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Dreaming of a home: Equity as an obstacle to home ownership

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  • Amaral, Francisco
  • Staratschek, Gereon
  • Zdrzalek, Jonas
  • Zetzmann, Steffen

Abstract

Housing (un-)affordability has become a defining social and economic challenge in German cities, shaping both wealth accumulation and intergenerational inequality. We decompose affordability into two components: the ability to service monthly mortgage payments and the ability to meet the upfront cash requirements for purchasing a home. Combining data on re-gional mortgage financing conditions, household incomes, and house prices from 1980 to 2024, we find that mortgage payments relative to income have changed little over time. In stark contrast, upfront costs relative to income have risen sharply: whereas households in 1980-1990 needed savings of less than two years of annual income to cover the equity re-quirement for an apartment purchase, households in 2015-2024 require more than three years. These results show that focusing on mortgage costs alone severely understates the decline in housing affordability. Instead, rising entry costs have become the primary constraint on homeownership, reinforcing advantages for households with existing wealth or familial financial support.

Suggested Citation

  • Amaral, Francisco & Staratschek, Gereon & Zdrzalek, Jonas & Zetzmann, Steffen, 2025. "Dreaming of a home: Equity as an obstacle to home ownership," Kiel Policy Briefs 200, Kiel Institute for the World Economy.
    • Handle: RePEc:zbw:ifwkpb:334523
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    References listed on IDEAS

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    1. Philipp M. Lersch & Selçuk Bedük & Enrico Benassi, 2025. "Einfluss der Eltern auf das Wohneigentum der Kinder ist immer noch hoch, geht aber zurück," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 92(44), pages 695-703.
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    3. Konstantin A. Kholodilin & Pio Baake, 2024. "Mietbelastung in Deutschland: In den letzten Jahren nicht gestiegen, aber ungleich verteilt," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 91(41), pages 627-633.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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