Housing is a difficult topic. It requires money to acquire land, clear zoning commissions, build structures, and have ongoing places to live. Outside of public housing, which hasn’t been a universal success in experience, all the work is left to private financing.
That means someone expects a profit, which comes from another’s pocket.
U.K.-based financial services firm Legal & General did a multi-part study looking at U.S. millennials and home ownership. The company, surveying 875 who did not currently own their own home, called it a “distant dream” for many.
A little more than half (56%) said trying to buy where they currently lived was hard or extremely hard. Half weren’t even trying to save for a down payment, frequently because they weren’t making enough with student debt and other obligations.
That should be no surprise. There’s been a chronic shortage in home building since the Great Recession in 2008: Terrific to push up prices but not good if you want people to start building equity and reducing their dependence on others.
In September 2020, I wrote a piece showing why it was hard to make ends meet even when inflation was low. One of the boulders on the backs of so many people was, and is, housing costs. With healthcare and higher education, the three are components of inflation, each rising significantly faster than the overall number.
Housing, though, is in a class by itself. Not because of the growth rate, which has been unusually high during this pandemic time, but for an available out. Or because you grow your net worth. If you move and cash in eventually, you still have to buy another place, and as experts say, especially if you’re older, you may no longer be able to afford a place where you’ve been.
If you own your own home, there are many costs involved, including the monthly mortgage. But a 15- or 20- or 30-year conventional loan is a regular fixed payment that doesn’t rise when the lender wants to juice its income, and that may be the most important reason to own. You step off an accelerating treadmill. So long as you don’t own, you’re subject to rent prices that can—and do, like now—grow at rates significantly topping inflation. You never get ahead and have to keep making rising rents a priority.
According to the Census Bureau, in the second quarter of 2021, home ownership rates were 75.4% for people 55 to 64, while for those 35 to 44 it was 61.3%. Under 35, it was 37.8%. In 2002, the rate from 30 to 34 was 54.9%, for 35 to 39 it was 65.2%, and from 40 to 44 it was 71.7%.
Millennials are already financially behind. They aren’t the first to enter adulthood in a major recession, but this one went on for a decade rather than two or three years. The conditions to let them catch up aren’t on the horizon of the obvious. As one of the reports notes, “In real terms, wages aren’t keeping up with everyday costs, and as we’ll soon see, rising home prices are by far outstripping wage increases.”
Our society is allowing policies and conditions that are expanding the renter class. For those who own property, the news is great. As people in the industry note, people need places to live, so may not have the choice to be price sensitive. That’s an upward transfer of wealth—the one type of transfer that so often goes without comment because it seems like the natural form of things.
Perhaps it is, and I wouldn’t suggest Marxist communism as a solution, given the history of implementation. Unprincipled and rapacious people at the top won’t act differently because of a theoretical system. But to increasingly push people into positions where they will never get out from under is a decision to structure unrest and eventual economic disaster, because no vibrant economy can exist though dependence on an ever shrinking number of haves.