Why Homeownership Feels Out of Reach
Prices matter—but marriage patterns, student debt, and income-linked policies matter too
Prices matter—but marriage, debt, policy design, and expectations matter too
Homeownership among young adults has fallen sharply in recent decades, and the decline is often attributed solely to high prices and interest rates. This essay argues that affordability is only part of the story, and that marriage patterns, student debt, income-linked policy design, and expectations about economic mobility all play central roles. Seen through this lens, what looks like “giving up” on homeownership may often be a rational response to how work, family formation, and policy incentives interact over the life cycle.
Today, only about 36–38 percent of U.S. adults under age 35 own a home, well below the roughly 45 percent seen in the early 2000s. Survey evidence suggests many young adults have given up the possibility of ever owning a home.
The dominant explanation for this shift emphasizes housing affordability itself. Home prices have risen faster than incomes, mortgage rates have increased, and down payments have become more difficult to accumulate.
Affordability matters a lot but focusing on house prices alone risks overstating its explanatory power. The decision to pursue homeownership depends on far more than the price of houses relative to wages. It is shaped by marriage and household formation, balance sheets, income-tested student loan and health insurance policies that weaken the link between income growth and housing affordability, and expectations about future economic mobility.
When these broader forces are considered, “giving up” on homeownership often looks less like a psychological surrender and more like a rational response to structural changes that have weakened the traditional pathway from work to ownership.
This essay argues that declining homeownership aspirations reflect the interaction of at least five forces: declining and delayed marriage, student debt burdens, rising pessimism about economic mobility, policy-induced implicit tax rates tied to income, and belief dynamics emphasized in recent research.
Housing affordability is central, but it is only one part of a larger story.
1. Declining Marriage Rates and Delayed Household Formation
For most of the postwar period, homeownership in the United States was closely tied to household formation. Marriage pooled incomes, shared fixed costs, and made mortgage payments feasible even when individual earnings were modest. The transition from renting to owning was often less about achieving a particular personal income threshold than about forming a dual-earner household.
That pathway has weakened substantially. Marriage rates have declined, and the median age at first marriage has risen sharply. A much larger share of adults now remain single through their late twenties and thirties — the very period in which first-time homeownership historically occurred. As a result, many households face the housing market as single earners for much longer than prior cohorts.
This matters because homeownership affordability is highly discontinuous with respect to household structure. A home that is unaffordable on one income may become feasible almost immediately with a second earner, even if both incomes are modest. When individuals assess the feasibility of homeownership based on their current single-earner status, pessimism may reflect conditional infeasibility rather than permanent abandonment. In other words, some people may not believe homeownership is unattainable in principle, but unattainable unless marriage or partnership occurs.
Aggregated data mask this distinction. As the share of single adults rises, the proportion of people who appear unable to afford homes on their own increases mechanically, even if the economic role of marriage in facilitating ownership has not changed. Without carefully accounting for household formation, declining homeownership among young adults can be misinterpreted as evidence of widespread giving up rather than delayed transition.
2. Student Debt and the Erosion of the Ownership Pathway
Student debt is another factor that complicates the link between income and homeownership. A substantial literature documents that higher student loan balances are associated with delayed household formation and lower homeownership rates. Traditionally, this effect was understood through balance-sheet channels: debt burdens reduce net worth, crowd out saving for down payments, and raise debt-to-income ratios used in mortgage underwriting.
However, the structure of student loan repayment has also changed in ways that weaken the traditional ownership pathway. The standard ten-year amortizing loan — under which income growth steadily reduced debt burdens over time — now plays a smaller role. In its place, income-driven repayment systems and newer repayment assistance designs tie required payments directly to adjusted gross income.
Under these arrangements, increases in earnings do not necessarily translate into faster balance-sheet repair. Instead, higher income raises required payments, leaving less additional cash flow available for saving or housing expenses. The mapping from income to homeownership has become flatter and less reliable, particularly early in the life cycle.
For many borrowers, this changes the timing calculus. Homeownership may not be delayed by a few years of saving, but by decades of income-contingent repayment. When loan balances persist well into prime homebuying years, postponing or abandoning ownership can be a rational assessment of financial constraints rather than a belief-driven retreat.
3. Rising Pessimism and What Standard Surveys Can Tell Us
Survey evidence suggests that pessimism about economic mobility has risen broadly, not just with respect to housing. Data from standard public surveys such as the Survey of Consumer Finances (SCF) and the General Social Survey (GSS) show increases in pessimism about future income growth, confidence that hard work pays off, and expectations about improving living standards.
Although these surveys do not include a direct question asking whether respondents have “given up” on homeownership, they contain variables that can serve as informative proxies. In the SCF, renters who report low expectations of future income growth face persistently tight budget constraints relative to renters who expect incomes to rise, suggesting differing assessments of the feasibility of ownership under foreseeable conditions. Similarly, GSS measures of economic pessimism and skepticism about upward mobility help contextualize whether housing-related discouragement reflects a housing-specific reassessment or a broader decline in perceived economic opportunity.
Taken together, this evidence suggests that housing pessimism may be part of a wider shift in beliefs about economic opportunity. If individuals doubt that income growth will translate into improved living standards, deprioritizing large, illiquid investments like housing may be a logical response.
4. Implicit Tax Rates from Policy Design: Student Loans and Health Insurance
Beyond prices, debt, and beliefs, policy design itself plays a direct role in shaping homeownership incentives. Two systems in particular — income-linked student loan repayment and non–employer-based health insurance — interact in ways that can make ownership rationally unattractive for some households.
Under income-linked student loan repayment, required payments rise with earnings. At the same time, many young adults rely on ACA Marketplace health insurance, where premiums increase with income and, absent employer subsidies, can change sharply over relatively narrow income ranges. The interaction of these two systems can generate effective marginal tax rates exceeding 50 percent, far above statutory income tax rates alone.
In practice, an increase in income may trigger higher student loan payments and higher health insurance premiums simultaneously, substantially reducing net take-home pay. The higher student loan payment directly impacts mortgage qualification through the debt to income ratio. The linkage of student debt and health insurance premiums to AGIU reduces disposable income available for mortgage payments and anything else.
Importantly, these effects differ sharply from those facing workers with employer-sponsored insurance and amortizing debt. Two households with the same gross income can face very different effective budgets depending on their exposure to income-linked programs. For individuals facing steep implicit marginal rates, the traditional assumption that earning more will steadily bring homeownership within reach no longer holds. Giving up on near-term ownership under these conditions can be a rational response to institutional constraints, not a failure of aspiration.
For a formal analysis of these mechanisms, see Liquidity Today, Tax Traps Tomorrow.Liquidity Today, Tax Traps Tomorrow: https://www.economicmemos.com/p/liquidity-today-tax-traps-tomorrow.
Consistent with this view, recent work emphasizes that belief formation itself is most sensitive early in adulthood. Lee and Yoo write:
“These results suggest that policy interventions aimed at preserving households’ belief in the attainability of homeownership may be most effective when targeted earlier in the life cycle—particularly before age 40—when housing transitions and belief formation are most sensitive to realized shocks in income, housing prices, and other life events.”
Paper available at: https://ssrn.com/abstract=5770722
Beliefs and the “Giving Up” Narrative
Lee and Yoo develop a framework in which housing aspirations and beliefs play a central role in shaping behavior. In their analysis, households update their perceived probability of becoming homeowners in response to realized shocks, and when ownership appears unattainable, these belief revisions can affect consumption, labor effort, and risk-taking. Their work is valuable in formalizing how aspirations matter in their own right, not merely as passive reflections of prices and incomes.
At the same time, belief dynamics are endogenous to the broader forces discussed above. Declining marriage rates, persistent student debt, pessimistic income expectations, and policy-induced cash-flow constraints all shape assessments of what is realistically attainable. In this setting, giving up on homeownership need not reflect mistaken pessimism or behavioral resignation; it may instead represent a rational updating of beliefs in response to demographic structure and institutional design.
This distinction matters for both interpretation and policy. If households are misperceiving affordability, interventions that restore optimism or subsidize entry may be effective. If, instead, belief revisions accurately reflect structural barriers, then belief-focused interventions alone are unlikely to restore homeownership pathways unless underlying constraints—such as balance-sheet burdens or income-linked policy incentives—are addressed.
Conclusion: A Multi-Causal View of Giving Up
Homeownership has long served as both a financial asset and a symbol of economic progress. When people give up on it, the implications extend beyond housing markets to savings, labor supply, social mobility and wealth at retirement. Understanding why homeownership is declining requires looking beyond house prices alone.
Declining and delayed marriage, student debt structures, pessimism about income growth, and policy-induced implicit taxes all interact to weaken the traditional path from work to ownership. In this environment, what appears as giving up may often be conditional, delayed, or rational rather than a wholesale abandonment of aspiration.
A multi-causal view does not deny the importance of affordability. Instead, it highlights that restoring homeownership pathways may require more than lowering prices or subsidizing purchases. Addressing upstream factors — how households form, how debt is repaid, how insurance is financed, and how income translates into economic security — may be just as important for restoring belief in the attainability of owning a home.
Authors Note: The short notes on ongoing research discussed in the appendix is open to engagement from all readers and will be developed here on this blog; annual and founding subscriptions help support that work.
Appendix: A Roadmap for Studying Housing Pessimism and Homeownership Decisions
