A new report from the Aspen Institute Financial Security Program reveals a widening financial divide between renters and homeowners in the United States, underscoring the urgent need for policy changes to help renters build wealth and achieve economic stability.
The report, titled “From Rent to Riches? A Profile on the Wealth and Financial Well-Being of Renter Households,” highlights that renters today have a median net worth of just $10,400 — a mere fraction of homeowners’ nearly $400,000 median net worth. This disparity is not solely due to home equity. While home equity makes up $200,000 of homeowners’ median net worth, the remainder comes from other assets that renters typically do not own, such as stocks, bonds, retirement accounts and business equity.
The report notes that 78% of homeowners own a potentially appreciating asset beyond their primary residence, compared to only 48% of renters.
According to BestNeighborhood.org, 30.95% of District of Columbia residents rent their homes or live in apartments, while 24.02% own their homes outright. The average home in the District was built in 1983, and the city’s vacancy rate stands at 6.13%.
The number of owner-occupied housing units nationwide increased by 8.4%, from 76.4 million in 2014-2018 to 82.9 million in 2019-2023. During the same period, home values rose by 21.7%, with the median home value climbing from $249,400 to $303,400. Still, renters continue to face disproportionately high housing costs. Nationally, the number of rented units where tenants pay more than 30% of their income toward rent increased to 20 million.
The financial instability faced by renters is also glaring. Only 39% of renter households have income exceeding their monthly expenses, compared to 54% of homeowners. This limited cash flow makes it difficult for renters to save, pay off debt, and invest in assets that can build wealth.
Renters saw a 43% increase in net worth between 2019 and 2022, outpacing the 34% increase for homeowners.
Researchers asserted that pandemic-era support, including stimulus payments, enhanced unemployment insurance, and other programs helped to fuel the growth.
Those temporary policies allowed many renters to reduce debt and invest in assets like stocks and business equity. However, the end of these supports and rising housing costs threaten to reverse these gains.
Rent prices surged by 27% from early 2020 to August 2022, exacerbating financial strain. Half of all renter households now spend more than 30% of their pre-tax income on rent, while 27% spend more than half of their income on housing. Researchers said rent burdens leave little room for saving or investing, perpetuating the cycle of financial instability.
The report identifies several systemic obstacles preventing renters from building wealth. Renters are more likely than homeowners to be burdened by student loan debt and late payments. Even though renters’ median debt decreased slightly in recent years, 18% still struggle with overdue payments, double the rate for homeowners.
Further, the median savings for renters is just $3,000, compared to $20,000 for the average household. Only 31% of renters have enough emergency savings to cover six weeks of expenses. Renters are also more likely to have subprime credit scores, limiting their ability to secure favorable loans for homes or businesses.
The report noted that approximately 50% of renters have said they were denied credit or receiving less credit than requested, compared to 28% of homeowners.
The report noted that policies like the Housing Choice Voucher program and Low-Income Housing Tax Credits (LIHTC) can help ease the rent burden. Another pathway to building wealth is encouraging renters to save through retirement accounts and innovative asset classes like shared real estate ownership. Programs like HUD’s Family Self-Sufficiency program have shown success, with participating families saving an average of $9,500. Programs that provide down payment assistance and those that increase the supply of starter homes can help renters transition to purchasing which could drive wealth accumulation.
As the nation’s renter population grows, with forecasts predicting 9 million new renter households by 2040, researchers said addressing the financial challenges facing renters is crucial for an inclusive economy. The report’s authors have asked policymakers, financial institutions, and community leaders to prioritize renter-focused wealth-building strategies.
“We cannot achieve a more equitable economy without addressing the financial instability of renters,” the report concludes. “All households, regardless of homeownership status, deserve the tools and resources to achieve financial security and resilience.”
