In a striking assessment of America’s housing landscape, Joshua Harris, executive director of the Fordham Real Estate Institute, argues in a recent Trepp guest blog that shelter—a fundamental need alongside food and water—is rapidly transforming into a “luxury good”. This shift, he notes, brings both opportunity and risk for the commercial real estate sector.
Harris draws a sharp distinction between necessities and luxury goods, pointing out that the latter are only attainable when people have ample disposable income left after covering basic obligations. Yet, as housing prices soar, even the essential need now fits the luxury category. For two decades, Fordham has tracked Trepp’s rental rate-per-unit data alongside key indicators such as median household incomes, mortgage rates and housing prices from the Federal Reserve, painting a sobering picture.
In 2004, the average apartment required just 37% of the median household income—$25,000 out of $86,000. By 2023, that share had nearly doubled to 71% of median income. The cost to buy an average has become even more daunting: the percentage of median income needed to qualify for a purchase jumped from 87% in 2005 to a staggering 152% in 2023.
Harris warns that homeownership has now become a luxury good, with little in the way of policy or economic forces to reverse this trend—even before accounting for new tariff pressures. Local “not in my backyard” zoning policies continue to restrict supply and drive up costs. Meanwhile, the end of the zero-interest rate era and anxieties over the national debt have pushed 10-year Treasury Note yields to around 4.5%, setting a new baseline for mortgage rates that is 129 to 378 basis points higher than during the recovery from the Global Financial Crisis and the early pandemic years.
For millions of Americans, the dream of owning a home is giving way to a new reality: a “renter nation”. This shift carries broad economic consequences, including a move away from durable goods and toward services, as renters typically spend less on their homes. Harris cites National Association of Home Builders economists who estimate that housing and related expenses account for 15% to 18% of U.S. GDP.
Renters, he observes, are generally less rooted than owners—a potential boon for labor mobility and business opportunities, but also a sign of financial disparity, as renters tend to be less wealthy than homeowners. The wealth effects of homeownership, which have long fueled consumer spending through increased equity, could diminish.
With multifamily inventory constrained, rents are likely to rise, potentially outpacing income growth. Harris points to Trepp data showing that gross potential rent per unit has grown at a compound average rate of 4%, compared to 3.16% for median home prices. This trend suggests continued strong performance for multifamily assets, as well as single-family rentals and build-to-rent properties.
However, as GlobeSt.com has previously reported, shelter costs make up a significant portion of inflation. A sharp rise in rents and homeowner equivalents could further stoke inflation and force the Federal Reserve to raise interest rates again.
Taken together, these forces are poised to reshape consumer spending patterns and drive population growth toward secondary, tertiary, and exurban markets where living costs remain more affordable.
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