By Josh Boak—
The Associated Press
Lori Shelton can't imagine ever having the money to buy a house, and that's one of the main reasons why so many voters feel depressed about the economy ahead of this year's presidential election.
Shelton, 67, drives an Uber to help pay rent in Aurora, Colorado.
An advance from her salary covered the security deposit on her apartment.
But she also cut her next paycheck, leaving her bank account dangerously low when rent was due, a cycle that seems to never end.
“I'm always one step behind,” Shelton said, his voice breaking.
“It's a nightmare, it's a fucking nightmare right now.”
The United States is experiencing a housing affordability crisis that has been decades in the making.
The root of this problem is that the country failed to build enough housing for its growing population.
The shortage strikes at the heart of the American dream of home ownership, undermining President Joe Biden's claims that the U.S. economy is strong, and underscoring the extent to which former Republican President Donald Trump, already a presumptive 2024 GOP nominee, has gone ignore this shortage.
A home under construction marked "sold" in a development in Eagleville, Pennsylvania, in April 2023. Matt Rourke/AP
Homelessness has caused a record number of renters to devote an excessive amount of income to housing, according to a Harvard University analysis.
There are not enough homes for sale or under construction, which keeps prices high.
Average mortgage rates have more than doubled, making affordability even worse.
In fact, the Census Bureau reported that homeownership fell slightly late last year in an otherwise strong economy.
If it weren't for housing costs, inflation (Biden's biggest economic problem) would be at a healthy and stable 1.8%.
Instead, it is around 3.2%.
[For home buyers, 7% mortgages become the “new normal”]
Administration officials are confident that housing inflation will cool soon, but the damage over several years is clear to advocates and economists.
"I've worked in housing for 30 years; the affordability challenge is the worst I've seen in my career," said Shaun Donovan, former Secretary of Housing and Urban Development during the Obama years who now runs the nonprofit.
Enterprise Community Partners
.
Donovan noted that this is an increasingly bipartisan challenge that could unite political parties.
The problem of high housing costs was once the domain of Democratic areas like New York City and San Francisco.
Now it has moved to red states as places like Boise, Idaho, face higher prices.
“It is a top-level issue almost everywhere,” he said.
“And that is changing national politics around it in a way that I think is quite different than I've ever seen.”
[The 10 Best and Worst US Cities for First-Time Home Buyers]
Mark Zandi, chief economist at
Moody's Analytics
, said the outcome of the November election could ultimately depend on the path of 30-year mortgage rates.
Currently, rates average around 6.74%.
If they fell closer to 6%, the odds of a Biden victory would increase.
But if rates approach 8% they could allow Trump to prevail, Zandi said.
“Given the current housing affordability crisis, higher rates will make homeownership completely out of reach for almost all potential first-time buyers,” he said.
“Given that homeownership is a key part of the American dream, if it seems unattainable, it will profoundly affect voters' sense of economics.”
Biden, a Democrat, acknowledged the pain felt by many in his State of the Union address earlier this month and in his budget proposal released last Monday.
The president wants to finance the construction and preservation of 2 million homes: a significant sum, but not enough to solve the shortage.
He also proposed a tax credit of up to $10,000 for buyers.
In the last three years, he has increased rental assistance to 100,000 households.
[Spend now or save for the future? The high cost of living presents a tough dilemma for young adults]
“The bottom line is we have to build, build, build,” Biden said Monday in a speech to the National League of Cities.
“This is how we reduce housing costs for good.”
Rapidly rising home prices were also a festering problem during the Trump administration, who first achieved celebrity status as a real estate developer.
While president, Trump called for limiting construction in the suburbs.
During the 2020 election he told voters that Biden's policies to boost construction and affordability would “destroy his neighborhood.”
During the 2018 to 2020 years of Trump's presidency, the country's housing shortage increased 52% to a deficit of 3.8 million units, according to mortgage firm Freddie Mac.
The Associated Press contacted the Trump campaign about its political plans but did not receive a response.
The
America First Policy Institute
, a think tank that promotes Trump's vision, said the key is to cut government borrowing to lower mortgage rates.
The former president has pledged to reduce deficits, but an analysis by the Committee for a Responsible Federal Budget shows that his policies in office would likely have added more than $8 trillion to the national debt.
“The best way to improve young people's access to homeownership is to lower interest rates again, not provide subsidies that make housing affordability worse,” said Mike Faulkender, the institute's chief economist.
[The Association of Realtors will eliminate the 6% commission on the sale of houses, which can reduce the price of housing]
Lower rates might favor voters, but most economists say they would offer temporary financial relief at best.
Purchase prices would likely adjust upward in response to increased demand resulting from falling rates.
Construction, the most durable solution, would take years to achieve and require new rules from states and cities.
The administration is trying to incentivize zoning changes, but the main options are outside the White House's control.
A sign advertising a house for sale outside a house in February 2024, in Kennesaw, Georgia, near Atlanta. Mike Stewart / AP
“Even when incomes are rising, the economy is doing well and inflation is going down, people can't buy homes,” said Daryl Fairweather, chief economist at brokerage Redfin.
“That's the biggest problem for Biden because he can't solve it.”
The general rule is that people should pay no more than 30% of their income on rent or mortgage.
According to Redfin, a typical household looking to buy a home would have to dedicate 41% of their income to mortgage payments.
This carries far-reaching economic risks.
High housing costs can lead people to cut back on other types of expenses.
Proponents of an affordable market said this allows landlords to neglect their properties since there is always a tenant ready to rent.
[Inflation rises to 3.2% due to gasoline and income, in a sign of resistance that may complicate Biden's reelection]
Evictions can worsen children's health and education outcomes and create an even greater cost to society, said Zach Neumann, a Denver attorney who provides more than $30 million annually in rental assistance through the Housing Project. Community Economic Defense, a non-profit organization.
The cumulative costs of evicting the poorest tenants are “between $20,000 and $30,000 a year if you include nights in shelters and visits to emergency rooms,” Neumann said.
“It's really overwhelming when you think about the sheer numbers and how these people are struggling to keep a roof over their heads,” she said.
While there is bipartisan agreement on the need for more housing, there has yet to be a significant plan that has passed the House and Senate.
Biden has proposed housing aid throughout his administration, but it never materialized.
“If Congress had approved some of the investments that the president has requested since the beginning of his administration, if they had done it three years ago, as he advocated, we would have affordable units that would be in operation right now,” said Daniel Hornung, deputy director of the White House National Economic Council.
But Mark Calabria, who was director of the Federal Housing Finance Agency during the Trump administration, said many of the federal tools to increase housing stock, such as the Low Income Housing Tax Credit, could further boost housing. demand without adding enough construction.
[The economy creates 275,000 jobs in February but the unemployment rate rises to 3.9%]
“I would be concerned that we have done a number of things that have increased demand when the problem is supply,” said Calabria, now an adviser at the libertarian Cato Institute.
But for renters like Lori Shelton in Colorado, the debate over how to increase housing supply is scant consolation when she now owes rent.
He has previously dealt with threats of eviction and late payment fees.
She receives some rent money from her son, but at times she has also relied on her church to cover the $2,399 a month.
“I don't think most of us have that savings account,” he said.
“If you spend so much on rent, groceries, cars and bills, you don't have much to fall back on.”