Is the American Dream now only achievable for the rich?

Some of the aspirational elements of the American Dream seem to getting further away from the grasp of many people, even those with middle incomes.

With financial concerns escalating for millions of households, while the richest keep getting richer, new research highlights how the cost of living is making homeownership, renting a home, and even a fairly basic quality of life out of reach for many.

First, housing. The most recent analysis from Realtor.com found that even though the market has softened, with more homes listed while sales decline, home prices were stable with the median list price nationally of $431,250, up 0.3% year-over-year.

Although a positive for affordability, a combination of rising prices and increased interest rates has pushed up the figure a household would need to earn to afford the median priced home to $114,000 per year – that’s a whopping $47,000 higher than in 2019, or 70%. It has, however, held steady over the past year.

A recent report from Gallup found that among those who do not own a home, just 30% think they will buy one within the next five years, 23% in the next 10 years and 45% not for the foreseeable future.

Renting meanwhile, is also becoming a real challenge. There are many young people moving back to their parents’ homes or considering tapping their 401(k)s to get on the housing ladder, and new data from Zillow shows that nationwide, renters today need to earn more than $80,000 to comfortably afford the typical rental, up from $60,000 just five years ago.

In eight metros - San Jose, New York, Boston, San Diego, San Francisco, Los Angeles, Miami and Riverside, California – renters need a six-figure income to stay just inside the 30% the rent burden threshold (the amount of their income they spend on rent payments).

"Housing costs have surged since pre-pandemic, with rents growing quite a bit faster than wages," said Orphe Divounguy, senior economist at Zillow. "This often leaves little room for other expenses, making it particularly difficult for those hoping to save for a down payment on a future home. High upfront costs are often overlooked, which can keep renters in their current homes."

And then there’s the wider issue of financial security, not just to be able to afford the basics, but also the expenses necessary for well-being, growth, and upward mobility.

The Ludwig Institute for Shared Economic Prosperity’s newly published Minimal Quality of Life (MQL) Index reveals that from 2001 to 2023, the cost of affording basic economic security doubled, rising 99.5% which is 38% faster than the Consumer Price Index. Housing costs surged 130% in this time.

But during that 22 year period, income growth for low- and middle-income households has only increased by 0.37% each year compared to more than 1% for the top 40% of households.

In 2023, the bottom 60% of households earned just 22% of all disposable income but needed 39% to meet MQL. On average, these households earn $38,000 per year, falling more than $29,000 short of the MQL.

"For too long, traditional cost-of-living measures have focused too much attention on mere survival. This approach ignores the fundamental truth that surviving is not living even a minimal quality of life," said LISEP Chairman Gene Ludwig. "When confronted with a measure that captures the cost of a life offering opportunity, dignity, and the ability to pursue one's potential, it becomes clear that middle- and working-class Americans aren't just being squeezed—they're being priced out of the American dream."