Ellen Seidman, senior fellow at the Urban Institute, discusses the role of housing instability for the latest post in the The Hidden Financial Lives of America's Poor and Middle Class blog and webinar series. Seidman points out that even if regulation helps to preserve America's limited stock of affordable housing, household income fluctuations still present barriers to home ownership:
Income volatility can also impact the process of getting a mortgage. In addition to savings, lenders make mortgages based on a potential buyer’s income. Traditionally, borrowers must have two years of stable earnings, and the only income lenders take into account for underwriting is that of the borrower and co-borrower. When families have multiple earners (who may change over the course of a year—let alone the much longer term of a mortgage) whose income is variable, this can present serious difficulties.
Research from the US Financial Diaries provides evidence that income and expense volatility makes it difficult for households to build assets, including housing.