Affordability: Renters vs. Owners

Homeowners and renters alike are facing affordability issues, according to a new survey from Freddie Mac. According to the GSE’s “Profile of Today’s Renter and Owner” study, over half of Americans are making spending or housing changes to afford their monthly housing payment. Additionally, 44% of renters and 35% of owners who had trouble affording their housing payment over the last two years reported having to move to afford housing costs.

Still, the majority of both renters and homeowners believe their current situation is the most affordable option for them, but the idea that renting is more affordable than ownership is on the rise. Freddie Mac’s survey of around 4,000 households found that 82% of renters view renting as more affordable than homeownership, up 15 points from February 2018.

However, renters are the most likely to be const-burdened. According to the survey, 34% of renters spend more than one-third of their income on rent, while only 25% of homeowners spend that much on their mortgage. The biggest obstacle preventing many renters from becoming homeowners, specifically low-income renters, is the down payment and closing costs. Around 88% of low income renters said the down payment and closing costs would be their biggest hurdle, compared to 72% of middle income renters. 

Many Americans have had to cut costs to afford housing, including 62% of renters and 47% of homeowners. Over half of renters, 55%, reduced spending on non-essential items such as entertainment, compared to 52% of owners. 

For younger homeowners and renters, student loans have had an impact on affordability, especially among renters. Freddie Mac found that 51% of younger millennials (aged 23-29) who rent had to make a different housing choice because of student loans, compared with 38% of younger millennials who own a home. Among older millennials (aged 30-38), the survey found 41% who rent and 36% who own experienced the same phenomenon.

Additionally, over half of workers employed in the essential workforce, serving in crucial positions like healthcare, education and law enforcement, have made housing decisions with their student loan repayment obligations in mind. This includes 51% of owners and 53% of renters working essential jobs.