The US has record-breakingly expensive housing and an incredibly high number of homeless people: what’s wrong with the real estate market in America - ForumDaily
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In the USA there is record expensive housing and an incredibly high number of homeless people: what’s wrong with the real estate market in America

The United States has record high housing prices and record high numbers of homeless people. One of the reasons for this is racism. American cities were built in an era of racial and social segregation - and are still struggling with the remnants of the past, reports "Medusa».

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The current problems of American cities are a legacy of 20th-century segregation policies. The modern appearance of American cities - office "downtowns" in the center and one-story suburbs - is a consequence of deliberate policies based on racial segregation.

Racial and social stratification

This process began due to the urbanization of the late 19th century. The Industrial Revolution led to a sharp increase in urban population density, poor sanitation and crime. Due to the invention of elevators, pumps, steel frames and public transport, cities began to grow not only in breadth, but also in height.

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The cities attracted numerous Jewish migrants, residents of Eastern and Southern Europe, and African Americans from the southern states.

The authorities of megacities began to divide them into zones of exclusive use, for example, separating residential areas from industrial ones. The white population began to use these rules to separate themselves from migrants. When outright segregation laws were ruled unconstitutional, upscale neighborhoods were designated as zones for the construction of separate houses for each family - such as neither the poor, nor migrants, nor African Americans could afford.

After World War II, mass motorization also began to influence the appearance of American cities: now one could get from a country house to work in a fairly short time. In the mid-1950s, under President Dwight Eisenhower, a massive interstate highway construction program was enacted. In the first 20 years of its activities, about a million people were forced to relocate due to the construction of roads.

To reduce the economic and political costs of construction, routes were often routed through migrant and non-white areas. Many highways separated "white" areas from areas where poorer Americans lived.

Districts earmarked for single-family homes began to expand, filling the suburbs. White Americans began to move there, and the rest of the city's residents were hampered by a discriminatory credit rating system and so-called “racial covenants” that prohibited the sale of houses to representatives of certain races or nationalities. Many of them were forced to stay within the city limits, in old and deteriorating multi-story buildings.

Due to white migration and declining tax revenues, these areas only became poorer and were unable to adequately fund social infrastructure and schools. The low quality of education prevented residents from getting decent jobs, creating a vicious circle of poverty. Many areas have turned into depressive ghettos with high unemployment and rampant crime.

Local authorities stopped developing public transport and tried to make cities convenient exclusively for motorists living in the suburbs. A new requirement during construction was the allocation of parking spaces. In the 1950s–1980s, authorities began to forcibly confiscate land for parking lots, which is why residential buildings were often demolished. Parking now takes up 20% to 30% of the area in many cities like Detroit, Louisville, Phoenix and Dallas.

The disintegration of neighborhoods led to the disintegration of local communities, and the onset of the first wave of urban deindustrialization led to the decline of many counties. The transfer of production to suburban industrial zones has complicated the life of residents of high-rise areas, forcing them to waste time on travel and transport. This led to a new round of growth in unemployment and poverty.

The poor condition of cities gave rise to the policy of "urban regeneration". Local governments tried to reduce population density by making land available for the construction of single-family homes, and the federal government provided grants to build infrastructure such as hospitals, universities, and schools. This revitalized entire neighborhoods and attracted wealthy families to the cities—but forced hundreds of thousands of residents from disadvantaged areas into forced relocation.

Investments in disadvantaged areas created a new vicious circle: the better the living conditions, the more unaffordable rent became for the old residents of these neighborhoods. This effect was enhanced by the influx of those who decided to return from the suburbs to the gentrified central parts of megacities. Old, dilapidated housing was being renovated, the number of jobs was growing, and crime was falling - but those who had lived in these areas for a long time were being squeezed further and further from the center.

This process - gentrification - has affected many American cities such as Atlanta, Boston, Chicago, Philadelphia, Washington and Detroit. But the most notable example was San Francisco and its satellite city of Oakland, where professionals employed in the Silicon Valley technology sector moved en masse.

Thus, the policy of dividing cities into zones, which previously affected mainly poor and non-white citizens, began to have a negative impact on the entire country. Housing shortages constrain economic growth, reduce productivity and social mobility, and increase homelessness.

“Legacy” of segregation

The housing shortage has led to a sharp rise in rental costs. This hits young Americans the hardest—a third of them consider buying real estate a pipe dream.

Even though racial segregation was banned 70 years ago, and cities and states have been trying to overcome its consequences for decades, many manifestations of the stratification laid down then persist to this day. Areas of the same city can differ in all possible parameters: from average life expectancy and the risk of chronic diseases to air purity and even average temperature.

In addition, strict building zoning remains in many American cities. In Los Angeles, 75% of the land is allocated for single-family homes, in Seattle - 81%, in San Jose - 94%. In these cities, the cost of low-rise buildings reaches several million dollars, and land plots under buildings, due to scarcity, become a valuable asset in themselves.

In addition, plans to build apartment buildings are subject to strict housing codes that dictate every aspect of construction.

In some municipalities with so-called discretionary review, even the smallest features of each project must be individually approved by the local government. The 2008 crisis also hit developers, and the pace of construction has not yet recovered.

According to various estimates, there is a shortage of approximately 1,5 to 6 million housing units in the United States.

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The shortage has led to a sharp increase in rental costs: in 2021-2022 alone, they increased by 25%. On average, Americans need to earn at least $24 an hour to afford a two-bedroom apartment. At the same time, the federal minimum wage since 2009 has been only $7,25 per hour and even in the most progressive states does not exceed $17. In San Francisco, you must earn at least $51 to rent an apartment, with a minimum wage of $18 per hour. Because of this, many rent housing outside the city, and some workers arrive at their factories at dawn so they can park and sleep in the car for a few hours.

Housing payments are becoming an increasingly burdensome item in household budgets. In the first quarter of 2023, Americans spent an average of about 30% of their income on rent. Even as inflation declines, rental prices remain the main driver of price increases, and Americans' incomes have not kept pace with rising rents.

Buying your own home is also becoming increasingly difficult. Of the 50 largest cities, mortgages are more profitable than renting in only four. The average home price reached $419 thousand, which is 40% higher than in January 2020.

At the same time, prices are rising noticeably faster than construction costs, although the cost of building materials and labor is also increasing.

This is especially noticeable in places with high demand for real estate: since 1980, housing prices in the New York metropolitan area have increased by 706%, prices for consumer goods - by 376%, and wages - by 326%. In the San Francisco Bay Area, prices increased even more, by 932%.

This is hitting young Americans hardest: Among those born after 2000, 34% consider buying a home a pipe dream, and the average age of first-time home buyers has risen to a record 36 years. Against this background, young people are increasingly postponing the purchase of housing. For the first time since the 1940s, the share of Americans ages 18 to 29 living with their parents exceeded 45%.

Rising rental prices also correlate with an increase in the number of homeless people. California and New York, especially their large cities like San Francisco, Los Angeles and New York, lead in both the high cost of housing and the number of people forced to live on the streets.

Homeless problem

Many of the homeless have lost their homes in recent years amid a pandemic, high inflation and an epidemic of drug addiction.

According to the federal Department of Housing and Urban Development, the number of homeless Americans in 2023 exceeded 650 thousand people. This is the highest figure since 2007, when officials began keeping such statistics. This growth was caused by lockdowns during the coronavirus pandemic, record inflation over the past 40 years, rising housing prices, an epidemic of drug addiction and the inaccessibility of mental health care.

The most dramatic example of America's homelessness problem—stemming from poor housing planning—is the situation in San Francisco. According to the most conservative estimates of local authorities, almost eight thousand city residents live on the streets, more than half of them do not have access to shelters or night shelters. Tent cities can be found in the very center of San Francisco.

Before the November visit of Chinese President Xi Jinping (he came to the APEC summit), the city authorities conducted a campaign to clear the city center of homeless people and clean the streets. Some of the homeless were placed in shelters, and the bulk were moved to streets away from the center. Immediately after the summit ended and the cordon was lifted, the homeless returned to their previous places.

In California alone, 180 thousand people live on the streets, and half of the American homeless are in large cities in four extremely liberal states: in addition to California, these are New York, Oregon and Washington. Most metropolitan mayors are elected from the Democratic Party, so the more acute the problem of homelessness becomes, the more often Republicans blame it on liberals.

Conservatives say city officials' tolerance of the homeless leads to increased crime. Republicans accuse Democrats of unwillingness to fight the problem, despite the availability of resources, and reproach them for their willingness to clear the streets only during the visit of foreign guests. Some even propose criminalizing certain types of homelessness. For example, Donald Trump proposes arresting all homeless people and giving them a choice between imprisonment and treatment in camps outside cities.

Liberals respond by insisting that forceful measures to combat homelessness are unsuccessful and do not help solve the problem. Instead, they propose focusing on social support for the homeless, such as the recent pilot program of an unconditional basic income in San Francisco, which showed some success. They also note that the situation with homelessness varies from city to city: in New York, out of 100 thousand homeless people, only 5% do not have access to shelters and other temporary housing, and in Dallas and Houston, Texas, which are also led by Democrats, homelessness is declining .

However, the catastrophic increase in the number of homeless people in California outweighs the improvement in the situation in other states - and the total number of people living on the streets of American cities increased by 2023% in 12. The main increase came from people experiencing homelessness for the first time, and out of 650 thousand, only 143 thousand were “chronically homeless.” The number of homeless families increased by 16%. The number of elderly homeless people who find themselves on the street has also increased: people aged 55 years and older make up about 20%. At the same time, the vast majority of elderly people who first found themselves on the street became homeless due to a sharp increase in housing costs.

Who is slowing down reforms?

Urban planning reforms are primarily opposed by owners of expensive housing, out of fear that the changes will lower the value of their property.

The influence of urbanists on the appearance of American cities was limited not only by codes of practice, but also by the violent protests of residents. Thus, throughout the second half of the 20th century, the so-called “freeway riots” took place in the United States demanding changes to plans for laying highways.

The culture of resistance to construction has become a major factor in urban planning policy - and is called NIMBY. Attempts to increase housing density, such as multi-family cottages or low-rise apartment buildings - not to mention the construction of high-rise buildings - began to face fierce resistance from residents.

As home prices rose in the 1970s, real estate became an important financial asset, and homeowners began to take anything that could harm it more seriously. Residents invoked so-called nuisance laws to prevent funeral homes from being built or solar panels installed near their homes. And in the 1980s and 1990s, gated communities with limited entry became popular. Residents collectively controlled aspects of their appearance, such as the aesthetics of their lawns and their ability to own pets. As a rule, such complexes are very homogeneous in social and racial composition.

Because any increase in the number of floors and housing density leads to a decrease in average housing prices in the area, residents are mobilizing both in protests at public hearings and in state-wide housing association campaigns. For example, in California they are trying to organize a referendum to repeal recent laws allowing the construction of low-rise, multi-family homes in zones designated for cottages. Attempts to ease affordable housing rules failed in New York and Colorado due to protests.

Among NIMBY activists there are approximately equal numbers of people with both conservative and liberal views. Participation in the movement is more likely to correlate with the value of real estate: the more expensive it is, the more actively residents fight against densification. Protecting valuable assets causes all kinds of people to abandon their views: when it comes to construction in their area, conservatives stop defending market freedoms, and liberals forget about fighting racism and helping the poor. It is in liberal states like California and New York, where the housing shortage is most acute, that urban planning reforms have stalled in local legislatures.

This is all the more strange because NIMBY arguments—for example, that affordable housing will attract “less advantaged” tenants—have often become a platitude for racist and segregationist views. In areas where predominantly white Americans live, there are still many more restrictions on land use due to protests. And NIMBY actions are aimed against the construction of buildings that are more often occupied by migrants and African Americans: budget housing, higher-rise buildings or houses with small apartments. Activists are also fighting the creation of shelters for the homeless, many of whom are non-white people.

At the same time, residents of megacities almost always elect Democrats as mayors, and it turns out that the richest liberal voters become the main obstacle to their implementation of affordable housing construction programs. At the same time, NIMBY activists are increasingly supported by right-wing politicians. Thus, in 2020, Trump called the federal government’s attempts to influence urban planning rules an “ultra-liberal dictate” and an attempt by “bureaucrats to dictate where and how people should live.” Famous TV host Tucker Carlson accused Democrats of wanting to “destroy the suburbs.”

Reforms that could lower housing prices are advocated by both leftists and libertarians. Many of their initiatives are being adopted by states - but nationally the problem remains acute.

Now, amid soaring home prices and homelessness rates, a counter-movement called YIMBY has begun to emerge, trying to encourage housing construction and loosen zoning laws. It brings together left-wing and liberal activists who believe housing should be affordable and zoning laws overhauled as a relic of racial segregation, as well as free-market activists and libertarians who oppose government restrictions on housing construction. Together, they develop initiatives and lobby for them at the local level: in 2023, 23 states introduced more than 200 bills related to housing reforms.

In addition to values, activists also cite economic arguments in favor of increasing urban density. Thus, the liberalization of zoning laws should lead to significant growth in the American economy - according to various estimates, the country lost from 9% to 36% of GDP due to restrictions. In addition, due to rising housing costs, Americans have less and less money for other expenses. Expensive rent hinders the mobility of workers: they refuse to move to metropolitan areas and remain in less productive regions and sectors. According to research, when a city’s population doubles, the productivity of each resident increases by 2%.

YIMBY activists note other effects of construction bans. For example, a 10% increase in housing costs leads to a fall in the birth rate of approximately 1,3%. The carbon footprint of every metropolitan resident is well below average. And motorization remains one of the drivers of the increase in obesity among adults from 10% in the early 1960s to 42% in 2020. In dense Manhattan, the rate of obesity is half the national average.

The arguments of YIMBY activists helped them get reforms passed in many states. In California, 56 laws were immediately passed to simplify the construction of residential buildings. Several similar bills have been passed in Rhode Island and Vermont. In Texas, Montana and Florida, even Republican politicians supported the reforms.

Land use regulations in the United States are determined by municipalities, and federal authorities can influence them only through indirect measures. Even under Barack Obama, Washington considered a program to stimulate housing construction; similar measures were proposed under Trump - but then the White House abandoned its own reform. In 2019, the YIMBY Act, which tied federal housing grants to zoning reform, failed in the Senate.

The Joe Biden administration has tried to implement a range of measures to stimulate housing construction. The package included making it easier to build housing for low-income renters and providing $10 billion to municipalities that reform their zoning laws—called “YIMBY grants” in the press. But after agreement with Congress, only $85 million remained in the budget for these purposes. The White House also advised states to use funds allocated to them during the coronavirus pandemic to develop the housing sector.

Experts believe that overcoming the housing shortage crisis will require separate, large-scale and targeted reform from the government. To get such a package through Congress, the YIMBY movement will have to get it on the bipartisan agenda.

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