Older Americans Are at Increased Risk of Surging Rent – Center for Retirement Research
As the nation emerged from the pandemic, rents exploded. Two years later, rent pressure is beginning to ease due to increased multifamily construction, including apartments.
But the COVID-era boom continues to hurt employers, who are paying about 20 percent more than they did in 2019, although healthy wage increases in recent years have offset some of that.
The nation is facing an “unprecedented affordability crisis,” Harvard’s Joint Center for Housing Studies concludes in its new report. The center estimates that nearly half of American renters — some 22 million households — will spend at least 30 percent of their income on rental housing by 2022. That is the largest share in more than a decade. About 12 million of them spend more than half of their income on housing.
A related trend discovered by the Harvard Housing Institute last year concerns future retirees: declining homeownership among older workers will expose increasing numbers of them to rising rents in retirement.
Any home owner will tell you the biggest advantage they have over renters is that fixed rate mortgage payments don’t go up. Renting does and, as we have seen recently, sometimes more. Rising rents are especially problematic for retirees as they have less money than when they were working.
Another bonus of owning a home is that it is a form of forced retirement savings. Every mortgage payment adds a little to home equity, which is money retirees can use to supplement their income. So far they are not willing to touch that money. But, nevertheless, it is a source of wealth available to them.
To the extent that home ownership is a form of retirement wealth, things seem to be going in the wrong direction.
Over the past two decades, homeownership among 50- to 65-year-olds — especially boomers — has peaked at 80 percent, the housing agency reports. Then the Great Depression hit, and home ownership began to decline. Today, 74 percent of older workers own their own homes.
That downward trend “is likely to portend lower homeownership rates for older adults in the future,” the center predicted.
If that prediction is correct, the absence of this major source of wealth can only mean the demand for affordable rental housing for retirees that the agency has warned for years will continue to grow.
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