Home loans have become very affordable today, as prices are rising at a rate that is faster than the economic growth. While in the past many Americans had to rely on their parents’ credit cards and other expensive household spending, today many home buyers can take out a personal loan, find out here for more. In recent years, the average household has gone from spending just under 15 percent of their income on their home, to spending more than 20 percent of income, or more than $100,000 on home loans alone. If you’d like to get to know all about home loans, then we suggest visiting https://www.sofi.com/home-loan-help-center/.
Even though home loans are very affordable today, many Americans are still struggling to pay their monthly mortgage payments. As homeownership rates have declined, the percentage of Americans that spend more than 20 percent of their income on housing costs continues to increase. The high cost of mortgage payments also limits Americans’ ability to save for retirement or for the future. The U.S. has more than 22 million seniors who are struggling to get by on a modest income. According to the White House Council of Economic Advisors, half of seniors will not be able to retire if current trends continue. This is particularly troubling considering the retirement age is slowly approaching for the next generation. The rising cost of home loans and rising rents in many American communities are also exacerbating the problem of mortgage payments for the elderly and the low-income families that live in them.
Families That Spend More Than 20 Percent of Income on Rent Are Nearly Three Times More Likely to Have Low Income
The housing affordability crisis that the U.S. is facing is not only due to high housing prices. Many poor families also live in a low-income neighborhood.
For low-income renters, home ownership is out of reach. According to the Census Bureau, about 28 percent of all renters in 2015 lived in a home where the total monthly housing costs were more than 20 percent of their income. Low-income renters who are on public assistance are also at risk. Over one in three low-income households and nearly half of households on food stamps spend more than 20 percent of their income on housing. Nationwide, only one in six low-income families have their home paid for completely every month of the year. What Makes These Places Affordable? For renters, a vacant home can be a costly burden. An estimated one-third of low-income renters are burdened by rent, either on a monthly basis or yearly, according to a 2014 Pew Research Center survey. Of those who pay 30 percent or more of their income on rent, 62 percent have monthly debts above $1,000, while 45 percent have monthly debts of $1,000 or more. Low-income households also have to contend with rising housing costs. According to the National Low Income Housing Coalition, the average cost of a one-bedroom apartment is $11,904. Over half of these renters spend 30 percent or more of their incomes on rent, meaning that they have to spend more than half their income to cover rent on a one-bedroom apartment, even if they are relatively rich.
These factors create an incentive for landlords to evict poor tenants, which drives up the number of people without housing in cities across the country.
A new study by economists David Neumark and Thomas Hirschl found that rent control not only reduces eviction rates, but the overall eviction rate in cities with rent control is also reduced.