Monday Morning Thoughts: NY Times Analysis Shows Why Housing Crisis a Driver in Inequity in America

By David M. Greenwald
Executive Editor

People are constantly accusing me of being a shill for developers locally.  While on the surface it could look like that, the reality is that I have increasingly seen the housing crisis as a class issue—with the increase of housing equity driving the gap between rich and poor even wider than it had previously been.

This is the point that a New York Times analysis made on Sunday remarking on the “extraordinary wealth created by the pandemic housing market.”  But there is a downside here.  They write: “Rarely have so many Americans gained so much equity in so little time, but it’s also inseparable from the housing affordability crisis.”

The Times in their analysis found, “Over the past two years, Americans who own their homes have gained more than $6 trillion in housing wealth.”

They continue with “most of this money has been created by the simple fact that housing, in short supply and high demand across America, has appreciated at record pace during the pandemic. Millions of people — broadly spread among the 65 percent of American households who own their home — have gained a share of this windfall.”

This is the key point here.  The short supply of housing, combined with high demand across the country (punctuated in California), has driven up the cost and value of existing housing.

It is critical to understand then, that the dynamic here is not developer against community, but rather those who own housing versus those who don’t.  The haves versus the have nots.

Or as the Times put it, “It’s a remarkably positive story for Americans who own a home.”

At the same time “it’s also inseparable from the housing affordability crisis for those who don’t. For them, rents are rapidly rising. Inflation is whittling away their incomes. And the very thing that has created all this wealth has pushed homeownership as a means of wealth-building further out of reach.”

Moreover, the Times argues, “That dual reality follows what has been a mass wealth creation event with few precedents in American history.”

“I really struggle to come up with a parallel to this,” said Benjamin Keys, a professor at the Wharton School of Business, “trying to identify a moment when this many people gained this much wealth in this little time.”

“There’s a rosy picture and a not-so-rosy picture,” said Emily Wiemers, an economist at Syracuse University who has studied how families tap their home equity to pay for higher education. “The flip side is pretty troubling. There’s this set of kids whose parents don’t own a home and so didn’t see this increase in wealth, and also whose parents may have seen declines in income.”

The Times writes, “The cumulative effects figure to be sweeping, and divergent: This period of rising equity will enable some families to create intergenerational wealth for the first time. It will force other families to delay homeownership for years.”

“I don’t think that there’s a viable alternative to homeownership at this point in time” in terms of building wealth, said Cy Richardson, the senior vice president for programs at the National Urban League, which promotes homeownership among Black families. “And it’s an economic disaster for Black families who are unable to achieve homeownership.”

Last year during the Housing Element discussion, we noted that no one under the age of 50 opposed broader housing allowances while no one over the age of 60 supported them.

Even pre-pandemic, in 2019, the Huffington Post ran a lengthy article that found, “Progressive Boomers Are Making It Impossible For Cities To Fix The Housing Crisis,” and “Residents of wealthy neighborhoods are taking extreme measures to block much-needed housing and transportation projects.”

As Sustainable Growth Yolo put it in a tweet last weekend, “People are going broke and homeless because there is not enough housing.”

Jackson Mill in his op-ed wrote, “The consequences of not building are rooted in basic economics: While housing supply in Davis has tapered off, demand for available and affordable housing has exploded.”

He explained, “This dichotomy has spurred a precipitous rise in housing prices: The median home value in Davis has jumped from $450,000 in 2012 to more than $875,000 in 2022. An average household income of around $200,000 is necessary to afford a home at this value, which only an estimated 11.2% of Yolo County households and 13.3% of California households make, according to the American Community Survey.”

All of this is great if you are an existing resident who owns a home.  Their equity has gone through the roof.  But it means the younger generation and the underclass are even further from the American dream and the ability to build wealth.

Mill points out, “One group hit particularly hard by Davis’s housing crisis is families…  But the ongoing housing crisis means that a growing number of families are unable to afford living in Davis. As a result, Davis schools are facing an enrollment decline that threatens to reduce state funding within a few years.”

The consequences here are potentially enormous and point toward a continuing widening gap between rich and poor, and also growing racial disparities.

About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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30 Comments

  1. Keith Olson

    People are constantly accusing me of being a shill for developers locally.  While on the surface it could look like that

    Excuse me, I have to clean up coffee I just spit on my keyboard.  I’ll comment later…

  2. Ron Glick

    Yet you still support Measure J.

    You are actually a shill for a kind of direct democracy that restricts housing availability but increases ad revenue.

  3. Ron Oertel

    People are constantly accusing me of being a shill for developers locally.  While on the surface it could look like that,

    No – not just on the surface.  It goes deeper than that, to the tune of $6,000 per the most-recent DiSC campaign statement, for “online ads” on the Vanguard.

    (Ironically, DiSC would create a housing shortage per the EIR itself – as already noted in previous comments. Assuming that the commercial component is actually successful.)

    Interestingly-enough, I haven’t seen any actual online ads for DiSC on the Vanguard, other than the articles themselves.

    I do see the ads for Palomino Place.

    1. Bill Marshall

      As was pointed out as a reason, by another poster, seems my ad-block is doing well… didn’t realize it applied to this site… so, I was incorrect when I posted “what ads?”… mea culpa…  my bad…

      Thank you, Ron O by posting,

      Interestingly-enough, I haven’t seen any actual online ads for DiSC on the Vanguard, other than the articles themselves.
      I do see the ads for Palomino Place.

      closed the loop for me… thx… and I still don’t see them, and don’t care, one way or the other… but will keep my ad-blocker on…

       

  4. Todd Edelman

    The spatial design and resulting anti-democratic mobility situation for over 90% of SACOG-area families is a grossly inequitable and thus also a racist attack. This is precisely why we have to ensure that all new housing-workplace-funplace aggregates ensure that people don’t have to not only not own a car, but to efficiently, joyously and safely move around without one, with one main goal among others to save money. New vehicles cost tens of thousands with running costs quite variable, but overall restrictive, if just psychologically This is why we need to expose individuals who intentionally delayed the Downtown Plan process, to move people away from nay-saying every greyfield development or densification not aimed at students, and of course to vote No on H.

    1. Alan Miller

      The spatial design and resulting anti-democratic mobility situation for over 90% of SACOG-area families is a grossly inequitable and thus also a racist attack.

      Please outline how and when this would no longer be a racist attack.

      (this should be fun)

      1. Keith Olson

        Please outline how and when this would no longer be a racist attack.

        Never.  Democrats are never going to give that up on almost every issue.

      2. Todd Edelman

        outline

        I can offer a summary: Any actions we take to reduce VMT, de-carbonize housing, transportation and the workplace, increase mobility options that don’t negatively impact others, respect our use of water and building materials, make people pay for their harm (e.g. fees on energy) and require corporations to better fund the sustainable transportation that makes their businesses viable and pay higher impact fees for pollution (AQMD’s are chronically under-funded)… all of this is inherently anti-racist.

        1. Ron Oertel

          Not disputing what you’re saying here, but I’m pretty sure that David would say (for example) that voting against DiSC is racist.

          While you would say that supporting it is racist.

          Somebody must be a racist here (or at least, a supporter of “racist systems”), and I think it’s time we found out who that is. (No, don’t point that finger at me!)

          “Will the real racist please stand up?”  🙂

        2. Keith Y Echols

          I can offer a summary: Any actions we take to reduce VMT, de-carbonize housing, transportation and the workplace, increase mobility options that don’t negatively impact others, respect our use of water and building materials, make people pay for their harm (e.g. fees on energy) and require corporations to better fund the sustainable transportation that makes their businesses viable and pay higher impact fees for pollution (AQMD’s are chronically under-funded)… all of this is inherently anti-racist.

          Is there some radical progressive left decoder ring that I didn’t get?  Maybe it was included in a non-GMO, Organic, kale based, farm to fork box of Cracker-Jacks  (can you puff pop kale?)

          Nearest I can tell:

          People that have money are bad.
          Things require money.
          Poor people have less money.
          Poor people have less things (like energy and housing).
          Minorities make up a disproportionate number of poor people
          So a system that requires people to spend money for things is racist.

          Interesting concept:  “growth for schools”.

          I think the addiction to growth for money is prevalent with private companies, cities and school districts.  I have no problem with growth.  As long as there’s a purpose, goal, set parameter….etc..   I yet have to see a school district show a target student population that optimizes existing and potential resources.  There could be population targets that include growth or reduction.  Both of which lead to optimization of resources.  But too often the simple solution is to just grow, grow, grow to keep pumping in more $$$ (students) in to system.

          1. David Greenwald

            “So a system that requires people to spend money for things is racist.”

            You’re missing a key ingredient here – systemic racism.

        3. Ron Oertel

          You’re missing a key ingredient here – systemic racism.

          I think we’re finally getting someplace, here.

          The monetary system, for example?  The currency shows nothing but old, dead white guys on it, right?  At least a couple of slaveholders, as well. (I wonder why no one tears up what they have in their wallets, as a result?)

          Remember the Susan B. Anthony dollar?  No one wanted it!  And she was probably white, as well. Or maybe gold-colored, not sure. In any case, my theory is that it was rejected due to systemic racism (or sexism).

          (Hopefully, I’m using the correct pronouns with all of this.)

          Or, the capitalist system itself?

        4. Keith Y Echols

          You’re missing a key ingredient here – systemic racism.

          I covered that in the earlier points about the disproportionate number of minorities the make up the lower socio-economic class.  Which concluded with a system that requires money is racist.  The end result is what makes it racist.  There’s a whole history of stuff that is baked in that was actually racist that led up to the inequality we have today.  But often times people can’t come up with what exactly is racist about a current system other than it’s disparate like effects.   It’s gotten to the point where everything and every system has disparate like effects.

          1. David Greenwald

            What exactly is racist about the current system is the byproduct of policies that led to a concentration of wealth and a concentration of poverty among different communities. I think asking what exactly is racist about a current system misses how the current system was created and the barriers it creates to upward mobility.

        5. Ron Oertel

          I think asking what exactly is racist about a current system misses how the current system was created and the barriers it creates to upward mobility.

          It’s not just about how it was “created”.  It’s also about new “systems” which come into play, based upon the existing rules (e.g., mass corporate investment in single-family rentals, which would normally be sold as entry-level houses).

          Personally, I think the entire system is not set up in an ideal manner (for society at large, not just particular skin colors), starting with the incentives for owning a house in the first place.  (Ownership also ties one down to particular areas, rather than having the ability to move where job markets arise.)

          Then, there’s the opposition to rent control, etc.

          It would be interesting to know more about how things work in other countries, as well. Perhaps there’s a reason they call it the “American” dream, and not necessarily “good” reasons.

          In any case, it’s clearly started to change, regarding the overpriced market.

          For sure, everyone seems to want to own a house when they’re overpriced, but not as much during a housing crash. It’s really just like the stock market, in that sense.

          Maybe we should all invest in Bitcoin. 🙂

        6. Ron Oertel

          By the way, did any of the “experts” predict the enormous, artificially-created rise in housing prices as a result of the pandemic?

          Because I don’t recall even one expert predicting that.

          Seems like they’re much better at analyzing things in the rear-view mirror.

        7. Keith Y Echols

          What exactly is racist about the current system is the byproduct of policies that led to a concentration of wealth and a concentration of poverty among different communities. I think asking what exactly is racist about a current system misses how the current system was created and the barriers it creates to upward mobility.

          Sure look at the what glaring rules and policies ARE racist.  Then fix them.  But as I said most of this a disparate like effects argument about people with money having advantages and people without money being disproportionately minorities.  Fix the glaring systemic problems but the by products remain…at some point you gotta say well the rules have been mostly fixed….now just do your best.  I’d rather spend my time empowering people to overcome their disadvantages then spend my time complaining about how unfair the system has left everyone.  Most would say that “Life is Unfair.  Get Over It” is cruel but a better way to put it is “Life is Unfair.  Overcome It”.

        8. Todd Edelman

          Keith

          Nearest I can tell….

          Systemic racism can be reduced by building and fortifying with various systems the built environment. That’s it.

        9. Keith Y Echols

          Okay…I’m going to backtrack some of my comment about disparate environmental effects on races due to income.   I still don’t think most of the current system is inherently racist but laws do need to protect everybody equally.  So for example if a pipeline is planned to go through minority neighborhoods and not white ones because the white ones can pay lawyers to block the pipeline and the minority ones can’t because of their lesser income….yeah something needs to be done to protect both neighborhoods if they don’t want a pipeline to go through their respective neighborhoods.  I don’t think it’s a race based decision by the pipeline company it’s simply a financial one.  So yes some systemic solutions need to be found to protect those unable to protect themselves.

          But I still stick with my belief that I’d rather champion/support people overcoming their disadvantages than spend my time looking for all the disadvantageous in the system that certain people have.    Basically I think we’re a better society when we create tough, persistent and creative people to overcome their disadvantageous rather than trying to create the perfect level playing field (which doesn’t exist).

        10. Richard_McCann

          Sure look at the what glaring rules and policies ARE racist.  Then fix them.

          Unfortunately it’s not just the rules and policies that create the racist system. It’s the distribution of existing resources and the attitudes of those who currently benefit from that system that perpetuate it. For example, research shows over and over again that it’s the educational attainment of a community’s parents collectively, not school spending, that dictates most of student success. The only real solution is redistribution of income and wealth from the privileged groups to those that are repressed. It’s that simple but its an uncomfortable one for those who have benefited from the current system but want to reform it without having to sacrifice.

        11. Alan Miller

          I’d rather spend my time empowering people to overcome their disadvantages then spend my time complaining about how unfair the system has left everyone.

          Amen, brother KYE!

          The only real solution is redistribution of income and wealth from the privileged groups to those that are repressed.

          And there’s the “truth” in a nutshell folks:  Communism!

          Perhaps there’s a reason they call it the “American” dream . . . “

          I have a refrigerator magnet with a picture of George Carlin that reads:   “There’s a reason they call it the American Dream.  You have to be asleep to believe in it”.

  5. Ron Oertel

    As a result, Davis schools are facing an enrollment decline that threatens to reduce state funding within a few years.

    Interesting concept:  “growth for schools”.

    Better get used to declining enrollment, across the state (including Yolo county).  And take appropriate action (which is NOT “adjusting the community”, to fit the desires of the school district).

    And state funding itself is going to have to account for this, one way or another.

    Overall, statewide K-12 enrollment is expected to decline by 7%, over the next 10 years.  In Yolo county, it will be a 6% decline.

    Head over to Placer or El Dorado counties, if you’re interested in one of the few growth areas for enrollments. No secret as to the reason for that, as they love sprawl over there. Enrollments projected to go significantly higher in those counties, per the interactive map below.

    https://www.ppic.org/interactive/changes-in-k-12-enrollment-across-californias-counties/

    Eventually, even those areas may tire of sprawl – and have to deal with declining enrollments as well. The only way that the K-12 growth machine can be satisfied (without continued sprawl) is if there’s turnover of existing housing.

  6. Keith Y Echols

    Yes, I believe that housing is a right.  I do not believe that MARKET RATE housing is a right.  I will say again that relying on for profit market rate home builders to solve affordability problems in the housing market….is just stupid.

    I believe that subsidized for profit housing is the wrong way to address the housing problem.  IMO the best way to address the housing problem is PUBLIC housing.  Homes built and owned by the community (local, state and federal government).   This used to be far more common in the 1950s-1970’s.  But over the years funding was pulled more and more from public housing and was moved to a system that gave that funding/benefits to for profit home builders to build some subsidized housing.  This resulted in “the projects, the hood…etc..”.   But the move towards for profit building of subsidized housing was cloaked in an inclusivity of class and race….and to a degree it was true; sure you get some low income homes built among the gentrified new homes for those who could afford new market rate homes….but it ultimately resulted in far less efficient use of funds to house people that needed public subsidy for housing.  Far more efficient use of funds would be to make public housing better.

    The way to think about it is: what if almost all elementary and secondary school in the US was private.  You had to pay for basic school.  Aside from huge impact on the education of society in general….you’d probably have everything from basic dirt cheap school to expensive exclusive education….which is kind of like what we have in the housing market.  You have a bunch of people scrambling around to barely afford the cheapest rent they can find along with people with homes that have far more home and wealth than the many that are scrambling looking for secure housing options.  But what vouchers?  Vouchers are controversial for schooling and I don’t think they work well for housing.  IMO it’s not an efficient use of funds to house people.  Those vouchers often go to for profit landlord/real estate companies….and that’s if the vouchers are taken in the first place.

    If more city, state and federal organizations land lords then they could house a variety of people.  What I mean is instead of cramming in a few low income people in with a bunch of people that can afford market rate houses: have a city provide some housing to it’s police officers among the rest of the public housing.  Have school districts provide housing to teachers to mix in with the public housing in a community.  Or fire fighters…..or med technicians…should a medical institution decide to contribute to public housing.  All this work force public housing mixed with all the other lower socio-economic groups that need public housing options.  If cops, fire fighters, teachers…etc… are the face of public housing….it would be far more palatable for a community and more likely to be politically successful.

    1. Richard_McCann

      Europe has many successful public housing projects. That could be a viable alternative but the history in the US is so fraught with so many failures, in large part because they were tied directly to racist policies.

      So the question is how do we come up with something that is politically viable?

      The second problem is that housing is the largest single source of household wealth in the US and Black households have been historically blocked from participating in that wealth building opportunity. How would public housing be designed to overcome this inequity?

  7. Ron Oertel

    “There’s a rosy picture and a not-so-rosy picture,” said Emily Wiemers, an economist at Syracuse University who has studied how families tap their home equity to pay for higher education. “The flip side is pretty troubling. There’s this set of kids whose parents don’t own a home and so didn’t see this increase in wealth, and also whose parents may have seen declines in income.”

    I decided to click on the article that David references above, and found the following in the conclusion:

    This paper examines the influence of parental housing wealth and income on college attendance and parental financial support for college and on college graduation rates and quality of college attended.  It also examines the ramifications of these decisions on the subsequent indebtedness of parents and children.

    But, parental wealth increases graduation rates, while parental income does not seem to have an effect on college graduation.  We find that the effect of parental wealth on college graduation is related to parents taking out home equity loans which appear to have a large effect on the likelihood that a child graduates from college. We also find suggestive evidence that the decision to provide financial support for a child’s schooling increases levels of parental mortgage debt.

    No kidding.

    In contrast, students who attend college with financial support from parents DO NOT have lower levels of student and other debt later in life than children who attend college without financial support.

    (I capitalized the wording.)

    The increases in parental debt as a result of college financing decisions may simply reflect an efficient way to fund college tuition. Alternatively, this increase in parental debt may represent an intergenerational shifting of debt incurred with children going to college, one that represents a burden on parents that may adversely affect their later-life consumption or other measures of well-being. This is an important avenue for future research especially in light of the large increases in college tuition and in levels of debt in recent years.

    So, it seems as though home equity loans do have an impact on college graduation, but at the expense of parents’ well-being.

    Actually, did we need a study to tell us this? (It is interesting that parental income was found to have no direct effect.)

    For that matter, wouldn’t that mean that the inheritance that these students (the children of these parents) would ultimately receive less from their parents’ estate?

    In a future study, perhaps they’ll examine whether or not reverse mortgages increase wealth. 🙂

    1. Ron Oertel

      Also interesting that the students themselves experienced no difference in student and other debt loads later in life, regardless of whether or not they received parental support.

      Perhaps due to financial aid, for those not receiving parental support?

      I think we’ve got a new slogan: Attend college, go in debt – regardless of whether or not your parents help. But if your parents help, they’ll go into debt as well.

      So, perhaps there were some interesting findings in that study.

  8. Ron Oertel

    Truth be told, it’s a little difficult for me to take anyone who claims to be concerned about disparate outcomes in the housing market seriously, unless they were also concerned about the impacts of the “Davis buyer’s” program in regard to WDAAC.

    Otherwise, it just sounds like a developer stooge co-opting the concerns of those who actually care about such issues.

  9. Ron Oertel

    Here’s an “inequity driver”:

    According to the Department of Treasury’s investigative and research unit, FinCen, the main drivers of housing prices are luxury housing, real estate speculation, and investment packaging by financial institutions. Conclusions of multi-year studies by Dr. John Rose as well as a 2018 paper from the International Monetary Fund, show that housing prices are disconnected from supply and demand for multiple reasons, not the least of which is that it never applied in the first place.

    From 2012 to 2019, SF Bay Area housing prices rose by 110 percent. The population decreased by 12 percent. What did increase was the wealth gap. During that same period, the average wage worker earned $45,000 a year, while those who received compensation rather than paychecks earned $160,000 a year.

    According to Forbes, nearly one-third of San Francisco residents are multi-millionaires—that is, people who have received more than $2.3 million per year in liquid assets (stocks, investments, trusts, financial instruments that translate into cash) for at least three years. Those who live on paychecks cannot compete against those who can borrow against and get a tax write off for loans against investments. Teachers do not get stock options.

    In a block of $1 million houses, when someone comes in and offers $2 million, then all the houses are worth $2 million. When a real estate speculator turns a $1 million single-family home into three units, they don’t build three $500,000 units, but three $2 million units. This has nothing to do with demand, and everything to do with wealth distribution.

    Even if supply and demand were a real process, emphasizing supply intentionally ignores what drives demand: tax subsidies for multi-billion-dollar corporations to continually enlarge.

    https://48hills.org/2022/05/letter-to-the-editor-supply-and-demand-doesnt-apply-to-housing-or-really-anything/

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