Renters Struggle on way to Homeownership
June 19th, 2016
With her 2-year-old son, Alexius Colton lived in a Jackson apartment with mold, parking issues and problems that it would take the property’s maintenance personnel a month or more to repair. On top of that, she was spending $720 a month on rent, plus several hundred dollars a month on utilities, with some of her electric bills as high as $450.
A minor stroke set in motion her plan to pursue homeownership through Habitat for Humanity Mississippi Capital Area.
“The next day, everything slowed down. The doctor asked me if I was stressed,” Colton said. “I wrote down the things that were stressful to me, and it was mainly the bills and rent at the apartment and everything that was going on, so that’s when I said, ‘I’ve got to make a move.’”
In March, Colton and her son moved into her Habitat home, where she pays less each month on housing than she did while living in her apartment.
“Actually, it feels like a load has been lifted off of me,” Colton said. “I can be able to save money for my son when he goes to college, or sometime take a family trip. The most important thing is saving.”
Although the Jackson metro area’s real estate market has remained fairly stable through the subprime mortgage housing crisis, industry experts have said student loan debt and a limited number of affordable houses available for purchase have created homeownership barriers for first-time buyers. Complicating matters, the area’s median household income decreased 8 percent from 2009 to 2014, at the same time that a rising number of renters are pouring their money into housing costs, hampering their ability to save.
In the Jackson metro area, 47 percent of renters use a third or more of their income to cover housing costs.
Even as it has remained stable, the Jackson area real estate market has transformed in recent years, particularly with a decrease in the number of first-time buyers, Central Mississippi Realtors President Megan Hall said. Nationally, first-time purchasers made up just 32 percent of homebuyers last year, according to the National Association of Realtors.
“First-time buyers are unable to save because they have such high student loan debt,” Hall said. “We’ve seen that be one of the main reasons first-time buyers are out of the market right now.”
Brad Benton, vice president and mortgage loan officer for Bancorp South, said most loan programs require a percentage of a buyer’s student loan debt balance to be held against them in their debt-to-income ratio, whether or not the loan is deferred.
“If someone has $75,000 in student loan debt, even if it’s deferred, that could be $750 against them in their debt-to-income ratio, which affects their purchasing power and how much they can buy,” he said.
As a result, those with high student loan debt must either remain renters or ask a family member to cosign with them, he said.
Jessica Shappley, senior policy analyst for Hope Policy Institute, expressed concerns that renters are stuck in a post-recession world without pre-recession job opportunities.
“Overall, in terms of renting, I think it’s very bleak for low-income families, and I think that goes back to the fact that there is a shortage of well-paying jobs in communities and a shortage of affordable, quality homes for people to rent, as well as to purchase,” she said.
Hall said the Jackson metro area has a low number of homes under $200,000 available for sale, and an increased number of buyers in the market can drive the prices of those homes up. Benton, on the other hand, said buyers have plenty of affordable options.
“We have enough homes available to purchase,” he said. “I think a lot of people are scared to buy a home right now, and I think that’s probably because of fear of the unknown.”
Contact Mollie Bryant at email@example.com or 601-961-7251. Follow @MollieEBryant on Twitter.