SC Connecticut News

The issue of housing affordability in the United States has reached concerning levels, with both owning and renting costs significantly higher than pre-COVID times. Between 2020 and 2023, average home prices increased at more than twice the rate of average incomes, marking an unprecedented rise in the home price-to-income ratio. Concurrently, the share of cost-burdened renters—those spending over 30% of their income on rent—grew from 20% in 1960 to 45% in 2022. Rental prices have surged by 22% nationally since before COVID-19, mirroring wage income increases.

For homeowners, property taxes as a share of income have modestly declined since the Global Financial Crisis. However, new homeowners who secured fixed-rate mortgages with a 20% down payment in 2023 are paying approximately 50% more monthly compared to those who did so in 2019 due to higher interest rates and purchase prices.

Potential buyers often use buy vs. rent calculators like Zillow’s to determine financial viability. Currently, these calculators suggest that renting is cheaper unless one plans to stay in a house for longer than six years.

Kamala Harris has proposed $25,000 in down payment support for first-time homebuyers. Research indicates that property tax reductions for current owners can disadvantage first-time buyers by lowering ownership costs for incumbents and raising house prices through the capitalization effect. This makes owners less willing to sell their homes and leaves renters without immediate benefits from tax breaks.

Down payment grants could counteract these forces but may not be uniformly effective across different regions. Previous policies like the First-Time Homebuyer Credit between 2008 and 2010 showed mild increases in house prices but enabled earlier homeownership for younger households.

Effective policy tools for improving housing affordability include demand-side measures such as down payment assistance and mortgage regulation, and supply-side measures like incentivizing construction. Increasing required down payments can make ownership more affordable by reducing buyer attractiveness and freeing up homes for sale. However, this approach is politically challenging without top-down implementation.

Encouraging developers to build more housing units would help reduce rents and prices. Entry-level home construction is at historic lows, with permit numbers still lagging behind pre-Great Recession levels due to local land use restrictions and zoning complexities.