Senate Democrats unveil $ 3.5 trillion. a spending plan on Tuesday to dramatically bolster the country’s security system. Among the priorities hundreds of billions for affordable housing – a long-awaited development in a country where availability crisis is blooming…
Details are still scarce, but we know President Joe Biden has called for a review lack of affordable housing options for building and renovating more houses. However, increasing the supply of affordable housing alone is not enough to overcome the crisis. Home ownership is the key to tackling affordable housing and closing the racial wealth gap.
Efforts to reduce the cost of housing often overlook ways to help people own rather than rent a home – even when home ownership is a more efficient and effective option and provides the stability families need while contributing to the accumulation of wealth.
Despite the strong belief that home ownership is only for people who have achieved a certain level of financial security, the opposite is true for most Americans. In two-thirds of the counties in the United States, it’s cheaper to buy a house than to rent… Financing of the assessment average house in the USA with a standard fixed rate mortgage, the average monthly mortgage payment is less than the average monthly rent.
This is true regardless of the family’s income level. Tenants earning less than $ 50,000 spend about a third of their income on housing, while homeowners spend only a quarter. And tenants who earn less than $ 20,000 a year spend almost half of their income on housing, while homeowners spend 38 percent. One of the reasons is that mortgage payments are generally stable and rents tend to rise.
And while black and Hispanic homeowners spend a higher percentage of their income on housing than white homeowners, total housing costs, including mortgage payments, insurance, and taxes, are still lower than all tenants. Black and Hispanic households who own a home spend nearly a fifth of their income on housing costs, while the typical white rental household spends almost a quarter of their income on housing.
Over time, the cost of owning a home as a share of income almost always declines. This makes sense, since our income and expenses usually increase over time in relation to the general rate of inflation. However, for homeowners, most of their housing costs – mortgage payments – are fixed, so homeowners end up living better than tenants.
Home ownership is also a key factor in well-being, as mortgage payments increase the homeowner’s equity. While renting is purely an expense, owning a home is a combination of cost and investment. After the final mortgage payment is made, housing costs will plummet, leaving only taxes, insurance and maintenance costs. This sharp drop often coincides with retirement, when income tends to decline as well. Tenants do not receive this financial benefit.
It is also important to remember when developing public policy that a focus on home ownership in the long term is a cheaper solution than rental vouchers, which are often our affordable housing policies. While rental vouchers are an important safety net, paying part of someone’s rent has been costly for years, while nothing is done to help a family accumulate wealth – and ultimately reduce their need for help.
In fact, according to my calculations, a one-time investment equal to the amount we are currently spending. annually with rental coupons could provide a home ownership voucher to enough new home buyers to increase the proportion of black homeowners from 42 percent to 60 percent, significantly narrowing the gap between black and white homeowners.
Helping households raise enough down payment to get an affordable and secure mortgage loan, and developing new ways to help them buy a home that communities of color do not rule out, such as helping families improve their credit to be eligible for a good mortgage loan or By finding real estate agents to help them find a home they can afford, we can both increase access to long-term affordable housing and have a major impact on narrowing the racial wealth gap.