Less people are buying houses these days as a result of the increase in home prices. But those who do end up as homeowners are able to prosper because of the equity from their house. As more people rent and less people buy homes, the benefits of owning a residence are going to a smaller select group of people and thus contributing to the wealth inequality in the U.S.
Expensive housing helps spread of economic inequality. Over the past couple of years, the costs of purchasing a house have skyrocketed. In San Francisco, middle-class families are only able to purchase 14 percent of homes located there. Slowly, the middle-class is disappearing. The distortions in housing ownership by the middle-class and wealthy are due in part to the growing divide in income inequality. As income inequality continues to widen, those with greater wages will be able to buy more when trying to obtain a house. As a result, this intensifies the cost of houses and contributes to the wealth inequality across a town. The high rate of income and house owning costs of New York is an example of this effect.
The concentration of wealthy households in an area segregates social classes and contributes to the erosion of the middle-class. Because of particular schools, jobs, and neighborhoods, families will flock to a particular area and add to that region’s wealth with their income. Unfortunately, other areas are left to languish and worsen as crime and lower housing levels drive people away. This leads to a societal class divide in the town and ultimately a future with an increased economic inequality. Unless something changes, the current housing wealth inequality situation is only going to worsen as concentration of housing wealth increases in the near future.