Born in 1949, I’m a bonafide baby boomer, and, when it comes to housing, I’ve behaved as many other baby boomers have. I grew up in a 900-square-foot brick house with three small bedrooms and one 5×7 bath with pink ceramic tiles. I finished college, got married, and bought my first house—a brand new 1,400-square-foot townhouse with sheet vinyl flooring in the kitchen for $68,000—when I was 29 years old.
In 1982, with two small children, I bought a 2,000-square-foot first-time move-up house. Five years later, with a third child and a better job, I bought a 5,000-square-foot, $500,000 brick colonial, the proverbial luxury move-up house.
Then in 2000, recently divorced and about to get remarried, I moved back into the city and bought a fully remodeled brick row house, the perfect thing for an almost empty nester. In 2002, I bought a small beach cottage as a second home, which I subsequently sold in 2011 in order to buy a proper retirement home in the same community.
I offer up all of that as proof that I, like many of my baby boomer brethren, believe in home ownership and all of its lifestyle and financial benefits. Along my home ownership journey I gladly took my mortgage interest deductions and sold one house after another at a nice profit and didn’t have to pay any capital gains tax.
But now I’m thinking it’s time that I and 70 million other boomers, as well as Congress, give some thought to the 45 million American households who rent rather than own their homes (yes, an apartment is a home). Here’s some food for that thinking:
- At 37%, the renter share of households is at a 50-year high.
- The typical renter household has an annual income of about $40,000 versus $70,000 for a typical owner household.
- Based on the rule of spending no more than 30% of one’s income on housing, about 50% of all renters are considered cost-burdened.
- Among the lowest-income renter households (those making $15,000 a year, which is roughly equivalent to working full-time, year-round at the federal minimum wage), 70% face severe housing cost burdens.
- For every 100 extremely low-income renters only 35 rental units are available at the 30% of income affordability standard.
Those numbers come from the Harvard Joint Center for Housing Studies. Other stats from Harvard suggest the situation is likely to get worse because of a supply and demand mismatch. Demand for rentals has increased for 16 years in a row and is likely to continue to increase as millennials come of age. Even though multifamily starts have been relatively strong for five years running, two-thirds of new units are targeted at affluent renters.
While much housing hand-wringing about tax reform has focused on the deductibility of mortgage interest and state and local real estate taxes, less attention has been paid to a provision that would end tax-exempt treatment for private activity bonds that support about one-half of all affordable multifamily construction.
For most people, the American dream still means owning a home. But the American promise is decent, affordable shelter for everybody, regardless of whether the home is owned or rented. Renters are not second-class citizens, but far too many of them are still treated and are living as such.
