Giving Compass' Take:
- There will be growing and continuous wealth disparities between homeowners and renters unless there's a comprehensive approach to increase affordable homeownership opportunities.
- What can donors do to help advocate for housing policy and programs that expand homeownership opportunities?
- Learn about the fight for housing justice.
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Homes are often families’ largest assets and one of the most effective ways to build wealth, but countless news stories and studies detail just how out of reach homeownership has become. What does that mean for the wealth gap between owners and renters?
The most recent Survey of Consumer Finances data reveal that in 2022, both the median and average wealth gaps have reached historic highs since the data were first collected in 1989:
- In 2022, the median wealth gap between homeowners and renters reached almost $390,000, and the average wealth gap reached over $1,370,000.
- Over the past 33 years, the median wealth gap between homeowners and renters has increased by 70 percent, while the average wealth gap increased more than 250 percent
- During this period, homeowners' median and average wealth increased by almost $165,000 and $900,000, respectively. But for renters, the increases were $5,800 and $56,000, respectively.
The significantly wider gap in average wealth (compared with median wealth) indicates that a large share of wealth is concentrated among a small share of households. Because of this, in a new analysis, we explore the reasons for the median wealth disparities, which better reflect differences among typical homeowners and renters.
We find that recent housing wealth gains are largely driving median wealth disparities. Because of supply shortages, home price went up, and rent prices also increased faster than incomes. This resulted in a higher housing cost burden among renters. Left with limited savings after paying for housing, renters have also not benefited from the strong financial market in the past several years, which further fueled the gap.
Boosting the housing supply is critical to ensuring the housing and financial wealth gaps between owners and renters don’t further widen.
Without increasing both the owner-occupied and rental housing supply, the growing wealth disparities between homeowners and renters are likely to persist.
Read the full article about wealth gap between homeowners and renters by Jung Hyun Choi and Amalie Zinn at Urban Institute.