Big Divide

A new housing report highlights the widening housing gap.

Reading the Harvard University's Joint Center for Housing Studies newest report–The State of the Nation's Housing 2005–you could get very depressed or very excited. It all depends on your perspective.

On one hand, low interest rates have brought a flurry of people into the housing market, as the homeownership rate reached 69 percent. But this flood of people has pushed prices to unaffordable levels for a growing number of Americans and also stimulated talk of a bubble.

"The overall tone of the report is wow to the housing sector at large," says Nicolas P. Retsinas, the center's director. "But that obscures some different issues within the housing sector and masks some very serious affordability problems. There has not been a return to widespread affordability. The new units come on-line at prices that exceed what people working in low-wage jobs can afford."

The worst part: The affordability problem could grow worse in coming years. "If there were to be a slowdown in homeownership because of rising interest rates, you could see a substantial run up in rents," Retsinas says. "And, in many cities, we're seeing widespread conversions to condos, which takes rental stock off the market."

Immigrants will offer even more opportunities for apartment owners. The report says that the number of new arrivals this decade could top the 1900s record of 10 million.

"Newly arriving immigrants are far more likely to rent than to own their housing," says Mark Obrinsky, chief economist and vice president of research for the National Multi Housing Council. "The continued influx of immigrants to the U.S. will add considerably to the overall demand for apartment residences. This should result in both additional apartment construction plus a moderate rise in rents."

–Les Shaver