The Growing Wealth Gap: Why Homeownership Puts Renters at a Major Disadvantage

Posted by Ania Kozera on January 20, 2025 at 8:00 AM

The gap in wealth between renters and homeowners in the United States is larger than ever, and it’s only growing. According to a recent report by the Aspen Institute, the median net worth of homeowners sits at $400,000. Compare that to renters, who hold a median net worth of just $10,400, barely 3% of what homeowners have. The disparity highlights the critical role homeownership plays in building financial stability and long-term wealth.

The Growing Wealth Gap- Why Homeownership Puts Renters at a Major Disadvantage

At its core, this gap is about equity. Homeownership allows families to accumulate wealth through their property’s appreciation and mortgage payments, which gradually build equity. The report reveals that median home equity alone accounts for roughly $200,000, making up half of a homeowner’s total net worth. Beyond the value of their homes, homeowners are also more likely to own appreciating assets like stocks, bonds, and other investments. About 78% of homeowners hold these additional wealth-building tools, while less than half of renters can say the same.

So, what happens when renters miss out on the wealth-building power of homeownership? The financial impact goes far beyond monthly rent payments. Without home equity, renters have fewer opportunities to create generational wealth, save for retirement, or even prepare for unexpected financial challenges.

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Age plays a role as well. Homeowners have a median age of 57, compared to 42 for renters. While this age gap might seem small, those additional years allow homeowners to build equity, grow their investments, and pay down debt. Renters, on the other hand, are often stuck trying to save while grappling with rising rent costs that consume larger portions of their income.

The pandemic provided a rare glimpse of hope. Between 2019 and 2022, renters’ median net worth rose by 43%, climbing from $7,300 to $10,400. This jump was partly due to temporary financial programs, like income support and rental assistance, which allowed many renters to pay down debt and invest in other assets like stocks or small businesses. But those pandemic-era programs have ended, leaving renters in a difficult position.

Today, high home prices and mortgage rates make it harder than ever for first-time buyers to enter the housing market. Young people, especially, are feeling the squeeze. Rents continue to climb, taking up significant chunks of household budgets and leaving little room to save for down payments or other investments. Without intervention, many renters risk falling further behind, widening the already significant wealth gap.

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The Aspen Institute’s report points to alternative solutions to help renters build wealth. Policies like rental assistance, down payment support for first-time buyers, and programs that encourage saving in retirement accounts could serve as financial “on-ramps.” These measures aim to give renters more options to plan for the future and build financial security, even if homeownership feels out of reach.

For renters, one of the most important steps to take right now is investing in appreciating assets like stocks, bonds, or mutual funds. While it might feel daunting to begin, even small, consistent contributions to a retirement account or brokerage fund can grow significantly over time. Experts suggest treating investments like a “virtual home,” where every dollar contributes to long-term equity.

Another step is finding ways to reduce high-interest debt, such as credit cards or personal loans, which eat away at savings. Paying off debt frees up income for investments, emergency savings, and eventually, a down payment fund for those who hope to buy a home in the future.

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The wealth gap isn’t impossible to close, but it does require a clear strategy. For renters who don’t see homeownership as an option right now, prioritizing investments and savings can help you move closer to financial security. If buying a home is part of your plan, start by understanding the available options, like down payment assistance programs or government-backed loans, which often require smaller upfront costs.

While homeowners enjoy the advantage of equity, renters can still take control of their financial futures. Building wealth isn’t limited to property—it’s about consistent, intentional actions that pay off over time. Whether that means investing in retirement accounts, reducing debt, or exploring homeownership programs, renters have opportunities to strengthen their financial footing and secure their place in the future.

The wealth gap is real, but it’s not insurmountable. By taking steps to invest, save, and plan ahead, renters can begin to level the playing field and create a foundation for long-term financial success.


 

Topics: Real Estate Moguls, Real Estate Moguls - Homeowners