Right now rental housing is tight, and the cost of renting is increasing. In these pricey days for renters, the Federal Housing Administration has made several competitive moves with the intention of lowering the cost of home ownership, effectively opening up the housing market to million of renters in the new year. 

The FHA, which has often been the preferred option for borrowers with limited down payment and credit, has announced a plan to drop its mortgage insurance premium from 1.35 percent of a loan’s value per year to 0.85 percent, according to the Motley Fool. This comes shortly after Fannie Mae and Freddie Mac put forth plans for new products that could allow for down payments as low as 3 percent. This could be enough to convince a number of renters from a pool of up to 18 million identified by the publication to begin looking at housing options.

Younger people may still prefer the flexibility that renting offers, but increasingly, the reality is becoming that a home is the more affordable option, NBC explained. Last year, renters paid a total of $441 billion in rent, 4.9 percent increase from 2013, according to a Zillow study. And the $20.6 billion year-over-year jump isn’t likely to be the last increase, the cost of renting is expected to grow through 2015 as well. The pricing surge from 2013 to 2014 translates to $26 more per month for individual renters. And in some markets, the cost growth was even worse. In San Francisco, renters paid 14 percent more, while in Denver they paid 11 percent more and in New York they shelled out 10 percent more in 2014 than 2013. 

With the large increases in the cost of renting across the country, the announcement from the FHA could bring many prospective buyers to the housing market. With the announcement from the administration, a borrower with a $200,000 30-year FHA mortgage would see his or her annual premium fall from $2,700 to $1,700. That drop in monthly mortgage insurance costs would save the individual $83 per month. Over the 30 years of the mortgage, that would translate to $20,000 in savings – no small chunk of change. 

A home is just the smarter investment for some these days
“Over the past 14 years, rents have grown at twice the pace of income due to weak income growth, burgeoning rental demand, and insufficient growth in the supply of rental housing,” said Stan Humphries, chief economist for Zillow. “Next year, we expect rents to rise even faster than home values, meaning that another increase in total rent paid similar to that seen this year isn’t out of the question. In fact, it’s probable.”

Jamille Ackerman, financial analyst in Washington, D.C. who is close to closing on a home in suburban Maryland, told NBC that she feels no need to rent, explaining that she doesn’t “believe in making someone else rich.” This is the single 32-year-old’s second attempt at buying a home, after purchasing one in 2007 and then losing it to foreclosure in 2011. Despite her struggles with her first home, Ackerman feels that it is still a smarter move than renting right now. 

“I prefer at my age to put my money towards a better investment,” she explained to the news outlet. “A home is an asset; an apartment, there is really not much in it for me as far as benefits.”

The recent moves by the FHA, Fannie Mae and Freddie Mac to make homes more affordable, in conjunction with the surging cost of renting, could create a whirlwind of competition beneficial to prospective homeowners.