Household wealth is increasing, but renters are largely locked out

The latest federal Survey of Consumer Finances – a triennial government report on the financial health of U.S. households – paints a mostly rosy picture of the U.S. economy. 

The typical household’s net worth, or wealth – the value of their financial assets minus their debts – has swelled by 37% since 2019, to $192,000. It’s the largest three-year increase in wealth in the modern history of the report, more than twice as big as the previous. 

Wealth gains were seen across the board, at the top and bottom of the income spectrum. The gap between the richest and poorest households narrowed slightly. Black households saw some of the biggest percentage gains.

But those encouraging wealth numbers are driven in large part by surging home prices, meaning that renters – who account for almost 30% of households in Minnesota – have been locked out of much of those gains. The median renter household now has a net worth of about $10,000, while the typical homeowner has nearly $400,000 in assets.

In inflation-adjusted terms, the median renter’s net worth is now roughly the same as it was in 1995. The typical homeowner, on the other hand, is worth almost twice as much as she was back then.

The numbers underscore that home ownership has long been the primary driver of middle-class wealth, and that people unable to afford their own home are often effectively locked out of the financial security that many Americans take for granted. 

In addition to lacking home equity, renters are more likely than homeowners to be saddled with certain types of debt, like credit card balances, student loans, medical debt and other lines of credit. Those liabilities are increasing, too: in 1989, for instance, about 13% of renters were making student loan payments, according to the survey. In 2022, 28% of them were.

Those debts, combined with rising home prices and mortgage interest rates, are making it more difficult for renters to make the transition to homeownership. In the Twin Cities a family now needs to make more than $103,000 a year to comfortably afford the median priced home, according to a recent Redfin analysis. That number’s risen 20% in the past year alone.

The survey does contain some good news for renters. Like everyone else, their net worth increased considerably between 2019 and 2022, driven in large part by gains in the stock market. If that trend continues, it could help renters set aside funds for a down payment on homeownership.