BRAIN C. COESTER'S BLOG
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Real Estate Prices Rising in 3 Cities

June 12th, 2019

In Charlotte, North Carolina, one of the Southeast’s biggest cities, is short 35,000 affordable housing units. A growing job market has attracted 110,000 new households to the city since 2000, and building supply isn’t able to keep up with demand. In other areas like Salt Lake City, Utah, there are more families than available places to live, a shortage of about 55,000 units. This deficit comes after a year when Salt Lake City led the nation in homebuilding. In Columbus, Ohio, the housing market has slowed down as buyers are not able to afford the high prices.

When policymakers and pundits talk about the nation’s affordable housing crisis, they usually talk about the forces that deny low-income Americans reliable and accessible housing near better jobs and educational opportunity. And they should; it’s not just a national crisis and widespread policy failure, but a moral crisis for the world’s richest nation.

But new research shows that the shocking realities of the nation’s affordability crisis—8 million renters pay more than half their income on rent, and the country is short 7.2 million affordable housing units, according to the National Low-Income Housing Coalition—have begun to metastasize and impact the middle class.

A new paper by Jenny Schuetz, a housing policy fellow at the Brookings Institution’s Metropolitan Policy Program, found that some of the severe affordability issues impacting low-income Americans have crept into the lower-middle class and, without action, will get worse. In “Cost, crowding, or commuting? Housing stress on the middle class,” Schuetz looked at census data to find the impact of a decade when housing costs rose faster than average incomes.

“The issues facing low-income Americans are now showing up in lower-middle income Americans, and I think that’s something we should worry about.”
Her nuanced conclusions suggest that, on an aggregate national level, there isn’t a middle-class housing crisis. High-cost metros like Seattle and San Francisco unquestionably have challenges, and, of course, low-income households are stretched like crazy. But it depends on how you look at the data.

If you break down the nation into five income groups, the crises faced by the fifth group—or the lowest-income—are increasingly being seen within the fourth group, the lower-middle class. The fifth of the country with the lowest income spends 60 percent of their money on housing, while the next-lowest fifth spends 40 percent, both significantly higher than the 30 percent recommended by economists.

“The issues facing low-income Americans are now showing up in lower-middle-income Americans, and I think that’s something we should worry about,” says Schuetz. “It’s a national pattern. That group is spending more money on rent everywhere, in Cleveland and not just in California.”

Other studies point to a similar kind of strain. Research from Berkadia, a Berkshire Hathaway company, found that the lower-middle income bracket, which it qualified as earning $35,000 to $49,999 between 2012 and 2017, has been hit hard, with 6 percent growth in rent-stressed families during that time period. Cities like Tulsa, Oklahoma, and Omaha, Nebraska, have become challenging for renters, with 40 percent or more of families identifying as rent-burdened.

It’s easier to focus on the extremes of the housing shortage, both the rising levels of poverty and homelessness and the seven-figure spec mansions of the tech jet set. But the creeping cost of housing is pinching a middle class already struggling with flat wages, rising child care costs, and the skyrocketing price tag of a four-year college degree. This “middle-class squeeze,” as a 2014 report by the Center for American Progress illuminated, was about new constraints, and how “the costs of key elements of middle-class security rose by more than $10,000 in the 12 years from 2000 to 2012, at a time when this family’s income was stagnant.”

“Housing unaffordability isn’t the cause of the crisis, per se. But with the cost of everything else rising, it’s not surprising that formerly stable families feel squeezed by even slight increases in housing costs, and that overall growth is hampered by a middle class barely able to pay the bills and put their kids through school” says Brian Coester, CEO.

Aren’t we already in a crisis?
Middle-class Californians, many of whom have recently moved to other, more affordable, areas in the West, like Boise, Idaho, and most new homebuyers looking to buy in the nation’s largest cities, would probably tell you there’s long been an affordability crisis across the income spectrum. And it’s an issue that’s grown over decades: According to a 2017 report done by the St. Louis Federal Reserve Bank, the median price of single-family housing in the U.S. outgrew the rise in median household income by 390 percent between January 1986 and July 2017.

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Brian Coester - CoesterVMS - Coester Valuation Management Services - CEO will use the information you provide on this form to be in touch with you and to provide updates and marketing.