Voters, Your Rent Is Too Darn High
No one seems to talk about the U.S. real-estate bust anymore, but its dark clouds are still hanging overhead. Homeownership is at 1967 levels. First-time homebuyers hit a record low last year, while the rental market is saturated, pushing rents up beyond the affordability point for tens of millions. Access to decent housing for the poorest families remains well below pre-recession levels.
You might think, then, that housing would be an issue in the 2016 campaign and an untapped source of popular discontent. But candidates are saying almost nothing about it.
The problem, largely one of affordability, keeps getting worse the more the mortgage crisis fades from view. Young adults with college debts and stagnant wages can't afford to buy homes or gain access to credit. Instead, they are renting for longer periods.
That pressure means rents are rising rapidly all over, not just in New York and San Francisco. Rents in Los Angeles are the highest, relative to income. Miami, Boston, Seattle and Phoenix also are seeing hefty hikes. And medium-sized cities, such as Denver, Austin, Portland, Nashville, Charlotte and even Kansas City, are increasingly unaffordable, defined as paying more than 30 percent of income for housing.
Supply is low because developers slowed the pace of construction after the crash, effectively reducing the number of residences as the population grew by 10 million. Since 2010, more than 4 million new single- and multi-family units have become available, but not enough to satisfy the booming demand. The emphasis in new construction has been on luxury homes and apartments.
Therein lies an opportunity for Republican presidential candidates.
Yes, housing issues are usually a Democratic preserve. The party's base -- minorities, low-income families and urbanites -- is certainly getting hit. According to HUD's "Worst Case Housing Needs" report to Congress last year, housing shortages are especially acute for the extremely low-income: 39 affordable rental units existed for every 100 families in 2013.
Yet Hillary Clinton and Bernie Sanders, who aren't shy about proposing new programs or ways to spend taxpayer dollars, have been surprisingly silent on this issue. One reason may be that government efforts to make it easier to obtain mortgages encouraged the housing bubble and subprime crisis in the first place (though they were far from the sole cause).
Another reason for the Democrats' silence could be that direct solutions -- government rent subsidies or funds for housing development -- remind voters of failed public-housing policies of the past. Instead, Clinton and Sanders have focused on general economic solutions, such as alleviating the student debt overhang and increasing wages.
This leaves Republican candidates an opening. Generation X (born between 1965 and 1981) and millennials (born between 1981 and 2000), for example, are being hit the hardest by the affordability crisis. Harvard's Joint Center for Housing Studies found that the share of renters aged 25–34 who pay more than 30 percent of their incomes for housing increased from 40 percent to 46 percent over the span of just 10 years, while the share with severe burdens (paying more than 50 percent of income) rose from 19 percent to 23 percent.
The traditional Republican voter base has a stake in this issue, too. According to HUD, white renters experienced the greatest share of worst-case needs -- 47 percent -- in 2013, followed by Hispanics with 24 percent. (Worst case is defined as renters whose incomes are 50 percent below the area median, don't get housing assistance and pay more than half their income in rent.)
As the Harvard housing report points out, Republican strongholds in the South and West have the largest concentrations by far of renters with incomes 50 percent below the local area's median.
A GOP-centric housing policy needn't get bogged down in disputes over Fannie Mae and Freddie Mac, the housing-finance companies operating under U.S. conservatorship after their 2008 bailouts. They buy and guarantee more than half of all new home loans today, and while few experts dispute the need to overhaul the companies, removing them as the only real secondary-market player would likely trigger another mortgage crisis. For now, the status quo is optimum.
Republican solutions needn't be budget-busters, either. The British government, for example, announced Monday that it would spend about $3 billion to commission small builders to erect homes on public land, with 40 percent of them to be sold at discounted prices to first-time buyers or to those under age 40.
The U.S. government could do something similar. For example, it owns more than 77,000 unused or under-used commercial buildings that could be modified for rental units. Why not let builders lease these assets at deeply discounted rates if they agree to lease the bulk of their units to start-up households at affordable rents?
It's true that most matters related to housing policies are state and local, not federal. But if discussed at the national level, awareness of the scope of the problem would pressure local officials to do something. Candidates could discuss impediments like exclusionary zoning, crazy-quilt permitting fees and regulations, and even union demands that drive up construction costs.
Most of all, a GOP housing policy could highlight where Democrats have failed their constituencies. Hispanic homeownership has declined to 46 percent from 50 percent, pre-recession. The fall for blacks -- to 42 percent from 47 percent -- has been even worse. Among whites, homeownership is still a fairly high 72 percent, down from 75 percent in 2007.
The U.S. spends about $70 billion a year in support of housing through the mortgage-interest deduction, yet most of that benefit goes to the affluent who can afford larger monthly payments. Why not means-test the tax break with an upper limit on household incomes eligible for the benefit and apply the tax savings toward helping underwater minority homeowners?
If Republican candidates want to address the problems of inequality and social mobility, as some claim they do, a housing policy that addresses the affordability problem would seem to open up a wealth of new opportunities to do so.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story:
Paula Dwyer at firstname.lastname@example.org
To contact the editor responsible for this story:
Katy Roberts at email@example.com