Or why we need to rescue the Rescue Funds
I have a new habit when I’m brushing my teeth at night – counting vacant houses. Last night I counted 6 vacant units visible out my window. This is in the middle of one of the hottest real estate markets in the country. Vacant houses are on my mind personally (I live in a home that was formerly vacant) and professionally as a shortage of housing sends prices skyward nationwide.
The housing crisis is now so mainstream that it was featured in my favorite ad from this year’s Super Bowl.
So this week, let’s talk about housing. I want to show the macro-picture – that the affordable housing crisis is pervasive and affects everyone. But I also want to note that the housing crisis is made up of many crises:
- racist lending and zoning practices (redlining)
- impossible post-release requirements for formerly incarcerated individuals
- failure to invest in transit
- regressive labor standards and mismanaged economic development
And much more.
This year is a critical moment where all towns, cities, counties, and states have a powerful short-term policy lever to address the housing crisis – $350 billion in American Rescue Plan Act fiscal stabilization funds (or ARPA dollars). These are local dollars controlled by your town and county, not a deadlocked Congress in DC, and they can be used in almost any way you can imagine to address housing (among other eligible uses).
In this issue you’ll find:
- How housing and the Rescue Plan are related
- My recent appearances on a podcast and in a news story
- A link roundup
As always, thank you for reading. On to the topics.
Let’s start with the big picture, er, graph…
Data from the Federal Reserve show how housing prices have run away from incomes over the past twenty years. In the graph below, the top line (red) shows the CPI for primary residence rent in U.S. cities (aka average rent), the middle line (cyan) is the an index of nominal weekly earnings in the first quartile (though other quartiles are similar), and the bottom line (purple) is the CPI for all goods (the inflation rate, aka your cost of living).
All of these values are indexed to equal 100 on January 1, 2001 so that the lines represent only the differences that have grown between them this century.
These facts should be the price of admission to any discussion about housing:
- Earnings have only recently kept up with inflation.
- Rent/housing costs have grown much faster than inflation and earnings
- Over this period weekly earnings grew about 70% (most of that only recently), while housing costs grew nearly 100%.
What this means is that the cost of everything is rising but the cost of housing is rising much more. Incomes, while rising, are falling far off pace. This leaves all workers with higher and higher costs for essentials like food, shelter, and transportation and less to spend on anything else or save.
When people say that affordable housing is their number one concern, this is the big picture for why.
People want affordable housing (obviously)
For a recent project at Civilytics, we reviewed 10-15 cities’ and counties’ plans for American Rescue Plan funds. These plans have a section on public engagement and, in the communities that solicited feedback, housing was consistently the number one issue that people wanted to address.
But you don’t have to take our word for it. Our friends at The Southern Economic Advancement Project undertook a big effort to survey SNAP-eligible households across the South to ask them about the needs in their community and ARPA funds. The whole survey report is worth a read, but I want to highlight what people said was their top priority: Affordable Housing.
In fact, including shelter, heat and electricity, and food – what we all would agree to be the bare essentials – 52% of people identified these as the top priority for spending ARPA funds in their community. Compare that to how SEAP found communities are actually planning to spend their ARPA funds:
While we see affordable housing as the number one concern for survey respondents, our ARP Local Funds Spending Tracker tells a different story about where local leaders are currently allocating funds. Funds allotted to revenue replacement or general government totaled slightly over $219 million in AL, GA, and MS in the first phase of our results. Housing assistance is only $10.9 million.SEAP
Let’s look at one potential reason why this mismatch occurs – because people who benefit from the present crisis are politically powerful stakeholders.
A crisis in affordable housing is a massive windfall for real estate investors
While the housing purchaser (whether through rent or a mortgage) feels the economic pain of hyperinflationary price increases, landlords and property owners experience a windfall of high returns on their investments that beat just about every available alternative.
This point is worth restating. In a period of skyrocketing housing prices, millions of consumers feel the pain, but property owners are seeing record profits. Too often the housing crisis is covered like a natural disaster with no one having agency over rising prices. If you take nothing else from this newsletter, I hope you take away that this is not true.
Let’s take evictions. Evictions are presented in the press as something suddenly and passively happening to hundreds of thousands of people across the country. In reality, these evictions are deliberate actions initiated by people: landlords.
These are modern day Ebenezer Scrooges sending out eviction notices, supported by publicly-paid law enforcement and court employees, to ensure they profit off a surge in rental values. They could choose to see their tenants as people and not evict them – no eviction moratorium needed. Some of them do. Many of them do not.
These people are politically powerful stakeholders who have optimized their operations to profit from the status quo. Any changes we try to make to improve housing affordability will cut into their profits and run counter to their interests. This poses one of the biggest barriers to addressing the crisis in affordable housing.
Case in point, commercial real estate investors are behind the push in the Biden administration to “bring the office back” – despite this being deeply unpopular.
Decades of developer-friendly housing policy helped create this crisis
It’s important to ask why our housing policy has failed to protect the public from skyrocketing costs over the past two decades and how real estate investors got the upper hand. One source I’ve been reading to learn about this is the Social Housing Chronicle by Paul E. Williams, which has a number of excellent articles on the history and mechanics of housing programs. I won’t purport to be an expert on this topic, but I’d like to share a few points that I think are key.
First, the bulk of social housing spending in the U.S. occurs through the federal Department of Housing and Urban Development (HUD) via grants to regional and local governments. (Local or regional governments could also spend their own money to address the housing crisis; it’s just that, to a large degree, they currently don’t.) This spending represents our commitment – going back to the Great Society – to ensure access to affordable and safe housing for everyone.
So let’s talk about HUD.
Check out this graph from an article by Williams on the evolution of HUD spending. In the past two decades (shown on the right side of the graph) the U.S. population grew by 47 million while housing spending as a share of GDP declined from 0.23% to about 0.19%. As our needs and means have grown in this period, our investment shrunk.
Just as important is the shift in what HUD spends money on, specifically the relative growth of housing choice and project based vouchers at the expense of public housing. Housing vouchers (dark blue above) are money that goes to real estate owners on behalf of beneficiaries (renters who qualify for HUD support).
Voucher programs are characterized by a devilishly complex mix of rules intended to “incentivize” certain behavior by tenants and landlords; a design pattern that leaves them open to grift, waste, and neglect. For example, Section 8- (housing choice voucher) eligible properties are subject to “minimum standards of health and safety,” but tenants have very few direct avenues to initiate enforcement of these standards once they’ve moved in. Instead of empowering tenants with the freedom of choice (a laudable goal), the voucher policy has empowered large-scale real estate investors who can master the bureaucratic rules and regulations.
How do I know that? Rents are skyrocketing and evictions are up.
To be fair, voucher programs were a response to many failures in publicly owned housing developments, which had their own problems in terms of waste, neglect, and the criminalization and surveillance of residents. But publicly owned housing developments are a successful part of the housing mix across the world from Singapore to Sweden, so we know they can help in some shape or form.
ARPA funds can help improve housing policy and protect against housing price increases
The reality is that one single policy lever cannot fix our housing crisis. Multiple responses are needed and answers can and should be different in different communities. The good news is there are BILLIONS of unallocated ARPA dollars available locally to address affordable housing in bold new ways.
We’ve been seeing a lot of interesting ideas across the country that I’d like to share in the spirit of diversifying the policy options on the table:
We’ve also been working with organizations advocating for other ideas including:
- creating a land trust,
- constructing new public housing,
- rethinking zoning rules, and
- providing publicly funded assistance for home ownership
Additionally, as Paul Williams has written in Politico, there’s plenty of room for federal expansion of housing spending including funding the Biden administration’s budget proposal for construction or rehabilitation of over 3 million homes within a decade (remember we added 20 million people to the country in the previous decade).
Finally, something I’m still studying is this example from Montgomery County, Maryland where a small investment of public dollars is creating an ongoing fund for maintaining and building new affordable housing. This would be a great way to leverage one-time ARPA funds for sustainable housing investments in a community. Exactly how we do that without recreating the ills of the current system is something I’m still learning more about!
Oh and about those vacants I look at every night – in my neighborhood I suspect they are the result of price speculation, but the causes in other neighborhoods may be different. People are looking at vacant property taxes as one possible solution, but that strategy is also complicated.
So the takeaways are:
- The pinch you feel in your wallet from housing costs is real and pervasive
- Underinvestment and overcomplication in housing policy got us here
- People have a lot of great ideas of what we can do about it
- There’s an opportunity to make things better in your own backyard
Learn a bit more about me through this recent podcast interview
I had the chance to be interviewed for the FrontMatter podcast by LeanPub. The interview came about because Wendy, DJ, and I chose to publish our book series, Education Data Done Right, via LeanPub to give people a DRM-free, pay what you want option.
The interview covered a lot beyond the book, including my personal journey to data analysis and the founding of Civilytics. If you’ve ever wondered about the origins of Civilytics and how I came to this work, this is a great place to start.
You can listen or read the interview here, or subscribe to the FrontMatter podcast wherever you get your podcasts. Or you can read this short recap of the interview that Hannah wrote, which includes the picture below.
Civilytics quoted on the problem of prison gerrymandering
At the end of 2021, I was quoted in this Intercept article describing our analysis of the impact of prison gerrymandering on representation in U.S. state legislatures. For Tableau’s Racial Equity Data Hub, we did a first of its kind deep dive into the data to measure the extent of the distorting effect of prison gerrymandering on representation in nearly every state lower house in the U.S. The state-level analysis is particularly important because, the smaller the population represented, the more sway the siting of a prison can have on drawing legislative boundaries.
My quote and our analysis is based on the most comprehensive look possible with the best publicly available data (and with a huge assist from the fine people at the Prison Policy Initiative who do not shy away from data challenges).
With the federal government mired in gridlock (except maybe about Daylight Saving Time?) and so many important policies decided at the local level, it’s more important than ever that we get involved in our county and municipal governments. If you want a steady stream of high quality stories that make this case clear, I highly recommend Bolts Magazine, a new publication dedicated to this work.
Techno-solutionism is something we’ve talked about before but we found this article on how the Crisis Text Line began and how it evolved to be an important cautionary tale about incentives, temptations, and the vulnerable people caught in between.
Well Joe Biden is not a fan of “defunding the police” but Jamelle Bouie has the facts that the Biden team is missing when calling for more funding of the police. This is one of the best evidence-based summaries of a debate that has too often drifted away from the facts. Highly recommend.
The Prospect has a great writeup on regional governments, which really vary across the country in their scope and strength and are worth learning more about. In many places regional planning is key to addressing the affordable housing problem instead of independent decisions municipality by municipality.
Finally, my friend from graduate school Bradley Jones at Pew wrote an important summary of what we know about the impact of COVID-19 on the political geography of the country.
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