The price of housing is through the ceiling. This might be good news if you own property, especially in Tampa Bay, which, by some estimates, leads the nation’s housing markets in year-on-year home value increases of 30 percent or more. But it is catastrophic for almost everyone else.
In the early days of the pandemic, when rents initially dropped, most commentators predicted a prolonged downturn, bringing much-needed relief for the vast number of Americans who struggle to make the rent, and who are shut out of homeownership. No one imagined that they would quickly rebound and soar. Now that eviction rates are picking up, the pre-pandemic affordable housing crunch has become an emergency.
There are many reasons for this crisis. They include shortages in new housing supply, restrictive zoning, inflating land values, wage increases trailing far behind the rising cost of health care, transportation and basic needs, and the crushing burden of student debt, which presents a barrier to market entry for first-time homeowners. Less obvious but undeniable in its impact is the so-called financialization of housing. Arguably this began in the 1990s when stagnating wages forced households to leverage debt (that is, borrowing against home equity) in order to “play” the market for resale value.
But in the last two decades, Wall Street has altered the landscape of housing finance twice, first with the subprime loan swindle, and then again after the financial crash when private equity firms snapped up millions of foreclosed single-family homes and turned them into rentals at jacked-up rates. Tampa Bay was one of the metro areas specifically targeted by these companies.
Analysts thought these opportunistic purchases would be a short-term play, and that firms like Blackstone (now the world’s largest landlord and real estate company) would sell off their portfolios when the market recovered. But the acquisitions have only grown, and private equity is now penetrating every real estate class: multi-family buildings, mobile home parks, hospitals, assisted-living facilities, student housing, master-planned retirement and age-restricted communities, and commercial real estate.
Last year, one in six homes sold in the United States were purchased by corporate investors, and in some markets as many as one quarter. Aside from being very lucrative, this Wall Street business model has produced two outcomes — artificially high prices and rents, and a loss of home equity for middle class households whose houses were gobbled up. Now that we have become a Rentership Society, the opportunity, for the foreseeable future, to generate family wealth through homeownership will be out of reach for the majority of households. Perhaps the most telling statistic is that Black homeownership rates have fallen to levels last seen before the Fair Housing Act of 1968 prohibited all forms of racial discrimination, and are now more than 30 percentage points lower than that of non-Hispanic whites.
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The Biden administration recently announced that it would not be pawning off foreclosed homes to corporate investors, but instead would prioritize sales to non-profit and community developers. This is a step in the right direction, albeit a baby one. But a much firmer regulatory hand is needed to stop Wall Street from gobbling up ever larger chunks of the nation’s housing stock.
We also need to stop pretending that the existing model of private market delivery is going to produce a significant quantity of affordable housing. Incentivizing builders and developers to jump into the game with tax credits and other subsidies has been the preferred formula for the last several decades. Yet the record shows that this recipe for sweetening the pot has chronically failed. It hasn’t even come close to meeting the long-term housing needs of working class and middle class households.
Non-market alternatives are the only way to ensure that housing remains affordable in the long run. Community land trusts, limited-equity cooperatives, and other mixed-income models of rental and ownership that fall under the rubric of “social housing” are proven ways of eliminating exposure to market inflation and the equally ruinous flipside of a price crash. These permanently stable alternatives need to be seeded and supported by policymakers.
Hillsborough, Pinellas and Sarasota counties have recently set up community land trusts, allowing these counties to acquire land and facilitate the building of price-controlled housing. Tampa has one on the way soon. So too, public housing is no longer a taboo topic among elected officials — its return is sorely needed when the private market has shown that it cannot provide the goods, even with generous subsidies on tap.
Affordable housing can mean many things in our minds, but the bottom line definition of the problem is that people simply don’t have enough income to afford a place to live. Across the country, we have finally seen wages rising at the low end, and Florida residents did their bit by voting for a $15 minimum wage in 2020.
But the sober reality is that what amounted to a substantial wage hike for many service sector employees won’t come anywhere near to closing the housing gap. A $15 minimum wage earner working a 40-hour week will have a monthly income of $1,919 after tax. If they want a studio apartment in Tampa, it will cost $1,330 on average, which would be a whopping 70 percent of their income. No wonder that budget motels and homeless tent encampments in the woods are filling up with long-term occupants, as I discovered in researching Sunbelt Blues, my recent book about the living conditions of working class households in Central Florida.
For millions of people struggling to stay in their apartments, or their mobile homes (which are now appreciating in value, upsetting longstanding market norms), the ability to cap rent increases would be a lifeline. Residential rent control exists in localities in several states — New York, California, Maryland and Washington, D.C. — and in 2019, Oregon was the first to adopt a statewide rent control policy.
Unfortunately, Florida is one of 37 states that prohibits or preempts rent control. Even if local officials wanted to tamp down the current runaway rates of housing inflation, their hands are tied. So much for Florida’s much vaunted principle of home rule for counties. The state’s landlord and developer lobbies tend to get what they want in Tallahassee, and tenants’ rights are too weak to offset their power.
Many people still remember President Dwight Eisenhower’s warning about the baleful influence of the “military-industrial complex” on government. Few recall President Harry Truman sounding the alarm about the obstructive doings of the “real estate lobby.”
“Nothing could be more clearly subversive of representative government,” he wrote in a letter to Congress. The core accomplishment of Truman’s Fair Deal was the landmark Housing Act of 1949. Though flawed in its implementation, it promised to fulfill the aspiration of “a decent home and a suitable living environment for every American family.” After more than 70 years, it is time we made good on that promise.
Andrew Ross is professor of American Studies at New York University and author of “Sunbelt Blues: The Failure of American Housing.” On March 10 at 1:30 p.m., he will speak at the St. Petersburg campus of the University of South Florida in Harbor Hall 110. The event is free and open to the public.