America's Emerging Housing Crisis

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America's Emerging Housing Crisis AMERICA’S EMERGING HOUSING CRISIS A SPECIAL REPORT BY JOEL KOTKIN WITH WENDELL COX EXECUTIVE SUMMARY From the earliest settlement of the country, housing have made much of the state Americans have looked at their homes and prohibitively expensive. Not surprisingly, AMERICA’S EMERGING apartments as critical elements of their the state leads the nation in people who own aspirations for a better life. In good spend above 30 percent, as well as above times, when construction is strong, the 50 percent, of their income on rent. HOUSING CRISIS opportunities for better, more spacious and Sadly, the nascent recovery in housing congenial housing—whether for buyers or could make this situation even more dire. renters—tends to increase. But in harsher California housing prices are already Joel Kotkin conditions, when there has been less new climbing far faster than the national construction, people have been forced to An internationally-recognized authority on global, economic, average, despite little in the way of income accept overcrowded, overpriced and less- political and social trends, Joel Kotkin is the author of THE NEXT growth. This situation could also affect desirable accommodations. HUNDRED MILLION: America in 2050, published by The Penguin the market for residential housing in other Press. The book explores how the nation will evolve in the next four Today, more than any time, arguably, since parts of the country, where supply and decades. His previous, also critically acclaimed book, was THE CITY: the Great Depression, the prospects for demand are increasingly out of whack. A GLOBAL HISTORY. improved housing outcomes are dimming Ultimately, we need to develop a sense for both the American middle and working Mr. Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University in of urgency about the growing problem of classes. Not only is ownership dropping to Orange, California and Executive Editor of the widely read website www.newgeography.com. providing adequate shelter. As a people twenty-year lows, there is a growing gap He writes the weekly “New Geographer” column for Forbes.com. He is a Senior Visiting we have done this many times — with between the amount of new housing being Fellow at the Civil Service College in Singapore. He serves on the editorial board of the Ultimately, we need the Homestead Act, and again, after the built and the growth of demand. Orange County Register and writes a weekly column for that paper, and is a regular Second World War, with the creation of contributor to the Daily Beast. to develop a sense Our still-youthful demographics are affordable “start-up” middle- and working- catching up with us. After a recession- class housing in places like Levittown of urgency about the generated drought, household formation (Long Island), Lakewood (Los Angeles), Wendell Cox is again on the rise, notes a recent study the Woodlands (Houston) and smaller Wendell Cox is a public policy and demographic consultant and growing problem of by the Harvard Joint Center for Housing subdivisions, as well as large scale principal of Demographia, in the St. Louis area. He is co-author of the Studies1. In some markets, there isn’t an cooperative apartment development in Demographia International Housing Affordability Survey, now in its providing adequate adequate supply of affordable housing for places like New York. Government policy 10th edition. He is also author of Demographia World Urban Areas, the working and middle classes. Overall, should look at opportunities to create the only regularly published compendium of population, land area shelter. according to the research firm Zelman and housing attractive to young families, and density for urban areas of more than 500,000 population. Associates, the country is building barely which includes some intelligent planning He was appointed to three terms on the Los Angeles County Transportation Commission one-third the number needed to meet the around open space, parks and schools. It is and one term on the Amtrak Reform Council. He served as a visiting professor at the growth in households. Overall inventories important to ensure that a sufficient supply Conservatoire National des Arts and Metiers, a French national university in Paris. He holds of homes for sale are at the lowest level in of affordable housing is allowed throughout 2 an MBA from Pepperdine University. eight years. metropolitan areas, for all income groups. The groups most likely to be hurt by the Nothing speaks to the nature of the shortfall in housing include young families, American future more than housing. If National Community the poor and renters. These groups include we fail to adequately house the current Renaissance a disproportionate share of minorities, and future generations, we will be short- who are more likely to have lower changing our people, and creating the National CORE’s mission is to provide award-winning affordable incomes than the population in general. basis for growing impoverishment and housing paired with best-practice social service programs tailored This situation is particularly dire in those poor social outcomes across the country. to help families move toward self-sufficiency and ultimately to parts of the country, such as California, home ownership. Over more than two decades, CORE has built and that have imposed strong restrictions on renovated needed housing for tens of thousands of people. Our Hope home construction. California’s elaborate through Housing Foundation has provided more than two million hours of service that better regulatory framework and high fees the lives of our very youngest to our most senior residents. It is that commitment that sets imposed on both single- and multi-family National CORE apart. Learn more at www.nationalcore.org. NATIONAL COMMUNITY RENAISSANCE ii SECTION ONE: AMERICA’S HOUSING CRISIS The current housing recovery has provided The number of renters, for example, now Figure 1 Housing Starts: 1970-2012 (United States) Figure 3 Severely Burdened Households (50% or more of income for housing) a welcome respite to homeowners, but paying upward of 50 percent of their it may exacerbate a growing shortage of 2.5 income for housing, has risen by 2.5 million 25% Multi-family Data from Census Bureau 2001 2007 2011 affordable residences. Overall, shelter is Detatched since the recession and 6.7 million over the From: Harvard Joint Center for Housing Studies becoming more costly to more Americans 2.0 decade. Roughly one in four renters, notes 20% in some parts of the country, and is likely the Harvard study, is now in this perilous to become more so as long as the overall 1.5 situation. The number of poor renters is 15% supply of housing of all types continues growing, but the supply of new affordable to lag household formation. Even with a Millions 1.0 housing has dropped over the past year 10% mild housing recovery, the number of new (Figure 3). Share of Households private housing units built in 2012 barely 0.5 The impact is particularly destructive 5% reached a half million, roughly one-third for the poor. Despite claims that lack of the level seen in the mid-2000s (Figure 1).3 0.0 transport and high gas prices represent 0% Owners Renters The uptick in housing prices threatens both 1970 1980 1990 2000 2010 their biggest financial challenge, it is the prospective owners and renters, forcing cost of shelter that most impacts their people who would otherwise be buyers pocket books. Housing far outstrips the Figure 4 Lowest Quintile: Housing & Transportation into the rental market, raising demand, cost of transportation, even with higher (Expenditures Pre-tax Income 2000-2011) Figure 2 Rent & House Prices (United States 1980-2012) which tends to boost prices.4 Ownership fuel prices, particularly for lower-income $6,000 levels continue to drop, most notably 300% Americans (Figures 4 and 5). Shelter From: Bureau of Labor Statistics data Average Rent Transportation for minorities. African-American home Average House Price (Existing) $5,000 ownership dropped 14 percent from 2004 250% to 2013 (2nd quarter), while Hispanic home $4,000 200% ownership dropped 8 percent from 2001. Data from Federal Reserve Bank of St. Louis & National Association of Realtors $3,000 In contrast, white-non-Hispanic home 150% ownership dropped only 4 percent from its Expenditures $2,000 peak in 2004.5 Last year, according to the 100% 6 Harvard Joint Center for Housing Studies , $1,000 50% the number of renters in the U.S. rose by one million, accompanied by a net loss of 0% 0% 2000 2005 2010 161,000 homeowners. 1980 1990 2000 2010 This is bad news for middle-income Figure 5 Housing & Transportation Cost Trend Americans, and even more so for renters, (Lowest Household Income Quintile: 2000-2011) particularly in the lower economic quintiles. Rents and home prices are closely related; $2,000 when prices rise for houses, they also Despite claims that lack of transport and high gas From: BLS Consumer Expenditure Survey $1,500 rise for renters, except during periods of speculative fever such as occurred in the prices represent their biggest financial challenge, $1,000 mid-2000s (Figure 2). it is the cost of shelter that most impacts their $500 $0 pocket books. Shelter Gas & Oil Other Vehicle Transit Expenses -$500 Vehicle Purchases (Net) -$1,000 Expenditures per Household: 2000-2011 1 AMERICA’S EMERGING HOUSING CRISIS NATIONAL COMMUNITY RENAISSANCE 2 SECTION ONE: AMERICA’S HOUSING CRISIS Overall, the National Low Income Housing These states include metropolitan areas As was the case in the late 19th century, This is occurring as a generation of middle- Figure 6 Affordable Housing Shortage: 2011 (Extremely Low-Income Households) Coalition (NLIHC) estimates a shortage of 7.1 that have the highest percentages of people overcrowded conditions create poor class people — weighed down by a poor 8 million housing units that are affordable for National data from: paying more than 50 percent of pre-tax outcomes for neighborhoods and, most economy, inflated housing prices and often extremely low-income households (Figure National Low Income Housing Coalition, income for housing.
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