The ‘affordability crisis’ has long plagued renters—but now it’s coming for homeowners

“Lack of affordability defines both the for-sale and the for-rent housing markets.” That’s one of the first lines in a report from Harvard University’s Joint Center for Housing Studies out today. Home prices are high, rents are high, and people are feeling the pain. We’re seeing that in the number of cost-burdened households, defined as those who spend more than 30% of their income on housing.

From 2019 to 2022, the number of cost-burdened homeowners rose by 3 million, to a total of 19.7 million. That means nearly one in four homeowner households “are now stretched worryingly thin,” the report states, of which, 27.4% are ages 65 and up. More concerning, it was households that earned less than $30,000 a year that “constituted over half of the growth in cost-burdened homeowners from 2019 to 2022.” Not to mention, 9 million homeowners are severely cost-burdened, defined as those spending more than half of their income on housing.

“For renters, the landscape is even more challenging,” the report read. “While rents have been rising faster than incomes for decades, the pandemic-era rent surge produced an unprecedented affordability crisis.”

Half of all renter households were considered cost-burdened in 2022; 22.4 million renters, the highest on record. And the number of severely cost-burdened renter households hit an all-time high of 12.1 million in the same year. The number of cost-burdened renters is up 2 million from 2019, and the number of severely cost-burdened renters is up 1.5 million.

Home prices are 47% higher than they were in early 2020, despite declining briefly at the beginning of last year—and rents are still 26% higher, despite some softening in the rental market. And let’s not forget mortgage rates, which reached a more than two-decade high last year, and despite coming down some, are still substantially higher than the pandemic’s historic lows. “The low interest rates that helped shield homebuyers from rapidly rising home prices have disappeared … Consequently, homeownership is less affordable than it has been in decades,” the report read.

A recent uptick in the supply of multifamily homes is behind some of that softening we’re seeing in rents, but apartment construction has already begun to plummet, so it’s not clear how long that slight bit of relief will last. There aren’t enough existing homes in the for-sale housing world, to boot. And in some parts of the country, it’s hard to build new homes because of zoning and broad land-use regulations. So it’s no secret that “homeownership is increasingly out of reach,” as the report suggests.

Higher prices squeeze households

“To afford such a high payment under common payment-to-income ratios, a borrower would need an annual income of at least $119,800, a threshold just one in seven (6.6 million) of the nation’s 45 million renter households can meet,” the report says. “It now takes an annual household income of at least $100,000 to afford the median-priced home in nearly half of all metro areas.”

So only 6.6 million renters, which equates to 14.5%, had the necessary income to afford  a median-priced home in the first quarter of this year. That’s down from 7.7 million early last year and 10.2 million in 2022. If you were to include a 3.5% down payment and 3% closing costs, only 2.6 million renters could afford a median-priced home, so 5.8%.

The homeownership rate across all ages across the country only increased 0.1% last year, the smallest increase since 2016 (the same year a post–Great Recession low was reached). The number of unhoused individuals has risen, too. As of last year, 653,100 people were experiencing homelessness, an all-time high, according to the report.

Literally, millions of people are priced out of homeownership and are cost-burdened, and it doesn’t seem as though much will change. “Looking forward, housing costs are likely to remain high,” the report read. “On the for-sale side, home prices are set to rise in the face of highly constrained supply, prolonging this unusually difficult market for first-time homebuyers.” And the for-rent space might see more softening, but “subdued rent growth will not last long.”

This story was originally featured on Fortune.com

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