Owning a home has become increasingly difficult in recent years. With a red-hot real estate market and skyrocketing mortgage rates, more and more Americans are worried they’ll never be able to afford a home.
At the end of last year, the number of homes for sale was at a record low. And in April, the average rate on a conventional mortgage hit its highest level since 2011. Renters are feeling the strain as well — rents in some American cities have risen 40% over the last year.
But experts are now exploring a new housing model to help solve this complex problem: a public-ownership rental option.
Instead of tenants paying rent to a landlord (who uses the money to pay off the building’s mortgage), a non-profit would own the building, and some of the rent that would go towards the mortgage would now go back in the renter’s pocket, said Shane Phillips, an urban planner and policy expert at the UCLA Lewis Center’s Housing Initiative.
The public-ownership option would allow renters to collect a share of ownership equity without having to pay the costs of operating and maintaining the apartment. And this would target renters who can already afford market-rate housing so that it wouldn’t compete with funds going toward low-income households.
“A lot of people [are] in that sort of middle position where they don’t make enough to own, but make too little to be eligible for subsidies,” Phillips said on this week’s Best New Ideas in Money podcast. “I wanted to make sure this was not something that was competing for funds that really do need to go toward … extremely low- income households who even now are not getting as much as they need.”
While Phillips’ proposal is only hypothetical at this point, people are already testing out creative and affordable alternatives to traditional housing models.
These include multiple families pooling their finances to buy apartment buildings that they live in and also rent out. And startups like Common are building co-living units with roommates in mind, which would rent for 20% less than comparable studio apartments in the same area.
Learn more in this week’s podcast. And tune in every week to MarketWatch’s Best New Ideas in Money podcast with Stephanie Kelton, economist and a professor of economics and public policy at Stony Brook University, and MarketWatch reporter Charles Passy. Each week, they explore innovations in economics, finance, technology and policy that rethink the way we live, work, spend, save and invest.
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May 07, 2022 at 02:09AM
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Is it time to rethink the traditional model for buying a home? - MarketWatch
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