Waking up the Sleeping Giant and Building a Renters’ Voting Block

us-hr-ageBuckhorn, Ontario  It is hard to escape the feeling, country to country, that low-and-moderate income families, and, just possibly, even families with more money, are rapidly consolidating into a permanent class of renters. Certainly in some cities around the world like New York City, Toronto, London, and elsewhere, this has long been the case. In the United States though it is a bumpier transition because the dominant narrative in the vast expanse of the land is that the American dream includes home ownership. Increasingly that dream comes with a disclosure now that you better be ready to move to smaller towns, cities, and rural areas if you want to live that dream.

In the US, the number of renters, and therefore potential renter’s votes, are rising. Renter votes increased 49% between 1996 and 2012, while owner votes only increased 23%, according to an analysis of U.S. Census data. According to data reported by the Wall Street Journal:

Nonetheless, just 22% of votes cast in the 2012 election were by renters, according to the analysis. But as the renter population grows, Apartment List [a rental leasing website] estimates that one-third of eligible voters in this election could be renters. Based on historical voting patterns, renters would likely cast about one-quarter of the votes—a small but meaningful increase from the last election.

This sleeping giant traditionally has not stirred much around Election Day. Renters are often seen as more transient, though some data interestingly finds that voting rates are as low for stable tenants as they are for frequent movers. They are also young, and poorer, none of which are huge vote movers. Furthermore, owners vote more consistently than renters. Another statistic in the Journal piece points to a potential game changer as anger over cost and affordability continues to rise.

The number of cost-burdened renters—those who spend more than 30% of their incomes on rent—has risen by 3.6 million since 2008, to a historic high of 21.3 million in 2014, according to Harvard University’s Joint Center for Housing Studies. In the meantime, the number of cost-burdened owners has declined by 4.4 million since 2008 to 18.5 million.

The Presidential campaign is silent on the issue of renters and rising rents and housing prices are at the heart of the entire Trump business model, so we shouldn’t be surprised. Either way, if any of them have a plan, it’s a secret.

There’s a way to change this though and wake the sleeping giant: put issues directly on the ballot in cities and states wherever possible that allow the people to step in with solutions where politicians fear to tread on campaign contributions from developers. Just as ACORN did earlier in place after place on living wages, we need to start crafting initiatives from our renters’ bill of rights from rent control to dedicated spending for public and subsidized affordable housing. Organizationally, we need to craft proposals that meet the crisis and the interest of tenants and bring them out to polls in force to alter this landscape.

We need to make sure there are consequences as well. As campaign discussions wound down on the prospects of winning a comprehensive and enforceable landlord licensing ordinance or bylaw in Toronto, ACORN’s head organizer there, John Anderson, noted flatly that either the Council passed the measure this fall or they would likely see the issue as the largest issue in the next election. As the votes of renters are triggered in just that way everywhere the issue is rising, that’s not a threat or a promise, but virtually a take-it-to-the-bank prediction.

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Is Affordable Housing Being Crucified by Inequality

IKEA home in Sweden

IKEA home in Sweden

New Orleans      Increasingly it seems that we are going to have to decouple the issue of home ownership and affordable housing at least in the traditional sense of small footprints in the dirt with picket fences around them.  Home ownership due to harder loan standards, tighter credit, and the Great Recession has now fallen to 63.9% at the end of 2014, lower than at any point in the last 20 years.  A recent survey found that nine of the top eleven metro areas now have a majority of renters compared to homeowners led by Miami, New York, Boston, San Francisco, Houston, Washington, Dallas, and Chicago.

The trend towards “executive” cities like Seattle, Vancouver, London, and many others where housing  costs are atmospheric has foreclosed any opportunity for regular working families to consider home ownership in the classic, outdated “American Dream” sense of the term, unless they are willing and able to purchase cooperative apartments or condominiums.  Even while moving that dream off the shelf, the affordable housing crisis remains unabated unless we embrace some change.

How about manufactured housing?  I’ve got to admit I like my time living in Airstreams, and I’ve become friendly towards trailers. The Economist had nice things to say about “system-built” housing recently which also caught my eye:

“…system-built housing does not have to be shoddy or impersonal. Huf Haus of Germany has been building high-end prefabricated housing since 1912.  Adatahaus, a British firm specializes in homes that can be reconfigured as a family’s needs change.  IKEA of Sweden sells flat-pack houses that can be customized.  Furthermore, big companies can help people to self-build a personalized home while enjoying economies of scale:  Cemex of Mexico provides self-builders with access to cheap fixtures and fittings, and cheap finance, as well as cement.”

Ok, maybe not everyone’s cup of tea, but poking through Craigslist last night I saw a corrugated metal-sided and roofed structure on higher ground towards the Gulf of Mexico that looked beckoning.  Just saying.

Where would you site such housing?  Interestingly there is already a controversy breaking out in East New York on Mayor DeBlasio’s plan to protect affordable housing in that area, which many residents see as gentrification.  We’ve talked about the double-edged sword of “market rates” before, when the inequality of wages and wealth has perverted the market.  The deal that ACORN made in Brooklyn for over 2000 units of housing around the train tracks at Atlantic Yards has still not produced on that promise after more than a decade.

There’s vacant land though in many cities crying for company.  Turkey assembled 1600 square miles equal to 4% of the country’s urban area when  the national housing agency bought land from other state agencies.  China puts the hurt on developers sitting on property to force the issue by imposing a 20% tax on the value of land parcels left undeveloped for more than a year.

Meanwhile rent levels of 30% or more of income and mass numbers of roommates has become the norm in many cities.  One estimate has more than 20 million paying more than 30%.Looking at average rents in mid-south cities like Houston, New Orleans, Dallas, and Little Rock, we found the numbers on the average between $650 to $750 per month.  To make that nut an individual would need to make between $12 and $16 per hour if they were going to live by themselves.

Affordable housing is possible, but not without living wages and a strategy that values citizen wealth and family security as more important than a picket fence.

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Toil Index and Tax Credits for Home Ownership

Robert Schiller from Yale gave props to Richard Green of USC for his recommendation that there be a targeted tax credit to encourage homeownership.  Green and Andrew Reschovsky of Wisconsin have studied the data closely are clear that the real benefit of existing tax policy allowing a standard deduction for interest on mortgages is for more wealthy homeowners who itemize their taxes.  They have concluded that this primarily encourages them to build bigger houses, rather than distributing the benefits as real incentives to home ownership.  The multi-billion dollar tax loss of interest deductions is the largest US investment in citizen wealth, and despite the fact that this investment has created homes as the single largest source of citizen wealth for many working families, the recent recession has now wiped out wealth for such families and destroyed confidence without offering an alternative for low-and-moderate income families to create wealth.  I’m not sure that these professors are right, but at least it is a way to go until we can right-size solutions to our current predicament and the emerging future.

Robert Frank of Cornell helped defined challenge to the middle class by creating what he called a “toil index” to puzzle out a problem he had recognized from Elizabeth Warren and her daughter’s book about the “two income trap.”  That problem was essentially that middle income families were being pushed into buying houses past their means in order to secure good schooling for their children.  He notes that, “The increase in the toil index has been spectacular.  From a postwar low of 41 hours a month in 1970, it rose to more than 100 hours in 2005.”

If a family is lucky, and it takes a lot of luck these days, to have two breadwinners working fulltime 100 hours of work would still be almost one-third of their income going to put a roof over their heads.  That doesn’t work under any calculation either for a family or for the entire economy which despite the failures of HAMP, Treasury, and the Obama Administration to address, is still very important to the US economy and the recovery from neighborhood to neighborhood around the country.

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Come On! Private Banks Poaching Fannie Mae

subprime mortgage securitization

subprime mortgage securitization

New Orleans On ESPN’s Sportscenter during the seasons they have a feature called “Come on!” in which they feature unbelievable or bonehead plays.  We need that in other fields of public life and politics.  Reading about the efforts of banks like Wells Fargo and JP Morgan Chase along with the various trade associations to try to get their noses under the Fannie Mae and Freddie Mac restructuring tent to shill a profit by issuing government secured mortgages, I could only thing:  Oh, come on!  How ridiculous!!  These are the same banks that just brought us the Great Recession due to their irresponsible lending and securitization schemes, and now they should somehow be allowed to profitably issue government mortgages.  Though by now we all ought to be used to the way that Wall Street thumbs their nose at all of the economic realities that all of us face, this is wildly unbelievable.

Reading the New York Times article by Louise Story, it was clear this was another predator’s ball with not only Wells and Chase at the trough, but also Goldman Sachs, Credit Suisse, and Morgan Stanley.  All of this reminds me of the scam that the Obama Administration stopped in recent years of allowing private interests to wildly profit as the middle men brokers for federally offered student loans.  Banks were making out like, well how else can I say this, bandits.  Stopping this sticky fingered scandal saved huge amounts of money, but now they are baaaaccccckkkkk with something perhaps even more outrageous.

The other backassedwards part of this is the problem of misdirected blame that still falls in the direction of Fannie/Freddie for supposedly bringing down the house by loaning to lower income citizens without looking at affordability or sustainability.  I understand the ideological need to blame the poor, but it’s important to point out that there is still no factual evidence that these loans, that should have been encouraged by the government, had anything to do with the mess.    Not only would we be throwing out the baby rather than the bathwater, but it seems we would be institutionalizing the bathwater and leaving the baby homeless, so to speak.

There’s probably a debate worth having about how many and how much of the “middle class” need to have federally guaranteed mortgages through these vehicles, but it seems obvious the we will need even firmer support for working class families in the future to have a chance at home ownership in we ever get out of this recession.  We need to slap away the hands trying to pretend this is all a cookie jar, and tell them to not only mind their own business, but maybe even try to get better at it than they have been (let’s see banks portfolio more mortgages on their own before they claim to know how to issue others), and keep federal institutions trying to solve the puzzle of adequate and affordable housing for all Americans again.

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Soft Case for Home Ownership: Forced Savings/Low Interest Rates

Sold HouseNew Orleans        Dueling columns in the Times smashed the drunken or doped spin of the Realtors Association trying to claim that the housing market was “back” and in the “Your Money” section made a soft and shrugging case for home ownership:
“Indeed, many people who are buying at the moment are locking in mortgage rates of about 4.5 percent. A year ago, they might have paid 5.25 percent on a $300,000 loan for a monthly payment of about $1,657. Today, you could lock in a lower monthly payment of around $1,520 on a mortgage that size, or you might not need to borrow that much, given that prices have fallen in many areas.

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Homes as Assets and Wealth

Housing bought today may not appreciate in valueNew Orleans The New York Times ran the article on the front page announcing that the “era” is over when a family in the United States could reliably expect their personal residences to appreciate and create citizen wealth. Housing Fades as a Means to Build Wealth, Analysts Say was headline on the email version.  This headline has been in the making for several years since the subprime crash and the advent of the Great Recession, but it is really more complicated than the headline or the story reveals.

For many lower income and working families, the evidence I amassed in Citizen Wealth would still be correct in establishing that a house is an asset which can act to separate a family decidedly, if not irrevocably, from the ranks of poverty, and provides an intergenerational asset that can continue to create income security, which is how I defined citizen wealth in the first place.  It is

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