It's a sign that the housing market is largely mended that Barack Obama barely mentioned homeownership in his penultimate State of the Union address Tuesday night, as he did at least 16 times in his previous six State of the Unions. The president did take the opportunity to tell the story of a couple from Minnesota who struggled through the recession and succeeded, finally, in buying their first home.
Here’s one thing he didn’t mention at all: the rent.
The omission isn’t surprising. Obama has mentioned rents only once in his previous six addresses, and then, in 2013, only obliquely.
But it comes as renters are getting squeezed. Rent is rising faster than wages in the country's 25 biggest metropolitan areas, according to a July analysis by Trulia chief economist Jed Kolko. The share of Americans who live in rental housing is at its highest point in nearly 20 years. The homeownership rate was 64.4 percent in the third quarter of last year, the lowest since 1995, according to the Census Bureau.
The result is a rent affordability crisis, said Sarah Edelman, a housing analyst at the left-leaning Center for American Progress. “The burdens renters face are extraordinary for low-income renters. Even middle-income families are having a hard time,” she said.
Presidents have long shown a policy—and rhetorical—preference for addressing homeownership in painting the American Dream for their audiences. This makes sense. Most renters hope to buy someday, while few owners hope to downsize to a rental. The emphasis is reflected in federal initiatives to make renting more affordable, like vouchers and tax credits, which often aim at the poor and skip the middle class.
Another reason is that affordability in the rental market is often seen as cyclical. The foreclosure crisis turned millions of owners into renters. Millennials are delaying marriage and parenthood, two milestones that have historically spurred Americans to buy homes.
“Part of the demand for rentals is young adults finally getting jobs and starting to move out of their parents' homes,” Trulia’s Kolko said.
Over time, those workers will save enough to buy homes, especially if wages increase. The private sector is building rental units that will eventually ease some of the supply shortage that has pushed up rents.
None of that helps with this month's rent, whether you're a Brooklyn yuppie struggling to pay down student loans and save for a down payment, or a low-income couple who can’t find affordable housing in neighborhoods close to good jobs or good schools. But it helps explain why renters, who have traditionally made up a third of Americans, often don't show up in the State of the Union.
What would the president talk about if he talked about rent?
Edelman suggests strengthening the Low Income Housing Tax Credit, which helps developers of affordable housing raise capital, or requiring Wall Street firms that buy distressed home loans from Fannie Mae and Freddie Mac to agree to more affordable rentals. Three-quarters of people who qualify for Housing Choice vouchers—designed to help families that earn less than 50 percent of their area’s median income—don’t get them because there isn't enough funding, said Stockton Williams, executive director at the Urban Land Institute’s Terwilliger Center for Housing.
Those ideas wouldn't have been out of place in a speech that asked Congress to commit to an economy that "generates rising incomes and chances for everyone who makes the effort."
On the other hand, Williams noted, proposing the ideas is only the first step. "It's more a matter of summoning the political will," he said.
