Homeownership slips further out of reach as prices outpace wages - Striking a Chord…

For many Americans, a key component of the American dream – owning one’s own home – seems further out of reach than ever before, as median home prices are now nearly six times the median household income.

Finding affordable housing continues to be a challenge for many, not just here in central Wisconsin, but across the country. Simply put, wages have not kept up with housing costs. Visual Capitalist created a timeline using Federal Reserve economic data showing how the housing market has changed over the last 40 years. Here are the key points.

• In 1984, the median household income was $22,400, while the median home price was $78,200 or 3.5 times higher.

• Although houses were more affordable in the 1980s, steep interest rates consumed nearly half of household income in mortgage payments.

• In the early 2000s, loose lending practices caused ballooning prices, a housing bubble, and a subsequent crash, leading to the 2008 recession. Housing prices fell roughly 15-20%. However, prices gradually started to recover in subsequent years, with a noticeable upswing in 2012.

• In the last 10 years, low interest rates, Millennials entering home buying age, and a supply shortage have driven housing prices through the roof.

• By 2022, the median household income was $74,600 while the median home price was $433,100, a price-to-income ratio of 5.8. This is significantly more than the 1985 ratio, not to mention how the cost of other goods and services has also outpaced wage growth, such as the cost of a new car, groceries, a college education, and healthcare. All of those inflated expenses mean people have even less income to devote to buying a home.

For those not in a position to buy a home, renting a home also has become significantly morechallengingfortheone-thirdofAmerican households that rent. For one, there aren’t enough available properties. In America’s cities, towns, and villages, there is a shortage of 4 million housing units.

A friend recently sent me an article from the Wausau Pilot & Review about housing challenges. The statistic that stood out the most was between 2013 and 2023, median housing costs for the lowest income bracket rose by 4%, while incomes in that group declined by 9%. This is according to a report from the Joint Center for Housing Studies, as cited by Shereen Siewert in Wausau Pilot & Review (“Housing affordability challenges mount in Wausau, echoing national trend”). Even worse than home prices outpacing wages, this reflects an inverse relationship. In other words, rising housing costs are impacting low-income households the most.

The article also points out that for many, the “30% rule” of allocating no more than 30% of one’s income to housing to ensure enough money is left over for other living expenses, savings, and unexpected costs is simply unattainable.

As stated in the article: “The 2025 edition of The State of the Nation’s Housing report finds that nearly half of U.S. renters are now cost-burdened, meaning they spend more than 30% of their income on housing. More than 12 million renters — over a quarter of all U.S. renting households — are severely burdened, allocating more than half of their income toward housing costs.”

The National Low Income Housing Coalition also points out that there is no U.S. state or county where a renter working full time at minimum wage can afford a two-bedroom apartment.

Although there are federal programs to assist with housing, the pool of funding is not big enough to meet the need. Approximately only one in four households that qualify for federal housing assistance actually receive it, according to the Urban Institute. The Center on Budget and Policy Priorities corroborates this, stating that only about 25% of eligible families are able to receive vouchers due to funding limitations. There are long waiting lists to get into these programs.

A multi-pronged problem requires a multi-pronged solution. Here are some proposed solutions, compiled from national housing policy groups:

• The National League of Cities recommends promoting public-private partnerships to fund housing. There also needs to be increased collaboration between counties and regionally.

• The League also suggests municipalities seriously look into office-toresidential conversions to utilize those buildings in an online, post-pandemic world. There has to be a balance. No one wants to see Main Street turned entirely into apartment buildings with no businesses, but it’s better for the buildings to be occupied than just sitting vacant.

• Cities can consider incentives like tax breaks for new homeowners or promote down payment assistance programs that make home ownership more attainable.

• Municipalities should look to streamline zoning regulations, building codes, and permitting processes to remove regulatory barriers to building new housing. They should aim to create neighborhoods with multiple types of housing available.

• Another strategy is incentivizing the construction of diverse housing types, such as the “missing middle” (townhouses, duplexes, etc.). This can increase the overall housing stock and potentially lower costs.

• Explore innovative building techniques and materials (i.e. 3D printed homes, container homes) that can expedite the construction timeline.

• Take a “Housing First” approach to individuals experiencing homelessness.

None of those solutions are simple or easily implemented. There is no Band-Aid solution. However, taken together, they could do a lot to move the needle one of the most pressing issues facing U.S. communities today.