{"rendered":"Addressing Housing Affordability with Access to Homeownership"},"content":{"rendered":"
>> Back to October 2021 Issue<\/a><\/div>\n

Faced with an affordable housing shortage, policymakers often overlook America\u2019s biggest source of affordable housing: homeownership.<\/em><\/h3>\n
Client photos courtesy of Homewise, inc.<\/h5>\n

\"MikeContrary to popular belief,\u00a0owning is often more affordable than renting<\/a>. Today, it is\u00a0cheaper to buy a home than it is to rent<\/a>\u00a0in two-thirds of US counties, including New Mexico\u2019s Santa Fe and Bernalillo Counties, home to high-cost Santa Fe and moderately priced Albuquerque, where\u00a0Homewise<\/a>, has helped more than 5,000 modest-income families become homeowners.<\/p>\n

Nevertheless, some believe homeownership is reserved for people who achieve some level of financial success, that it\u2019s not for people still on the path to financial security. This may explain why most federal, state, and local\u00a0efforts to create more affordable housing narrowly focus on the rental market<\/a>.<\/p>\n

However,\u00a0the data disprove this thinking<\/a>. The typical homeowners spend 10 percentage points less of their income on housing than the typical renters.<\/p>\n

This remains true when controlling for income. Among households with annual incomes of less than $50,000, renters spend an average of 34 percent of their income on housing, but owners spend only 24 percent. Similarly, for households earning less than $20,000 a year, homeowners spend 38 percent of their income and renters spend 48 percent.<\/p>\n

The lower cost of owning also holds true when controlling for race and ethnicity. Though Black and Hispanic homeowners have higher housing expense ratios than white homeowners, they have lower housing expense ratios than all renters, including white renters. The median housing expense ratio for Black and Hispanic homeowners is 19 percent, and the typical white renter household spends 24 percent of its income on housing.<\/p>\n

I\u2019m not suggesting homeownership alone can solve the housing affordability crisis. But strategies focused only on rental housing can be shortsighted, especially when homeownership may be more cost-effective for all involved. Many rental programs, including\u00a0housing choice vouchers<\/a>, require the government to send monthly assistance to a landlord who is under no obligation to renew a tenant\u2019s lease.<\/p>\n

In comparison, homeownership can provide the kind of affordability and stability low-income families need. Here\u2019s how.<\/p>\n

\"Homewise<\/p>\n

The Average Monthly Mortgage Payment is Less Than the Average Monthly Rent<\/h2>\n

In November 2020, the\u00a0Zillow Home Value Index<\/a>\u00a0estimated the median US home value was $263,351. If a homebuyer financed 100 percent of their home purchase, their monthly mortgage payment would be $1,464 (assuming a 30-year fixed-rate mortgage at a 3.5 percent interest rate, with taxes and insurance estimates from the\u00a02019 American Housing Survey<\/a>).<\/p>\n

At that time, the\u00a0Zillow Observed Rent Index<\/a>\u00a0found the median monthly rent was $1,734, meaning the average renter paid $270 more per month than the average homebuyer.<\/p>\n

Mortgage Payments are Generally Stable, But Rents Tend to Rise<\/h2>\n

Increasing rents and home prices do not affect renters and owners the same way. Whereas renters are continuously vulnerable to cost increases, rising home prices do not affect current homeowners\u2019 costs.<\/p>\n

Over time, owning and renting produce starkly different economic outcomes. Homeownership\u2019s major affordability benefit is that it stabilizes what is likely the household\u2019s biggest monthly expense, assuming a buyer has a fixed-rate mortgage. The only potential changes in homeowners\u2019 housing expenses are taxes and insurance. The principal and interest payment stays the same for the length of the loan.<\/p>\n

The Cost of Owning as a Share of Income Almost Always Declines Over Time<\/strong><\/h2>\n