Rural America's Struggling Housing Market: Increasing Costs Challenge Residents
In a recent brief published by the Council of Economic Advisers (CEA), titled "The-Deterioration-of-Housing-Affordability-in-Rural-America", the worsening housing affordability situation in rural America is highlighted. The brief plots cumulative income and housing cost growth for rural renters and homeowners relative to their year-2000 values.
The data shows a marked deterioration in housing affordability since the turn of the century. Housing costs have grown more than income in rural America, putting a strain on both renters and homeowners. This trend is due to a combination of factors.
One key factor is the higher prices of new rural housing without a corresponding increase in supply. The average age of rural housing is rising rather than declining, suggesting new builds are expensive and infrequent.
Another factor is the limited response of housing supply despite low interest rates and ample land. This could be due to underestimated regulatory constraints or local opposition to development, which restricts new affordable housing construction in rural areas.
Economic challenges in rural areas also play a significant role. Reliance on volatile industries, population loss, and shrinking local tax bases reduce funds for public services and worsen housing affordability and availability.
There is also a disparity between wages and housing costs, especially for renters. The "housing wage" needed to afford modest housing far exceeds minimum wage, placing low-income rural residents under severe financial pressure.
Additionally, the poor quality and location of affordable rental housing, as well as insufficient support for home repairs, rising costs of insurance, and taxes, add to the ownership costs and financial instability for rural homeowners.
These interrelated factors constrain affordable housing options, hinder worker recruitment and retention for rural businesses, and challenge the economic vitality of rural communities. Some rural areas are exploring mechanisms like community benefits agreements to ensure development projects contribute to affordable housing and economic diversification. However, broader structural and policy challenges remain significant.
The brief recommends increasing the rural housing supply to tame costs and enable greater homeownership. This could help alleviate the housing affordability challenge in rural America and improve the quality of life for its residents.
- In light of the increasing housing costs and decreasing income in rural America, many individuals are finding it challenging to invest in real estate, impacting their personal finance and overall financial stability.
- As the affordable housing supply remains low in rural areas due to various factors, such as regulatory constraints and limited development, more focus should be directed towards finance solutions, like community benefits agreements, to boost housing development and improve housing affordability for all residents.
