Shelter affordability has hit a record low as the cost of living currency crisis takes households back to the 1970s.

Shelter affordability has always been a topic of discord in most metropolises, but the 2020 global lockdowns turned a problem into a crisis. The rising cost of building materials, the cost of servicing a mortgage and pro-tenant laws allowing tenants a moratorium period where they were not obliged to pay rent during the lockdowns also increased landlords’ risks.

Shelter Affordability
Cost of living

“Shelter affordability has hit a record low as the cost of living currency crisis takes households back to the 1970s”

WEALTH TRAINING COMPANY

Dead-end policies have compounded the shelter affordability crisis 

Post-2020 Lockdowns, many private landlords have been burnt and are factoring higher rents or requiring six to twelve months of rent paid in advance for the rental agreement to compensate for the higher risk of non-paying tenants. 

A renting shelter affordability crisis in many metropolis cities could be impacting worker mobility and the ability of young people to form independent households, form a union and have a family. 

So, a shelter affordability crisis could accelerate a demographic time bomb decline in future workers as the population ages. 

A government policy to build more affordable houses could be challenging, with the US public deficit expanding to one trillion dollars every hundred days. The interest payments on servicing the 34 trillion dollar national debt will soon be the highest budget item, overtaking infrastructure expenses, defence spending and education. 

The US ballooning public deficit is not an isolated case, with many of the Group of Seven G7s, dubbed the insolvent 7, experiencing a rising public deficit, a cost of living and a shelter affordability crisis.  

Housing Affordability

a shelter affordability crisis could accelerate a demographic time bomb decline in future workers as the population ages

WEALTH TRAINING COMPANY

The shelter affordability crisis is particularly acute in the US, Canada, the UK and Japan   

The public sector is neck-deep in debt to solve the shelter affordability crisis. There is a reason why the G7 have been dubbed the insolvent seven. The US public deficit to GDP stands at 123%, Japan’s is 251%, Canada’s is 106% and the UK’s is 97%. The EU’s most indebted country is Greece , whose public deficit to GDP is 165%. The EU’s debt to GDP average is 89.40%. So, if the public sector had a solution to the shelter affordability crisis, the already ballooning public sector spending, financed through ballooning debts would have solved the problem.

Massive public spending where public money has little accountability, and no shareholder scrutiny leads to mal-investment, white elephant projects, roads leading to nowhere, and multi-million dollar airports built that have never seen a plane land or take off.  

When investments are made by the State, everyone pays the price, through inflation. When mal- investments are made by the private sector, the company, its shareholders, and creditors pay the price. In the latter case, if it continues to make mal-investments the company goes bankrupt. The state, on the other hand, can keep making mal-investments, spending and going further into debt financed by newly minted currency. But households are burdened with higher inflation and borrowing costs, falling living standards with shelter affordability hitting record highs.  

“Shelter affordability for American first-time buyers is chronic”
Wealth Training Company

Shelter affordability for US home buyers fell to record levels as a new listing with a monthly mortgage payment no more than 30% of the median monthly income in its county became scarce

“Many buyers have become priced out of the market due to soaring home prices and high-interest rates. Last year alone, the number of affordable homes shrank by almost 41%, equal to over 243,000 properties,” Visual Capitalist. 

Shelter affordability; you’ll own nothing and be happy 

The smartphone generation, without the support of their wealthy parents, is priced out of the dream of owning their homes.

Most middle and upper-middle-class parents will struggle to pay for assisted living in their old age. Hyperinflation has also hit nursing homes. 

Most ageing parent homeowners will probably sell their properties to finance their health care in old age. But those homes will need to be remodelled into affordable micro flats for the smartphone generation who have smaller families or have decided not to have children,  

Shelter affordability for American first-time buyers is chronic.

Only 16% of US homes for sale were affordable in 2023, hitting the lowest point on record.

Soaring home prices, high interest rates, and a fall in listings are all factors impacting affordability.  

“The shrinking supply of residential lettings is adding to the shelter affordability crisis” – Wealth Training Company

Moreover, escalating wars on multiple fronts disrupting supply lines, inflation, and the anticipated rate cuts this year may not fall sharply enough to undo the “golden hand-cuff” effect, where homeowners are reluctant to sell to hold on to their low mortgage rates. Compounding the problem is that home construction has fallen significantly since the global financial crisis. During this time, home builders and lenders became increasingly cautious, leading home construction to drop 55% between 2006 and 2021.

The shrinking supply of residential lettings is adding to the shelter affordability crisis. 

As explained above, the rising costs associated with maintaining a property, higher risks in the post lockdown era of tenants not paying, scarcity of solvent tenants as the economy goes into free fall, and the higher cost of servicing debt means that many landlords are pulling out.

What could be the solution to the shelter affordability crisis?

Develop areas where land is relatively affordable compared with the cities, bearing in mind that remote working will give these new areas a boost.

Governments could levy higher taxes on unoccupied properties in prime cities. Land is a precious resource. Real estate provides shelter for its owners or tenants and it should be put to good use.Treating real estate like gold bars store of value in a monetary crisis could worsen the shelter affordability crisis.

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