In this country we have an ever expanding gulf between the upper class and the lower class as the middle class continues to shrink and adequate, affordable housing is an increasingly limiting factor in the financial stability of families. In 2015 the Joint Center for Housing Studies of Harvard University put out a “State of the Nations Housing” report – think of it as the President’s State of the Union address, but…you know…housing. In this study they look at housing markets, demographic drivers, homeownership, rental housing, and specific challenges of each to quantify the state of housing in America. Taken as a whole, the study simply suggests that even though the economy has improved, and continues to improve, housing is not keeping up with the demographic mix of the population. And with a population that is aging at a staggering rate and households that are increasingly multigenerational due to shrinking incomes and rising property values, as well as a rising immigrant population, housing in America, to put it bluntly, sucks.
According to the study, in 2013 almost half of all renters were paying 50 percent or more of their income toward housing costs. Even households making up to $75,000 per year, 20 percent of them are paying more than 30% of their income toward housing. For poor and minority families the percentage rises to almost 80 percent with extreme housing burdens. These are unacceptable statistics in a modern society. But what is driving this trend?
In 1937 the Federal Government passed the Public Housing Act, also called the Wagner-Steagall Act, which provided federal funding for housing but left the ownership and maintenance to the local housing authorities. In theory this was a wonderful idea. The federal government provided the mechanism by which cities could build public housing but left the location, size and construction up to the individual cities. Those cities that did not want to provide public housing simply did not have to. Furthermore, the Act set very low maximum income standards for housing as a way to ensure they would not compete with the private housing market, thereby hurting a once again growing economy.
Where this goes wrong is not taking into account human nature. Then, as now, the majority of the poor (those that would qualify for these public housing programs) are minorities. This fact, coupled with the ability of local governments to decide where such projects are built, virtually guarantees a segregated housing system that also unfortunately works to keep the poor poor. The ultimate Catch-22.
Cities now armed with this Federal system of providing low income public housing obviously did not want to take on the risk and expense of construction and therefore sought out private sector firms to partner with. Again, on the surface this sounds like a great idea. Even today the venerated “Public/Private Partnership” is the end all be all of good policy. But how does this affect housing?Simple, banal, unimaginative, and constant greed.
Private businesses are in business to make money. This isn’t a bad thing. It’s what enables all of us to have a job, to provide for our families, to take vacations and buy iPhones. But when you’re in business to make money, again not a bad thing, and you are partnered with a local government that wants to build low income public housing there is an automatic need to design and build as cheaply and as quickly as possible in order to maximize profit. This is not a recipe for ultimate long term success for any business, and public housing is no exception.
Without a model for long term, quality affordable housing solutions in this country our cities and towns will continue to be gentrified, continue to be segregated along racial and socio-economic lines that do not promote upward mobility, and continue to stagnate as our elected officials continue to tell us that “if re-elected” they’ll bring real change with them. Uh huh. Real change will only come when we, collectively, take a longer view of real estate investment and its impact on our communities at large.