What’s gone wrong?
From cities to suburbs to rural America,
the cost of housing has far outpaced
increases in salaries. Home prices are
growing at twice the rate of wages, and
there are fewer houses on the market
than in any year since 1982. The single-
family house, with a garage and a front
lawn, remains a bedrock of the American
dream, even as it recedes from many
people’s reach. Young adults are one-
third less likely to be homeowners than
the previous generation was at the same
age, and nearly two-thirds of renters say
they can’t afford a house. The median
single-family house costs about $280,000, with demand driving
prices at the lower end of the market to rise twice as fast as those
of high-end homes. Once the backbone of U.S. wealth, housing
has become a civic, economic, and environmental catastrophe.Is renting any better?
It’s even worse. Nearly half of renters are cost- burdened— meaning
they spend at least 30 percent of their income on rent. Since 1960,
renters’ average earnings have increased 5 percent as rents have
jumped 61 percent. Eleven million Americans spend more than
half of their paycheck on rent. They have little choice: After 2011,
more than 4 million units renting for $800 or less per month dis-
appeared nationwide. In trendy cities like Seattle and Austin, older,
multifamily buildings are being demolished or converted into con-
dominiums and co-ops. A minuscule percentage of new apartments
are low-rent. Today, a full-time minimum-wage worker can afford
a two-bedroom rental in precisely zero U.S. counties; on average, it
would take clocking 127 hours a week
at the federal minimum wage to make
paying for one possible.Are expectations too high?
After World War II, home ownership
went from a luxurious status symbol
to a national priority. “A nation of
homeowners, of people who own a real
share in their own land, is unconquer-
able,” President Franklin Roosevelt said
in 1942. Zoning changes helped cre-
ate the suburbs, as did improved cars
and new roads, enabling people to live
farther from work. Mortgage markets
developed, and the rate of homeowner-
ship grew from 43 percent in 1940 to
66 percent by 2000. The size of houses
per resident also doubled in that period.
It became conventional wisdom to
borrow as much as possible, buy the
biggest house attainable, and hold on
as the property steadily grew in value.
But that’s no longer feasible for many
people: In 1990, 18 months of the
median local salary could buy a house
in 72 of America’s 100 largest cities,
Harvard University found. Now that’s
possible in just 25 of them.What’s jacking up costs?
Demand, above all. Houses are sup-
posed to pass between generations, but
Baby Boomers are living longer and
staying put. People are also moving less
than ever, down to 10 percent of the
population annually. After the recession,
private-equity firms and hedge funds
spent an estimated $36 billion on more
than 200,000 homes in ailing markets,
and their strategy was to evict current
residents and target the ultrawealthy. In
New York City, homeless shelters have
been filling at the same time towering
new luxury condos rise into the skyline.
Since 2011, the average cost of a New York condo rocketed from
$1.15 million to $3.77 million. Even more perversely, nearly half
of Manhattan’s new luxury condos are empty.Why not build more housing?
The cost of land and building materials such as timber and steel
keeps climbing, and there are major shortages of construction
workers. That makes it financially unfeasible to build low- income
housing. In San Fran cisco, where the median one- bedroom rental
goes for $3,700 per month, it costs $700,000 to build a single
new apartment unit. “In a lot of cities, the market can’t sup-
ply housing for people making less than six figures,” said James
Mad den, a Seattle-based affordable- housing developer. Even when
developers do seek to build dense rental or condo units with
affordable prices, they run into NIMBY—the “not in my back
yard” attitude of existing residents who insist that new construc-
tion and new residents will disrupt their views, schools, parking,
and property values.Can NIMBY be defeated?
Government initiatives can only
achieve so much without current
homeowners making concessions.
California is plagued by crippling
housing costs and widespread home-
lessness, but recently the legislature
narrowly failed to pass a law that
would have overridden local zoning
rules to allow high-density hous-
ing. NIMBY is on vivid display in
Lafayette, Calif., a wealthy town
of 25,000 outside San Francisco.
Gov. Gavin Newsom has said the state
must build 3.5 million homes by 2025
to ease the affordability crisis, yet
Lafayette residents were outraged by a
proposal to build 315 new apartment
units near a commuter train station.
When developers and the city manager,
Steve Falk, agreed to a compromise
of 44 single-family homes on the site,
residents went to court to fight that
too. Falk resigned, saying he couldn’t
oppose such a modest plan amid a
massive housing crisis. “My con-
science,” Falk said, “won’t allow it.”Briefing NEWS^11
A tent encampment in SeattleThe housing crisis
Getty
The racial gap in home ownership
Scarce housing is behind a surprising number
of social problems. Transportation accounts for
about one-third of U.S. carbon dioxide emissions,
and much of that is due to obscene commuting
times in cities and suburbs with inadequate mass
transit. (Four million Americans spend at least
three hours every day driving to and from work.)
There’s a substantial racial gap among homeown-
ers, with black and Hispanic Americans more
than 25 percent less likely to own a home than
whites. That gap, which is at least partly caused
by redlining and racist lending policies, reinforces
racial wealth disparities and impedes social
mobility. The poor of all races are most affected
by housing shortages and costs; by one esti-
mate, there are now only 37 available affordable
units for every 100 extremely poor households.
In California, state lawmakers have allowed
homeowners to convert garages into residential
spaces and build small homes in their backyards,
known as granny flats or casitas, that they can
rent out. Ben Metcalf, the state’s former director
of Housing and Community Development, com-
pares renting out parts of your property to grow-
ing “victory gardens” during World War II food
shortages. “Your civic duty as a Californian,” he
said, “is you’ve got to convert your garage.”Millions of Americans can no longer dream of buying a home. Rental apartments are also unaffordable. Why?