by Taylor J. Kovar – CEO/Founder, Kovar Wealth Management
–Hey Taylor – My wife and I live in a rental and had planned on renting for a few more years while we save for a house. However, rent is so high it feels like we’ll never be able to save up enough. Is this just how things are now?
–Hey Marshall – Right now, this is the state of the market. It won’t always be this way, and something is going to shift soon because the current situation isn’t sustainable. What that shift will look like is anyone’s guess.
- More affordable options. On the rental front, the best minds in real estate are trying really hard to come up with alternatives to what we have right now. The cost of building a new house, coupled with limited availability of undeveloped land, is making brand-new homes really hard to come by. That has a ripple effect, making the houses people sell more expensive, which makes more people need to rent, which makes the cost of renting higher. There’s no immediate fix for the problem of building new houses, but people are trying to come up with ways to make more affordable rentals. One idea that’s thrown around a lot is turning abandoned office buildings into apartment complexes. There’s a lot of merit to this idea (the buildings are just sitting there), and yet it’s a little problematic because the cost of renovation would be massive (big buildings = big projects). What’s important is that there are organizations focused on creating affordable rentals, which will make a big difference when there’s finally a breakthrough.
- Financing. While people wait for more housing options to be available, things can be done to address how a person pays for their new home. Interest rates are a lot higher than they were a few years ago, but they’ll eventually come back down. In the past, the government has provided vouchers and created systems to get more people into homes. Of course, if available real estate is the issue the government can’t just build more houses, so someone will have to think of another solution. In addition to housing vouchers, tax credits are one way to get people with lower incomes into new rentals.
- Targeted building. One aspect of the problem is connected to how and where housing was developed in the past. A good apartment doesn’t just need the right number of bedrooms and bathrooms—it has to be in an area with good jobs, internet, schools, etc. If developers stay focused not just on what they build, but who they’re building for, the connection between industry and living conditions will strengthen and hopefully help alleviate the problem.
I’m sorry there’s no immediate solution for your situation, but I do think there are reasons to stay hopeful. Keep saving, and keep an eye out for how the housing market is changing. Thanks for the question, Marshall!
