◀︎return to newslistAddressing Housing Affordability with Access to Homeownership

October 7, 2021 – 

Faced with an affordable housing shortage, policymakers often overlook America’s biggest source of affordable housing: homeownership.

Contrary to popular belief, owning is often more affordable than renting. Today, it is cheaper to buy a home than it is to rent in two-thirds of US counties, including New Mexico’s Santa Fe and Bernalillo Counties, home to high-cost Santa Fe and moderately priced Albuquerque, where Homewise, has helped more than 5,000 modest-income families become homeowners.

Nevertheless, some believe homeownership is reserved for people who achieve some level of financial success, that it’s not for people still on the path to financial security. This may explain why most federal, state, and local efforts to create more affordable housing narrowly focus on the rental market.

However, the data disprove this thinking. The typical homeowners spend 10 percentage points less of their income on housing than the typical renters.

This remains true when controlling for income. Among households with annual incomes of less than $50,000, renters spend an average of 34 percent of their income on housing, but owners spend only 24 percent. Similarly, for households earning less than $20,000 a year, homeowners spend 38 percent of their income and renters spend 48 percent.

The lower cost of owning also holds true when controlling for race and ethnicity. Though Black and Hispanic homeowners have higher housing expense ratios than white homeowners, they have lower housing expense ratios than all renters, including white renters. The median housing expense ratio for Black and Hispanic homeowners is 19 percent, and the typical white renter household spends 24 percent of its income on housing.

I’m not suggesting homeownership alone can solve the housing affordability crisis. But strategies focused only on rental housing can be shortsighted, especially when homeownership may be more cost-effective for all involved. Many rental programs, including housing choice vouchers, require the government to send monthly assistance to a landlord who is under no obligation to renew a tenant’s lease.