Housing prices have recorded a pretty dramatic reversal from the crash that occurred during the Great Recession, but the upward price trend is becoming unsustainable.
Home prices have risen significantly, especially in metro areas with strong job growth. These price hikes are occurring during a time that wages continue to stagnate. Needless to say, that’s quickly becoming a recipe for disaster.
[graphiq id=”6luuLustMY5″ title=”Consumer Price Index for Housing” width=”600″ height=”504″ url=”https://w.graphiq.com/w/6luuLustMY5″ link=”http://time-series.findthedata.com/l/35897/Consumer-Price-Index-for-Housing” link_text=”Consumer Price Index for Housing | FindTheData”]
As a result, housing is eating up an increasingly larger portion of our take-home pay. The same scenario is playing out for renters: it’s likely your rent has surged in recent years, while your salary has barely kept up with inflation.
Meanwhile, many of our cities are rapidly changing, as the inner core of our cities come back to life after a generation of neglect. As urban centers are becoming gentrified, people are being priced out of the very neighborhoods that they’ve called home their entire lives.
“There used to be a much larger stock of ‘naturally affordable housing’ in less desirable neighborhoods,” said Angela Boyd, managing director of Make Room, a national campaign that seeks to give renters a voice in housing policy. “Increasingly, we’re seeing population growth, along with gentrification, and unfortunately, there are no affordable options anywhere, even in the suburbs.”
Housing advocates around the country point out that even people that would likely consider themselves middle class are encountering issues finding affordable housing options.
The likely cure for our national housing crisis is to build as much as possible. In a perfect world, we would build our way out of this problem, but there’s a lot of red tape standing in the way. Well-intended zoning laws and other urban-planning initiatives that limit density are killing opportunities for affordable housing.
“Density has long been a dirty word in the suburbs because people tend to automatically associate it with overcrowding, noise, crime,” said Lisa Prevost a regular contributor to The New York Times Real Estate and Business sections and author of Snob Zones: Fear, Prejudice and Real Estate. “Certainly, there are legitimate questions to be asked when a dense development is proposed, but too often opposition based in fear, misconceptions and prejudice overwhelm the discussion.”
Undeniably, we’re all complicit because we’re resistant to change in our neighborhoods. Culturally, deep down inside, once we become homeowners, we turn into NIMBYs (Not in my backyard, as in we don’t want anything built in our neighborhoods).
“At a certain point, we’re all a bit skeptical of density,” said Aaron Renn, senior fellow at the Manhattan Institute for Policy Research and a Contributing Editor at its quarterly magazine City Journal. “I would even be wary of building skyscrapers in my neighborhood of New York City. NIMBYs are a fact of life everywhere. Zoning is a great thing, but it’s being taken to new heights. It’s damaging to affordability.”
Unfortunately, the public input process stops a lot of needed development in places across the country.
“What happens in communities is that there’s a vocal minority that is allowed to have too much say into the process,” Boyd said. “People are generally supportive, but they are often absent from the public decision making process. For the time being, the NIMBYs will keep on winning.”
The solution is simple: build more and allow more density in both the cities and the suburbs.
“We’ve reached the place where, especially in left-wing cities, where anyone can veto anything. That makes building anything in many places in modern America nearly impossible,” Renn said. “A combination of pro-business policies combined with a development regime that permits housing supply to expand as needed has proved a winner.”
[graphiq id=”aGycKxSqvrL” title=”US Household Income Spent on Rent & Utilities By State – 2013″ width=”600″ height=”509″ url=”https://w.graphiq.com/w/aGycKxSqvrL” link=”http://home-insurance.credio.com” link_text=”US Household Income Spent on Rent & Utilities By State – 2013 | Credio”]
If these trends continue, most Americans will be priced out of home-ownership in major employment hubs.
“One of the misconceptions we’re up against all the time is that people just insist people move,” Boyd said. “Increasingly, there’s no affordable options anywhere, even in the suburbs. People are having to go out farther and farther, which creates a whole new set of problems. In the suburbs, you have to consider that a car is an added expense that these families can’t afford. They’re moving farther and farther away from employment centers.”
Make no mistake, restrictive planning regulations that don’t allow for growth are the single biggest threat to home-ownership in America.
Owning one’s own home is the bedrock of our culture and is the most tangible manifestation of the American dream. If the masses are priced out of owning a home, political movements that favor more redistribution are all but guaranteed to gain traction.
David is the Editor of Bold. He's especially passionate about millennial economic empowerment. A former local news reporter, David is originally from the Little Havana area in Miami, and later became a pioneer resident of the Disney-inspired town of Celebration, Florida. David holds a Master’s in Public Policy from the Harvard Kennedy School.