Housing Affordability and the Cost of Ignoring Reality

A family close to me is currently renting and hoping to buy a house this year. Like many would-be buyers, they are doing everything “right”: saving, budgeting, and watching the market closely. Inevitably, our conversation turned to affordability—a word that seems to be everywhere right now, from kitchen tables to campaign speeches. It’s a hot topic, particularly as mid-term elections approach, and it sits at the intersection of economics, housing policy, and deeply personal expectations.

What Do We Mean by “Affordability”?

Affordability is a term you are likely to hear much more of this year. Politically, it tends to have an anti-incumbent bias; whichever administration is in office gets blamed for things feeling unaffordable. And to be clear, affordability is not something anyone wants to be against. Nobody campaigns on “making life harder.”

The problem is that affordability is a slippery concept. It is difficult to define because it isn’t an objective measure. As Paul Donovan of UBS put it, “People want things (generally ‘better’ things than they currently have) and are upset that they cannot afford those things.”[i] That observation may sound blunt, but it captures something true about human nature. We measure affordability not against what we need, but against what we want—and usually against what others appear to have.

Complicating matters further is the reality of how economies work. Because of marginal inflation and productivity gains, prices over time almost always rise. Even when inflation slows or prices “come down,” they are often still far higher than they were pre-COVID. Affordability, then, is not just about prices. It’s about expectations, comparisons, and timing. That makes it deeply subjective, even though we often talk about it as if it were purely mathematical.

Housing’s Special Role

Housing occupies a unique place in the affordability conversation. For decades, it has been one of the major engines of financial growth, particularly for the baby boomer generation. Many boomers bought homes when prices were lower relative to income, benefited from declining interest rates over time, and experienced decades of appreciation. They didn’t just invest in real estate—they lived in it. The result has been remarkable returns combined with daily utility, something few other assets can match.

That history shapes today’s expectations. Homeownership is still seen as a cornerstone of middle-class life, wealth building, and stability. When access to that cornerstone feels out of reach, frustration naturally follows.

Supply, Demand, and the Missing Starter Home

At its core, today’s housing affordability problem is largely a supply problem. There simply isn’t enough housing—apartments, single-family homes, and especially starter homes. In a basic capitalist system, rising demand should lead to increased supply. But housing does not operate in a frictionless market.

Many communities have made it difficult to add housing, particularly the type of housing people say they want. Zoning restrictions, regulatory hurdles, construction costs, limited buildable land, and long approval timelines all limit supply. On top of that is the familiar phenomenon of NIMBYism—“not in my back yard.” Established homeowners often resist the construction of smaller, less expensive starter homes near higher-valued properties, fearing changes to neighborhood character or home values.

The result is a persistent shortage at the entry level of the market. That shortage is compounded by a growing gap between home prices and wages. Since 2012, U.S. home prices have surged dramatically while wage growth has lagged far behind. One estimate shows home prices rising 160% compared to just 38% growth in wages.[ii] Another analysis found that from 2012 to 2023, median home prices rose roughly 87%, while median household income increased only about 18%.[iii] When housing costs grow faster than incomes for more than a decade, affordability inevitably becomes the system’s bête noire.

As affordable homes disappear, buyers are pushed into renting, which in turn drives rents higher. The pressure doesn’t go away—it just shifts.

Proposed Solutions—and Their Costs

In response to affordability concerns, a variety of solutions have been proposed, some more problematic than others. The Trump administration recently touted a 50-year mortgage, which drew immediate criticism.[iv] On paper, it lowers the monthly payment, making homes appear more affordable. In practice, it does so by stretching debt over a much longer period, resulting in virtually no principal being paid in the early years and dramatically higher total interest costs.

For example, borrowing $100,000 at 6% over 30 years results in total payments of about $215,000. Stretch that same loan over 50 years, and total payments jump to over $315,000—more than 46% higher. In some scenarios, the interest paid more than doubles. While mortgage interest may be deductible, the math remains unforgiving. Lower monthly payments come at the cost of long-term wealth erosion.

Other proposals are more radical. In some cities, for instance, they have called for the abolition of private property[v]. This approach misunderstands the role of property ownership in building a middle class. As Albert Mohler has noted, the middle class consists of people who own property or have the means to own property—not as landed gentry, but as those rising economically and socially. Their values—thrift, investment, marriage, family, children, and community—are aspirational.[vi]

Rent controls and confiscatory policies may sound compassionate, but they create contradictions. You cannot demand more investment in housing while simultaneously denying investors the income from that investment. The result is less supply, not more, and pushing the middle and upper classes out of your city.

Dave Ramsey and the Discipline Problem

Dave Ramsey’s advice on housing remains simple and, at times, unpopular: put 20% down, keep your mortgage payment under 25% of take-home pay, and use a fixed-rate mortgage.[vii] He has also argued for 15-year mortgages instead of 30-year ones, citing the massive reduction in interest paid over time. The math supports his argument, even if the advice has drawn criticism.

The challenge is that in many U.S. metros, even so-called starter homes can push debt-to-income ratios above 40%, instantly disqualifying first-time buyers who try to follow these guidelines.[viii] That reality doesn’t invalidate the advice—it highlights how far prices have drifted from fundamentals.

The Bottom Line

Affordability is real, but it is not always innocent. Many people have made poor financial decisions, overspent on experiences or lifestyles they couldn’t afford, and now want assets—like homes—that remain out of reach. Overextending yourself to buy more house than you can comfortably pay for can quickly turn a home from an appreciating asset into a financial liability.

For some, the solution may be relocation to more affordable, even less desirable, areas. For almost everyone, minimizing debt is critical. Debt is one of the fastest ways to destroy wealth, especially when taken on in the name of keeping up rather than building something sustainable.

Housing affordability is not a problem with easy answers. But ignoring math, incentives, and personal responsibility will only make it worse.

[i] https://fortune.com/2025/11/16/why-affordability-is-different-from-inflation-housing-real-estate-politics/?xid=soc_socialflow_twitter_FORTUNE

[ii] https://www.realpha.com/blog/impact-of-government-policies-on-housing-market

[iii] https://globalrealassets.georgetown.edu/insight/why-are-houses-so-expensive/

[iv] https://apnews.com/article/home-prices-50-year-mortgage-trump-56a931881ca6f6efeccf2de0333a83bd

[v] https://www.nbcnewyork.com/news/local/cea-weaver-white-supremacy-posts/6440534/

[vi] https://albertmohler.com/2026/01/08/briefing-1-8-26/

[vii] https://www.businessinsider.com/dave-ramsey-buying-house-prices-mortgages-personal-finance-affordability-crisis-2024-6

[viii] https://www.sfgate.com/realestate/article/dave-ramsey-swears-by-this-15-year-mortgage-rule-20799277.php

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