Davis, CA – In my column yesterday I wrote, “We know from the housing crisis in California, and increasingly nationally, that we have not built enough homes to keep up with population growth and that has led to rising housing costs that threaten to create a further discrepancy between rich and poor in this nation.”
One commenter observed, ““We know from the housing crisis in California, and increasingly nationally, that we have not built enough homes to keep up with population growth and that has led to rising housing costs that threaten to create a further discrepancy between rich and poor in this nation.””
They also pointed out the recent decline in multi-generational living as a driver for the demand for housing. That trend may start changing – and it might not be a good sign.
The gap between the haves and have nots have been widening. The rising cost of housing may force children with less earning potential to once again living with parents and grandparents.
While that represents a practical solution to the housing crisis and the increased cost of housing, it threatens to further expand the gap between those who can afford to buy housing and those who cannot.
This past spring, the Urban Institute published findings that show that the wealth gap between owners and renters have reached an historic high.
- In 2022, the median wealth gap between homeowners and renters reached almost $390,000, and the average wealth gap reached over $1,370,000.
- Over the past 33 years, the median wealth gap between homeowners and renters has increased by 70 percent, while the average wealth gap increased more than 250 percent
- During this period, homeowners’ median and average wealth increased by almost $165,000 and $900,000, respectively. But for renters, the increases were $5,800 and $56,000, respectively.
They conclude: “The significantly wider gap in average wealth (compared with median wealth) indicates that a large share of wealth is concentrated among a small share of households.”
The report continues: “Because of supply shortages, home price went up, and rent prices also increased faster than incomes. This resulted in a higher housing cost burden among renters. Left with limited savings after paying for housing, renters have also not benefited from the strong financial market in the past several years, which further fueled the gap.”
The commenter seems to suggest that one solution to the current housing crisis is more multi-generational households.
While again that makes some sense – it is likely to further exacerbates these inequities.
For example, the Urban Institute cites Redfin survey “finds that more than a third of young homebuyers plan to use a cash gift from family to fund down payments, suggesting that intergenerational wealth may fuel gaps among the next cohort of homebuyers.”
In other words, those who have with be able to pass along intergenerational wealth to their future generations.
As the Urban Institute put it, “if the housing supply fails to keep up with demand, households with financial resources will continue to build wealth with almost no effort.”
Meanwhile, “households with limited ability to build wealth—who are most likely to be households with lower incomes and households of color—will remain renters and face higher housing costs that further restrain their ability to save for future homeownership.”
Those who are fortunate to own homes, may be able to consolidate their households to at least conserve some resources. Those who do not own their own homes, will be forced to consolidate into rental units where there is no net gain in wealth.
That seems likely to not only fail to solve the housing crisis, but further drive a gap between the haves and have-nots.
The Urban Institute suggests that in order to solve this problem, “we need a comprehensive approach to increase supply, while providing financial support for renters to enhance access to homeownership.”
