Washington Can’t Solve a Housing Crisis That Doesn’t Exist
motherjones.com
motherjones.com
And why would you measure median rents against median household incomes anyway instead of against median individual incomes? The median household can grow and shrink depending on housing cost pressure. Maybe the median household is 1.8 median incomes now rather than 1.2, but this statistic wouldn't pick that up.
These statistics seem carefully crafted to paint a particular picture, not selected to paint the most complete picture. And then I notice the author and the venue, and wonder why I wasted time on this comment.
The problem is the houses are not in places people want to live anymore. The jobs aren't there. The communities aren't there.
So yes there is a housing crisis where the jobs are or there is a lack of jobs and community crisis where the houses are.
Once way or another it's a problem
Both exist, just not where we want them
You can concrete over the entire length and breadth of the UK and house prices would still rise: (http://uk.businessinsider.com/societe-generales-albert-edwar...)
Why building more homes will not solve Britain’s housing crisis: (https://www.theguardian.com/commentisfree/2018/jan/27/buildi...)
Why solving the UK housing crisis requires more than new homes:(https://www.ft.com/content/f3143c7e-c56b-11e7-a1d2-6786f39ef...)
There is no housing crisis. It would be easier if there were:(https://www.spectator.co.uk/2018/02/there-is-no-housing-cris...)
The recent Econtalk podcast suggests poor regulation is creating unaffordable supply (ie in manhattan the size of dwellings is fixed (as an anti-slum landlord measure) but it means luxury (is big) apartments are the only profitable ones to build - whereas many people would trade square footage for being near central park.
I find that more likely to be a rich seam to mine - the regulation around UK house building is obtuse and abused for years.
I mean even on road parking plays a part - I can rent square footage on the road outside a Mayfair property for orders of magnitude cheaper than square footage in the property- that has knock on effects we don't really consider. A holistic view on the drivers of price would be the best first step.
I am not sure i have seen it yet
Ok - you have to read to the end and then restart to grok it but I kind of get it now - well worth a read and does encompass most of my obvious objections - basically two crises - housing is less affordable on the demand side because inequality, and housing is less affordable on the supply side because financial investor reasons
So rents could rise 10x per square foot, and when the dust settled people would end up paying about 40% of their income for a place 1/10th the size.
The rent crisis manifests in people living in small, crappy places far from their work, not in any of the statistics presented here.
Anyone with the government data access skills care to reply?
1. Moving out of the city center under these conditions doesn't mean moving out of the city, it means moving into a low-rise apartment among urban sprawl that's underserved by transit and good quality food sources.
2. A long commute is a significant quality of life decrease.
I remember people in SF claiming that there are roughly 1million people in San Francisco [1] . And roughly 1million total housing units. Therefore there is no housing crisis.
Galaxy brain stuff really.
[1] https://48hills.org/2018/04/myth-housing-underproduction/
This is not a constructive response to an article based on aggregate national statistics. If the article seems wrong to you, at least ask about statistics that might refute it. For bonus points, find those statistics yourself.
Personally I live in a very high rent area (Berkeley), all the houses anywhere near me cost more than $1 Million, but I believe the statistics. To quickly check you can look at rents and house prices in Fresno CA, Mobile AL, Duluth MI, St. Louis MO, Austin TX, etc. etc. The internet has a wonderful set of resources to help us get out of our bubble.
If you want to argue that rents in the Bay Area should be more like those in St Louis, fine! That is a policy question we can work on, but it will be a long slog to get where you want to go.
1. House prices will increase to generate appreciation (through 5:1 or more leverage) that households can tap into to finance consumption. Mortgage rates will be kept as low as possible through programs like QEX and abandonment of QT. Tax code will be kept in a state that allows at least the more extravagant spenders to claim a mortgage deduction on income taxes, stimulating home buying.
2. House prices will be kept low so that new families can afford to buy a house. Zoning, highway construction subsidies, and suburbanization tax giveaways will keep the dream of a standalone house alive as long as possible, unsustainable economics be damned.
It should be obvious, but house prices that routinely outstrip consumer inflation are incompatible with affordability.
We can't have it both ways because we've zoned/policied "starter homes" out of existence. That part can be reversed. It doesn't have to remain true.
If you rank the metro areas by population, the median American lives in Richmond, VA or Louisville, KY. These places don’t have a housing crisis. High rents are a self-inflicted problem affecting a handful of metro areas with a minority of the population.
The cities are homes to some of the most important and dynamic industries in the country and the high cost of housing is a big barrier preventing many people from moving to these cities to take advantage of the opportunities these cities provide. This, in turn, limits the human capital available to these industries. I see this as a pretty big problem.
I am willing to admit that this hope might be irrational and wishful thinking.
Federal programs post WW2 were involved in the birth of the modern day suburb. We wanted housing and we created it in droves. We created a particular kind of housing -- single family detached designed for the nuclear family. That became our standard and remains our standard.
The Birth And Death Of America's Oldest Suburb is about Levittown.
https://thecommunityalliance.blogspot.com/2005/08/birth-and-...
Levittown gets its name from its builder, the firm of Levitt & Sons, Inc. ... which built the district as a planned community for returning World War II veterans between 1947 and 1951.
https://en.wikipedia.org/wiki/Levittown,_New_York
The G.I. Bill aimed to help American World War II veterans adjust to civilian life by providing them with benefits including low-cost mortgages, low-interest loans and financial support. African Americans did not benefit nearly as much as White Americans. Historian Ira Katznelson argues that "the law was deliberately designed to accommodate Jim Crow". In the New York and northern New Jersey suburbs 67,000 mortgages were insured by the G.I. Bill, but fewer than 100 were taken out by non-whites.
https://en.wikipedia.org/wiki/African_Americans_and_the_G.I....
In the United States, suburbanization began to occur in mass amounts after World War II, when soldiers returned home from war and wanted to live in houses outside of the city.
https://en.wikipedia.org/wiki/Suburbanization
The rapid growth of homeownership and the rise of suburban communities helped drive the postwar economic boom. Suburban neighborhoods of single-family homes tore their way through the outskirts of cities. William Levitt built the first Levittown, the archetype suburban community, in 1946 in Long Island, New York.
The country’s suburban share of the population rose from 19.5% in 1940 to 30.7% by 1960. Homeownership rates rose from 44% in 1940 to almost 62% in 1960.
https://courses.lumenlearning.com/ushistory2ay/chapter/the-r...
"Rich, Urban areas"
"Rich, Urban"
Considering the way that "urban" became a euphemism relating to low-income inner-city African Americans, I want you to stop and think about the way you're saying there's nothing wrong.
Here we are, universally gentrifying anywhere there's actually jobs. We apparently dont care where people go, or if there are jobs there to be had.
The regulatory scale of each instance may be local, but the effects are national, even international. Britain, Germany, the US, Canada, even France has serious problems with runaway housing rents.
Even those "median income" cities cited in another comment has seen median housing rent rise by 50% in the last 15 years while wages stay flat.
But since the responsibility lies with your city council, (and not, say, global international banks treating our housing as "investments" that magically never decreade in price, even after housing bubbles collapse!) this must be a local issue!
But who cares about those low-income people and where they're going. Let them eat cake! Are you the kind of person who cannot understand why young people want some Socialism?
The idea that job growth is limited to a few high cost metro areas is a myth. Job growth in the south is very strong. From 2005-2013, California and New York underperformed in terms of job growth compared to Montana, Idaho, Texas, Utah, Oklahoma, North Carolina, etc. http://www.policymattersohio.org/wp-content/uploads/2013/04/...
You can tell the housing crisis is a local issue because it’s not evenly distributed. America actually has some of the most affordable housing (comparing average house price to average income) out of large metro areas in the developed world: https://www.newgeography.com/content/005858-housing-affordab....
The “socialism” angle is odd. It’s the most progressive and heavily regulated cities that are burdening their young people with unaffordable housing. The unemployment rate in Indianapolis is 3.2% (less than half the rate of Paris) and you can buy a house for just 3 times the median income. The unemployment rate in LA is 4.5% and a house costs 9 times the median income. From a housing perspective, it seems like we need more Mike Pence and less Gavin Newsom, not the other way around.
It's not a handful. We're not just talking about SF and NY. Housing prices are increasing much faster than wages at nearly all the large cities in the US.
And, it's not just affecting people in those cities. People across the country used to find their upwards mobility in our country's most important centers of industry, research, education, etc. Now they can't.
I need no convincing that it is a crisis, but the crisis is probably more linked to government monetary policy than housing. The huge amount of money being created [0] hasn't appeared in the consumer inflation statistics/wage growth [1] so it must be going in to inflating asset prices.
[0] https://tradingeconomics.com/united-states/money-supply-m2 [1] https://www.bls.gov/data/inflation_calculator.htm
I assume their methodology is technically mathematically correct, but I can tell you from experience, the ~"$45k/yr" number for Michigan is not accurate -- most people can not close on a home in livable condition (in a city with jobs) for that salary. That would require a closing price of only ~$120k, which is probably still possible in a few specific suburb/exurbs, and is easily possible in dying small towns, but is not happening for most people in any employable urban area in Michigan.
If howmuch is using "average home closing price" for that calculation, that metric is very skewed -- in Michigan, that's dragged down artificially low by investor-purchase shenanigans, extreme abuse of Brownfield Tax credits or Income/Property Tax Abatement zones, Land Bank purchases and resales, "Just $1 in Detroit" homes that need $150k+ of work to be habitable, or have $50k of backowed-taxes attached to them, and more.
We have people who make 50% more than median salary, who are still getting outbid by private equity firms that make all-cash zero-contingency offers. We have people with above-median salary who are struggling with housing insecurity. This is not just a "poor person" problem, a solid chunk of the middle-class are suffering here, even in our supposedly "low-cost-of-living" markets.
If you haven't purchased a house in the last 4 years, you might not realize just how fundamentally broken housing is, even in bumblefudge nowhere midwest cities. As far as I can tell, our conventional housing metrics simply are not accurately capturing the size or severity of this problem.
I said housing prices are growing much faster than wages in nearly all of the largest US cities. You responded saying that things are affordable in most cities, citing your map. But to take in example where I have ties, 38% of NOLA pays >50% of income towards housing, up from 24% in 2004 [1]. "Affordable" is in the eye of the beholder, but I have ties in NOLA and I know housing prices are a top issue in politics and daily life.
Those numbers are for Orleans parish, but a) the same trend is true for the broader metro area, and b) if people now have to move to Abita Springs to afford "New Orleans", then my broader point (that it's becoming harder for people to come up by moving to the country's power centers) still seems pertinent.
[1] https://www.datacenterresearch.org/data-resources/who-lives-...
Why do you say that? Most small-to-medium US cities have a major housing crisis too, these places just have wildly different causes for their housing crisis than say, San Francisco, and therefore have wildly different metrics by which to evaluate the state of that crisis.
> High rents are a self-inflicted problem affecting a handful of metro areas with a minority of the population.
No, this is not true. High rents are affecting almost every metro in the US. You just won't see them if you "average" figures, because these metros don't earn average dollars. You can't average two crises into nothing.
(If your left lung is collapsed, and your right lung is overinflated to the point of bursting, you have two major crises on your hands. You can't say "well, everything is fine because on average my lungs have a healthy volume", that's accurate math, but not accurate to real life)
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A midwest average rental price of say $1500/month will seem cheap to folks in Seattle -- until they learn that incomes are over 50% lower here, so to anyone working in-market, a $1500/month rent price here is equally as expensive/painful as a $3000/month rental would be in Seattle. That's still a crisis, equal in pain/severity to a "superstar" city, but it won't show up in any "US average" figures, and can easily lead people to write ridiculously uninformed hot-takes.
Stfu and pay your workers enough to live.
Your estimation of the rent and income is off. The median household income in Louisville is $57,000. The Bay Area is $97,000, only 50% higher. But the median 1BR in Louisville is $750, while the Bay Area is close to $3,000, four times as much. Four times higher rent, only 50% higher income. Housing is even worse. The median house price in Louisville is $165,000. (That’ll buy you a 2,000 square feet house.) In the Bay Area it’s $800,000, almost five times higher.
When Kevin Drum looks at national medians, he entirely misses both of these problems.
For this year or this century, housing prices are economically absurd, unless they are seen as a "pay as much as you can afford" type of product and this indicates a supplier market that can be fixed by drastically increasing supply.
In a country that deregulated as USA, housing regulations are among the most strict in the world. Is it a surprise costs are very high?
Yes.
http://www.aei.org/publication/new-us-homes-today-are-1000-s...
Yes. The limited resource is land, so to maximize profit, developers either have to pack in more units (a strategy often restricted by zoning), or pack as much house onto the same property as possible. The size of stand-alone houses has been steadily growing. It's up by more than 2.5 times since the 50s. [1] And then there are the modern features which used to be considered high-end but are becoming standard. Check the growth in the size of refrigerators, for example, or the number of homes that have multiple fridges/freezers.
The problem is not so much that my income doesn't cover my rent. The problem is that my income doesn't cover the rent for the people who fulfill the services I need to live here.
Just as an example, we pay almost as much as our rent for daycare for our two small children. And our daycare providers have to commute from quite a distance to be able to afford anywhere to live. Or they still live with large, extended families. We really like our daycare, and the folk who work there are wonderful. I would personally feel better paying them more, but that's just where we are, the market we are in has settled on this being the "top end" of the childcare market.
We're not doing gangbusters, but we're also not doing bad. A few of our friends are doing better than us and they have private nannies for their kids. We can't do that. Most of our friends aren't doing as well as us and I almost want to quit my job just to get their kids out of the places they can afford. There is a big gap between "the best" daycare center and "the middle". We were briefly in "one of the better" daycares while we were wait-listed for our first choice and it was hell.
I don't need a place more affordable for me to live. I need a place more affordable for my mechanic to live. For my grocer and my barber. I want to know that the guy teaching my kid to swim is not about to fall asleep from working three jobs.
Beyond that, I want to know that the people fixing my roads can live here, too (hell, at this point, I'd like just anyone to fix the roads. I don't understand how we can be so "rich" on paper and yet I need to take my car in every 6 months for a pothole-related repair). I want the folks taking care of the homeless to not be a missed paycheck away from being on the streets themselves. I want my city counsel positions to be accessible to anyone other than folks with their own private law practices.
Median rent vs. median income isn't enough. It has to be accessible for everyone who needs to work in the local economy. And that's the problem. We really only have rents that fit the paychecks of the richest people here. There aren't many options for affordable housing.
Thomas Sowell
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Where do the sacrifices end that allows the average person to live comfortably in a home? In my opinion there is a housing crisis.
"The distribution of U.S. household income has become more unequal since around 1980, with the income share received by the top 1% trending upward from around 10% or less over the 1953–1981 period to over 20% by 2007.... While median household income has a tendency to increase up to four persons per household, it declines for households beyond four persons." https://en.wikipedia.org/wiki/Household_income_in_the_United...
Clearly rentals have -risen sharply- in the past few years. In -some- places, the number of people who can't afford -any- available rental unit has increased rapidly.
Since something like the 1970s, we've outright eliminated about a million SROs and largely zoned out of existence the creation of new Missing Middle housing. Historically, single young people with starter salaries routinely lived in SROs or boarding houses. Now, we de facto expect most young people to rent a place designed for a nuclear family and get roommates.
New homes have more than doubled in size since the 1950s and the news is constantly filled with articles about the homeless problem.
https://en.m.wikipedia.org/wiki/Single_room_occupancy
Historically, single young people with starter salaries *routinely* lived in SROs
Between 1955 and 2013, almost one million SRO units were eliminated in the US due to regulation, conversion or demolition.
Military barracks and college dorms are not hugely different from SROs. Most people who join the military do so at age 18, the same age most people start college.
I don't readily have some percentage for how many youth were housed in SROs, but both college dorms and military barracks strike me as a lingering form of that legacy from a time where Americans generally figured a single adult didn't really need a full apartment, they just needed a room to sleep in.
I'm still trying to to put together stats, but it's a problem space I've studied for years. In a nutshell, our current housing policies and resulting housing stock were born of policies created post-WW2 for the generation that produced the Baby Boomers.
Thus, it is all posited on a nuclear family model with a breadwinner father, homemaker mother and 2.5 kids. Meanwhile, our demographic has diversified away from the nuclear family. People are getting married later, having children later, having fewer children, etc.
There is a huge mismatch between our housing stock and our housing needs.
I'm not suggesting that SROs were solely for single young people. I'm only trying to paint a general picture of the kind of housing that once was commonly available and is no longer which is well-suited to a demographic we have more of now.
So yeah, there's no housing crisis in Eastern Oregon, but there are also no jobs and none of the economic clustering and spillover effects that one gets from superstar cities. So you can try to live in cities and first-tier suburbs where the jobs are, but where exclusionary zoning has made housing ungodly expensive (https://www.vox.com/cards/affordable-housing-explained/exclu...), or you can live in the boonies where there are no jobs but (relatively) cheap housing.
Those of you who are going to reply about remote work: remote work is lovely, but it doesn't generate knowledge spillovers and has a bunch of other problems as well. See again the Glaeser book. It is not a practical, mass solution, although I'm glad it works well for you.
Part of this problem can and should be solved at the state level, but DC should also tell states and municipalities that, if they don't end exclusionary zoning, they're also not getting federal highway funding and other federal transit funding. That's the stick DC has.
> Now, there’s no question that a few specific cities have seen big rises. The Bay Area is obviously one, Denver is one, and Seattle is another—though the market has responded recently in Seattle and housing development is now increasing. But if you look at big cities more broadly, there’s not even a generalized urban rent crisis.
The author's contention isn't simply that there's no housing crisis in places like Eastern Oregon, but rather that there's no housing crisis anywhere outside of a few major cities. He's also got a bunch of numbers to back up the assertion.
Now I'm inclined to think Drum's staked out a position that is too extreme in one direction (I live in one of those major cities!) but I feel like your position is too far in the other direction. I think we want to accurately characterize the problems we're trying to solve. Here in Seattle, housing supply is a big issue. But back in my hometown of Tulsa, I suspect housing is pretty cheap, and the problem is more likely a lack of good jobs.
Drum specifically calls out the high cost cities. But the aggregate statistics show that these are exceptions to the general pattern. We should not argue from our personal experience when the statistics show it is not typical.
This is policy relevant. If the Feds are going to intervene, it is very important that they intervene in the actual problem, not some misunderstood version of the problem where intervention would be at best a waste of resources and political capital, and at worst further proof that "government intervention is always bad."
A question with potentially constructive answers: "What federal interventions would potentially be helpful given that the housing crisis is mainly in a few high-rent cities?"
That's the problem, it's in aggregate when the problem is very localized.
The nation is producing a ton of high paying jobs but only in places where rent and property values are skyrocketing, which is in a tiny sliver of American cities. That's the problem and why aggregate statistics will never capture the problem.
My wife works in biotech. I work in tech. A year back we asked ourselves if we wanted to move to the mid sized American city where my parents live. Homes are very affordable there and if we had children, we could raise them near my extended family.
One factor in choosing not to move is that there's only one employer in the entire metropolitan region that hires in her specialty of biotech. I would have to take a pay cut or work remotely, which I'm okay with, but we might be totally ending her career altogether which we are less okay with.
So instead we're now renting at 3500 a month (3 bedrooms) and saving up for the enormous downpay we will need in greater Boston
>A question with potentially constructive answers: "What federal interventions would potentially be helpful given that the housing crisis is mainly in a few high-rent cities?"
Parent already offers an answer, tell states to end exclusionary zoning or lose federal transit/highway funding. Exclusionary zoning is born out of a dark period of American policymaking (redlining) so personally I'm on board
If the hyper concentration is part of the problem, then won't forcing SF or other popular hubs to build high rise just make them even more popular and further increase the gravitational pull that will send another wave of migrants from the 2nd tier cities and we just repeat the same cycle with higher buildings?
Isnt this the same as making streets wider because of traffic? Now even more people decide to drive.
Just a note but I find it highly disingenuous to conflate eliminating restrictive zoning with mandating high-rises. Eliminating restrictive zoning is just allowing the free market to better utilize land, which may mean high rises, or it may mean tightly packed townhouses or single family homes like in many Japanese suburbs, and only where the demand exists. If you own a standard American SFH, nobody is forcing you to demolish it.
>just make them even more popular and further increase the gravitational pull that will send another wave of migrants from the 2nd tier cities and we just repeat the same cycle with higher buildings?
Absolutely, without a doubt. There's a limit (globally it seems to be around a population of 30 million in the metropolitan region), but there's no doubt that if market forces brought reasonable prices to the Bay area at the very least the gentrified and priced out would return, those who fled to the exurbs and drive in for 70+ minutes would return, and at the very least a bunch of techies in other cities who could never imagine paying 3600 on a single bedroom would give the Bay area a try.
Essentially, the region would likely boom much in the way that New York boomed in the industrial revolution, or more recently Shanghai and Beijing boomed. Whether you view this as positive is obviously debatable but I find it undeniably fair that we stop stacking the deck in favor of the rich and landed
Interestingly one of the arguments of the anti-growth folks in these high-rent cities is that more housing will just aggravate concentration. Unfortunately they don't offer alternative proposals.
I would like to hear about alternatives to increase employment opportunities where people can afford to live. Are there ways to encourage businesses to relocate to low-rent locations? Or to allow remote work? Or ??
If it were only Oregon, that'd fly. But we have nearly everywhere in the country that's more than 1-2 hours' travel from a major metropolitan area.
While we can discount some farmland, there's a fracked-land house I can sell you in Ohio for as little as $5K, $10K tops.
The only internet available is dial-up. The planned $150/month 10Mbit-down/1Mbit-up cable internet deal for the county with Comcast fell through back in '11.
The only water is well-water - and you'll have to pay more for a filter system than for the house. The power company will charge you more than a mortgage payment to keep the place surviveably warm in the winter.
And the only jobs? The Walmart closed back in '11. And being from out of town isnt gonna help. But if you're nice to a guy I met at the Denny's about 40 mins from the place, he can get you $8/hour at the Walmart distribution center 90 minutes away on the highway.
Food? There's a Dollar Store about 20 minutes down the road at "downtown." There's a gas station, a McDonalds, and a couple of pawn shops and antique dealers that are effectively interchangeable - that's where you can buy "farnature" if you cant build your own from cord-wood that you buy from neighboring farms. And a gun store that popped back up after the Walmart closed. And the one church left, where the whole town will expect you. And the bar, called "bar's".
If you hear chanting on one Saturday night of the month, accompanied by faint light from the woods out back, that's just the Klan rally where the locals go to blame immigrants and African Americans for taxes still existing. Local Government has effectively collapsed from lack of funding. But the county Sheriff gets to use "Civil Asset Forfeiture" on unwary travellers to put his kids through boarding school.
The house itself? Is a shotgun shack. From the way you talk about people, I expect you have currently closets this size. If the fridge and stove still work, they're still from the 70s. The place probably would have been condemned if the 5-county inspector handn't passed on about five years back.
But hey, its almost the cheapest house in America. Its been on the market since before the housing collapse.
The point is that we're undersupplied in growing economies; of course we're also oversupplied in shrinking ones.
It takes a lot of poor people to support a millionaire's lifestyle and business.
There was an article linked here on HN recently detailing the problem of running a restaurant in SF. They couldn't pay their employees enough to live within a reasonable commuting distance.
If you're not one of those people, all is well.