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Housing affordability crisis impacts young adults globally

Insurance Rate Reporter / 6 hours ago

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Yi Fang Yen SVP, Digital Media and Advertising Business Solutions | realtors.com

When Mikey Cullen's parents were in their early 20s, they could afford a house in Dublin as public-sector workers. Today, Cullen, a 27-year-old high-school teacher, lives with his mother due to the high cost of housing. He previously shared a house with nine roommates but returned home when he realized renting or buying was beyond his means.

This situation is common among Irish adults aged 20 to 34, with 59% living with their parents in 2022, up from 38% a decade earlier. "The price in Ireland is mental," Cullen stated. "Owning a home isn’t feasible."

The housing affordability crisis affecting young Americans has spread globally to major cities in Europe and beyond. Factors include robust job growth and insufficient new development, leading to rents and sales prices rising faster than wages.

Research by the International Monetary Fund indicates that homes are less affordable now than before the 2008 housing crisis. The housing crunch is impacting living standards for poor and middle-class workers and increasing wealth inequality.

In Ireland, after years of limited construction, it now has the European Union’s most expensive housing according to Eurostat. Average rent in Dublin doubled over the past decade while median home prices rose by 75%.

Central and Eastern Europe have also seen sharp rental increases. In Hungary and Lithuania, rent grew more than 60% from 2015 to 2023. Estonia experienced the highest increase in both rents and home prices among European countries through 2022.

Tallinn's deputy mayor for urban planning Madle Lippus highlighted red tape as an issue delaying new housing projects by up to fifteen years.

Historically, during periods of rapid urban expansion, construction kept pace with population growth. Samuel Hughes from the Centre for Policy Studies noted that restrictive land-use policies have hindered this process since the latter half of the 20th century.

Christian Hilber from the London School of Economics pointed out that Commonwealth countries like New Zealand, Canada, Australia, and Ireland have seen significant home-price growth due to adopting elements of Britain's restrictive planning system.

Vancouver's median home price reached $1.1 million this spring—17 times the median household income—while Sydney saw home prices climb from nine times average income in 2019 to twelve times in early 2024.

Higher prices benefit existing homeowners but raise monthly mortgage costs for new buyers and renters as fewer people can afford to buy homes.

Globally inflation-adjusted home prices rose by 32% over ten years through 2021 according to IMF data.

Wendell Cox criticized tight restrictions on urban expansion which drive up property costs: “When you draw lines around places...you force prices up.”

Politicians across several countries are attempting reforms such as easing rules on undeveloped land usage; however state/local regulations often favor current homeowners over potential renters making reform difficult according Hughes & Hilber .

U.S., once experiencing booming construction pre-2000s crash hasn't fully recovered since then; Freddie Mac estimates nearly four million homes shortfall nationwide .

Dublin became global economic hub post-1990s tax cuts attracting foreign investors resulting rapid population growth yet lagging behind necessary infrastructure developments leading today’s challenges faced by residents like Cullen who lamented how city changed unrecognizably amidst growing socio-economic divides exacerbated lack affordable options forcing many emigrate despite low unemployment rates hitting nine-year highs April last year alone .

Efforts address issues underway include increased government spending subsidies aid programs alongside tax breaks loans help prospective buyers secure mortgages although remains contentious topic politically evidenced recent Sinn Féin campaign promising make 'housing affordable'.

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