Possibilities to escape the rental trap

Abstract

Despite a resurgence of economic activity since the 2008 financial crisis and longstanding government policies promoting homeownership, the percentage of renters has remained stable over the past decade despite most preferring homeownership. This study examines the time required for various rental market groups to save for a down payment on an apartment in the capital area from 2011 to 2022. We also assess the potential impact of a government program allowing certain low-income groups to set aside just 5% of a property’s price as a down payment. The focus is on people in the lowest 20^th percentile group. Using data on wages, taxes, compulsory pension contributions, and spending patterns, we analyze how much each group can realistically save, considering both minimal (bare) and typical consumption benchmarks. This analysis reveals how much each group can save for a down payment. Our findings show that despite economic prosperity and wage increases outpacing the consumer price index (excluding housing costs), the time needed to save for a down payment in 2022 remains nearly the same as in 2011 due to rising housing prices. Single parents face the most difficulty saving for a down payment, but the 5% down payment program offers a more realistic path to homeownership. The implications are that government policies should focus on controlling house prices and continuing the 5% down payment program to enhance homeownership opportunities.