In part one of this series on the future of homeownership, we laid a case for why the future of homeownership is bright. However, one clear challenge is in the area of affordable housing. Today, we’ll take a closer look at these challenges and discuss what both the individual and the greater community can do to address the challenges of affordable housing, so that the future of homeownership remains bright for all people.
The Gap Between White and Black Homeownership Rates
By now, you could already tell that America has a serious affordable housing problem. Today, you find that homeownership is more of a privilege that only a few people living the “American Dream” enjoy.
Sufficient studies show that it is the wealthy white Americans that enjoy the privilege of owning homes. According to Urban Wire, in 100 cities with large black populations, there was a gap between white and black homeownership rates in every city. Meanwhile, the challenges facing the millennial demographic are equally daunting.
Looking at today’s economy, you would think the amount of millennials stuck living with their parents and unable to buy a home, is a joke. For many millenials, the alternative of renting seems to be the best and most logical option left. A history of ever-increasing unemployment rates, foreclosures, bad loans, and the likes have deterred many millennials from even thinking of owning homes.
All this has made it increasingly important that millennials start building their financial portfolios at a very young age.
Don’t Limit Yourself, Educate Yourself
A critical first step in building your financial portfolio is education yourself before jumping to conclusions. In just the last two years, I’ve seen a number of my peers in the millennial demographic discover that despite the challenges of affordable housing, they can in fact, purchase a home.
I have friends in multiple cities who’ve discovered that it is actually more beneficial to their financial portfolio to purchase a home rather than rent. As we learned from Trulia’s recent findings, nationally, it’s over 26 percent cheaper to own a home than renting.
Not only do you say goodbye to overpaying on rent, you can always rent out an extra room in your home and earn a monthly rent income. Thus, even though finding affordable housing is a challenge, when you break down the numbers owning a home can still be the most economically sound decision for millenials.
This is why it’s critical for millenials to educate themselves about their particular market and the unique trade offs they face with buying vs. renting. If you find out that it is actually cheaper on a monthly basis to own a home, then you can begin setting and meeting regular savings goals for a down payment. For some of us, enlisting the help of a budgeting app is the first step towards saving. Remember, even if your savings goals seem far off, at least you are moving forward towards homeownership and the benefits to your financial portfolio that it can bring.
Economic Revitalization and Fighting Displacement
For most millennials, the choice between owning a home and getting a job is a stark one. Manufacturing and farming communities are declining. Cities are the hubs of the knowledge economy. As a result, job opportunities are concentrated more in the cities. Unfortunately, these are areas where homeownership is now far out of reach for ordinary Americans.
Plus, the situation seems to be even worse for young people of color. They have to fight decades of racial disparities even in housing policy. Also, you find that most markets have locked these families out of any such wealth-building opportunities, opportunities that the parents and grandparents of most white individuals enjoy. The impact of these disparities are widely felt today.
A study by Zillow shows the stark contrast in homeownership rates between races. Here’s the breakdown:
- White – 71.3%
- Black – 41%
- Asian – 58.1%
- Hispanic – 45.6%
It’s also worth noting that when homeownership was attainable, homeowners of color built wealth a lot slower than their white counterparts.
It’s easy to see that the American housing system isn’t sustainable, either economically or morally. Fixing this system and working to get the American Dream back on point means that we have to rethink how homeownership works entirely.
As Americans work to make this a reality, we also need to make sure we keep the community’s long-term interest at heart. Economic revitalization does not necessarily need to be accompanied by skyrocketing prices. In the end, this makes homes more unaffordable especially in the cities.
Community Land Trust
Thus, when thinking about the future of homeownership, we also have to consider community-controlled land and housing. By this, we mean looking into things like housing co-operatives and community land trusts. The idea here is to try and create opportunities for everyone.
Steve Dubb of Nonprofit Quarterly, provides a historic and modern account of how community land trusts have been used to create equal housing opportunities. He notes that in the 1960’s community land trusts were used to help preserve the land of black farmers in Albany, Georgia. Today, the Fruitbelt Community Land Trust in Buffalo, New York seeks to provide the same protection for the lands of low-income, working class citizens.
According to Dubb, here’s how the land trust works:
“The land trust ensures long-term affordability; in exchange for signing a purchase agreement at a below-market price, the buyer agrees to accept a lower price at sale, thereby ensuring that the housing remains available at below-market prices for future generations.”
The future of homeownership is greatly impacted by cities like Buffalo, that think outside the box with community land trusts. If enough communities follow their lead, affordable housing might not be such a challenge for future homeowners.
As you can see, the future of homeownership for many hinges on affordable housing. However, when it comes to facing the challenges of affordable housing, there are a lot of uncertainties. Several factors can impact your prospects. As we’ve seen throughout the country, revitalization can lead to skyrocketing prices, which make affordable housing an even bigger challenge for certain demographics.
However, there are steps we can take as individuals and as communities to overcome the challenges of affordable housing. Individuals can use tools like Realtor’s Rent vs. Buy Calculator, to determine if homeownership is a more financially sound option. Meanwhile, communities can study nonprofits like the Fruitbelt Community Land Trust. This nonprofit can be a blueprint for how changing communities can ensure the American Dream of homeownership is open to all, through affordable housing.
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