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Why housing costs are out of reach for millions of Americans
When it comes to the modern American economy, location is everything. But a good location means higher housing costs. - photo by JJ Feinauer
When it comes to the modern American economy, location is everything. As recent studies have shown, your zip code makes a huge difference when it comes to upward mobility and career opportunities.

But according to City Lab's Richard Florida, the best locations also have housing costs that are spiraling ever upward. The average recent graduate, according to Florida, simply can't afford to live in the areas where their training will suit them best.

The reason for this, according to Florida, is housing costs have outpaced inflation and income.

"This effect has been particularly acute in superstar cities like New York, where incomes fell by 8 percent between 2000 and 2011, while rents increased by 7 percent," Florida explained. "While housing affordability has long been an issue for the poor, concern has crept up the income ladder in the last couple of years."

But Florida's analysis is concerned primarily with rental costs in major cities. So what about those who wish to buy a home? It seems as if that may be too far out of reach for many Americans as well.

"Even creditworthy borrowers are having difficulty securing a mortgage to buy a home," Fortune magazine's Chris Matthews wrote last month. Even though buying a home makes sound economic sense after living in a city for about two years, Matthews wrote, the fallout from the 2008 housing crises has made lenders "gun shy about getting involved in residential real estate."

What has happened, then, is the price of buying a home has outpaced wage increases, much like rental costs. So even though it might make financial sense to purchase instead of rent, lenders are wary of the massive gap between how much is needed for a mortgage and how much homebuyers can actually afford.

For that reason, the Urban Institute recently shined a light on a new method to keep rising housing costs at bay, almost like a third way for the housing market, wedged between buying and renting.

"For individuals and families who dont struggle to pay their monthly bills, but find homeownership out of reach, shared equity can provide the bridge to their first home," UI's Brett Theodos and Rob Pitingolo wrote on April 29.

According to Theodos and Pitingolo, shared equity makes it so "the market cost of the home is shared between the buyer and the entity administering the program," which eases the burden of cost on the buyer. This, they argue, may be our best bet to curbing housing costs in the coming decades.