Homeownership has long been known as a tool for building riches and lifting Americans into the middle class. But a recent update highlights other ways in which renting burdens many households, keeping them from financial stability and riches creation.

“Less positive liquid assets flow, fewer funds, and lower financing all highlight the challenges renters often face in trying to construct stronger financial well-being,” notes the update, from the Aspen Institute, a nonpartisan ponder tank.

Some community programs have mitigated many of those issues, the update says suggesting that there are policy solutions available. In a housing trade as strained as this one, that might be crucial, since the riches-building opportunities offered by homeownership may not be achievable for as many people in the upcoming as they were in the history.

What’s more, many renters are satisfied with their current arrangement, the update says, noting that “a Federal safety net study revealed that 57% of renters discover renting more convenient and flexible than homeownership and 36% simply prefer to rent.”

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Still, the scope of the issue – renters have a median ownership of just $10,400 compared to about $400,000 for homeowners with only about half of that accounted for by home stake – suggests there’s a lot of work to do to ensure financial stability for those who can’t, or don’t desire to, access homeownership.

Renters battle with positive liquid assets flow

Consistently positive liquid assets flow, or excess turnover after all household spending, is critical to achieving financial stability and building riches, the update argues. But renters are disadvantaged in many ways. Among them:

• Half of all renter households spend more than 30% of their pre-responsibility turnover on housing costs, compared to less than one-third of homeowners, the update finds. Some 27% of renters pay more than half their turnover for housing.
• As of 2023, 54% of homeowners had incomes that were higher than their outgoings. Just 39% of renters had positive liquid assets flow.
• Renters at all turnover levels save less and have recently started cutting back on their spending due to the high expense of food, gas, vigor, housing, and more.
• As of 2022, only 48% of renters owned any property that might gain in worth, such as superannuation accounts, business stake, stocks and bonds, or other real estate not including their primary residence. Over 78% of homeowners owned such “appreciating assets.”
• Renters are more likely than homeowners to battle with obligation: about 18% of renters had a late obligation settlement of any sort as of 2022, about twice as high as the percentage of homeowners who did.  Renter households have higher obligation-to-turnover ratios than homeowners, and are more likely to hold learner financing obligation than homeowners. Since having learner obligation makes it harder to save for a down settlement and skews the obligation-to-turnover metrics that mortgage lenders use to qualify a financing, it is more likely that learner financing borrowers will remain renters, the update says.
• While the update stresses that Americans from all turnover levels rent their homes, just over half of renter households earned under $50,000 a year in 2022. “Many renters under this turnover threshold live in fragile housing situations, unable to access housing assistance but still at uncertainty of eviction,” the authors wrote.
• Renters tend to have poorer financing profiles than homeowners: in data from 2010 to 2015, 84% of renters had scores below 550, while only 27% of those with scores over 750 were renters. That makes it harder to access financing for things like mortgages and business loans.
• Rent prices increased by 27% from early 2020 to August 2022, and while they have ticked down since then, they remain challenging for many renters, especially those who are trying to save to buy a home. That’s even as the expense of homes to buy “have exceeded the reach of all but the most financially well-off buyers (including those with household riches), forcing many renters to reconsider their way to building financial resilience for their upcoming,” the authors wrote.

How can renter households achieve financial stability?

What can be done? The update outlines several policy paths to assist renters, including higher minimum wage laws, lower-expense education and training, and responsibility credits designed for low- to moderate-turnover households, such as the Earned turnover responsibility financing (EITC) and the kid responsibility financing.

“Local markets require substantial increases in housing supply generally,” the authors write, “but especially for efforts that maintain and boost the supply of affordable rental housing.” Rental assistance such as vouchers for affordable housing can assist some of the most vulnerable households.

Expanding programs that already exist, like workplace superannuation funds plans, can assist households without home stake construct riches. And making it easier for more renters to become owners – by increasing the supply of starter homes, easing financing score requirements, and bolstering down settlement programs, among other steps – can also assist.

“A powerful and well country needs all of its people to have access to the conditions and tools that will enable riches-building, regardless of whether they own the place where they live,” the update concludes.