Study shows: Ownership vs. rentals demonstrates that rental options should be a consideration in housing proposalsMortgagePress.comHomeownership, rentals, Center for Economic and Policy Research, National Low Income Housing Coalition, Census Bureau's American Community Survey
As Congress debates solutions to the mortgage meltdown and ever
more homeowners find themselves facing foreclosure, a report
released by the Center for Economic
and Policy Research (CEPR) and the National Low Income Housing Coalition
(NLIHC) shows that in many bubble-inflated markets,
homeownership remains a costly and risky proposition.
The study, "Ownership,
Rental Costs and the Prospects of Building Home Equity: A
Comparison of 100 Metropolitan Areas," evaluates the median
house price and fair market rent, as determined by HUD, for the 100
largest metropolitan areas. The study extends the methodology from
an earlier study,
"The Cost of Maintaining Home Ownership in the Current Crisis:
Comparisons in 20 Cities," to the 100 largest metropolitan
areas in the U.S.
The new analysis shows the wide diversity in housing markets
across the country. While many metropolitan housing markets
continue to be subject to real estate bubbles, prices are not out
of line with rents in large parts of the country. The findings of
the report again show the importance of not relying on a
one-size-fits-all solution to the current housing crisis.
The report also notes the problems that many homeowners are
likely to face finding quality rental housing due to its limited
availability.
"This is not just a homeownership crisis," said Danilo
Pelletiere, NLIHC research director and a co-author of the report.
"Data shows that the entire housing market. Across the country,
rental properties are being foreclosed on and in many area,
homeownership markets remain highly uncertain. Any policy to
address this crisis must recognize the rental market as part of the
solution."
According to the report, which analyzed data from the Census
Bureau's American Community Survey (ACS), the most inflated markets
currently see monthly homeownership costs outpacing rental costs by
as much as 300 percent. This creates a substantial and unnecessary
drain on household income, especially for middle- and lower-income
families.
"This could mean that families may have to forgo health
insurance or quality child care as they struggle to make their
mortgage payments," said Dean Baker, co-director of CEPR and an
author of the study. "Furthermore, since prices are still falling
in these markets, many homeowners won't ever accrue any
equity."
The study projects that in the bubble markets, most homeowners
will leave their homes with large amounts of negative equity. For
example, it projects that by the year 2012, homeowners in New York
will have $106,000 of negative equity and in Los Angeles, the
shortfall would be $228,000. In these, and other bubble markets,
households would benefit from proposals that attempt to provide
affordable rental options as part of policy solutions.
For cities where the costs of owning are much closer to rental
costs, it is likely that a small amount of equity will be accrued.
In these markets, policies that keep owners in their homes,
possibly through some form of government-guaranteed mortgage, are
preferable.
