As well-noted in this article from New Geography.
The suburban house is the idealization of the immigrant’s dream—the vassal’s dream of his own castle. Europeans who come here are delighted by our suburbs. Not to live in an apartment! It is a universal aspiration to own your own home. —Los Angeles urbanist Edgardo Contini
For the better part of the past century, the American dream was defined, in large part, by that “universal aspiration” to own a home. As housing prices continue to outstrip household income, that’s changing as more and more younger Americans are ending up landless, and not by choice.
The share of homeownership has dropped most rapidly among the key shapers of the American future—millennials, immigrants, minorities. Since 2000, the home ownership among those under 45 has plunged 20 percent. In places like Atlanta, Dallas-Fort Worth, Houston, and Indianapolis, and elsewhere, households with less than the median income qualify for a median-priced home with a 10 percent down payment, according to the National Association of Realtors. But in Seattle, Miami, and Denver, a household needs to make more than 120 percent of the median income to afford such median-priced house. In California, it’s even tougher: 140 percent in Los Angeles, 180 percent in San Diego, and over 190 percent in San Francisco.
Rents are rising as well. According to Zillow, for workers between the ages of 22 and 34, rent costs claim upwards of 45 percent of income in Los Angeles, San Francisco, New York, and Miami, compared to closer to 30 percent in Dallas-Fort Worth and Houston.
The basic reality: America’s new generation, particularly in some metros, increasingly seems destined to live as renters, without ever enjoying equity in property.
The Housing Crunch
Last year, the gap between new builds and demand was estimated at 330,000 houses. Nationally, the inventory of homes for sale has been shrinking for 24 straight months, and supply, according to the National Association of Realtors, is nearing its lowest level ever.
Given the surging demand among millennials and immigrants, why are builders not meeting the demand? The reasons vary, but, according to the National Association of Homebuilders, they include higher material costs, long permitting waits, labor shortages, and too few inexpensive lots.
Not all the difficulties, however, can be traced to market forces. In many regions of the country, conscious government planning discourages single-family home construction, a policy often described oddly enough as “smart growth.” Advocates of this approach suggest that most people, particularly millennials, do not want single-family homes, and prefer to live chock-a-bloc in dense multi-family units.
This does not reflect reality. In survey after survey, an overwhelming majority of millennials, including renters, want a home of their own. A Fannie Mae survey of people under 40 found that nearly 80 percent of renters thought owning made more financial sense, a sentiment shared by an even larger number of owners (PDF). They cited such things as asset appreciation, control over the living environment, and a hedge against rent increases. Roughly four in five purchases made by people under 35 are for single-family detached homes (PDF).
The real problem is a growing gap between what people want and what they can afford.
Jason Furman (PDF), the former chairman of President Obama’s Council of Economic Advisers, has warned that price escalations associated with strong housing regulation push many people “out of the market entirely.”
These huge price premiums, particularly stark in California, also plague Denver, Miami, New York, Portland, Seattle, Honolulu, and Boston. Where housing prices once closely tracked rents, they now have shot up in many metropolitan areas far past what renters would ever be able to afford.
Retrieved April 3, 2018 from http://www.newgeography.com/content/005923-landless-americans-are-new-serf-class