Affordable Housing Crisis Growing Globally

(Reuters/J. Herrmann)
“Commerce alley” and “hawked for $28 million” by property giants: Berlin’s rising rents have many very afraid of affording their rent or losing their homes

Chicago    When affordable housing is in the headlines, it’s a safe bet that it is not prompted by a concern for low-and-moderate income families, but maybe we can take a lemon and make it lemonade, as activists are doing in many cities.

Here’s the context.

  • According to Knight Frank, a London-based real-estate consultancy reported in the Wall Street Journal: “Across 32 major cities around the world, real home prices on average grew 24% over the past five years, while average real income grew by only 8% over the same period.”  Reading between the lines, when home ownership becomes an affordability crisis for middle- and upper-income families, then “Katie bar the door!”
  • Despite governments in Canada and Australia adding taxes aimed at second-home and transient investors, affordability is still out of control. In Sydney, Australia the average price for a home is 12 times the median income for middle-class families.
  • Rent control is gaining ground as families come to terms with elusive home ownership dreams. There are drives in California, Berlin, and London for example and the Swedish election turned on deregulating rents.  Spain’s government recently capped apartment rent increases as well.

Berlin, Germany, might be the sharp point of the spear.  There tenant advocates are collecting signatures for a ballot proposal that would force the city to expropriate all private, for profit landlords that own more than 3000 apartments.  According to reports, the Berlin mayor has also proposed buying around 50,000 apartments from private owners and his party wants to freeze rents over the next five years.  Germany has a unique system of contracting with private landlords to provide housing for lower income families on extensive multi-year contracts rather than building more public housing as sort of a different twist on Section 8 housing subsidies in the United States.  Nonetheless, taking such units over totally would be huge.  Large landlord combines, as we found in Frankfurt several months ago, are often beneficiaries of so-called public-private partnerships which contract with these rental conglomerates in Germany to build and then manage the units making their size and operations increasing controversial.

The lack of a national housing program or much of a local one complicates the response in the United States.  An easily observed irony that is depleting the construction of affordable housing in many cities is the double standard allowed for AirBnb in commercial rental complexes as opposed to neighborhoods, making some condo and luxury apartment construction projects mini-hotels when they are not able to price their units to sell on the market, the AirBnb loopholes balance their books and fuel more of the same faux market-rate development.  This is easily observed in New Orleans and many other cities.

Meanwhile in Germany the effort to collect 170,000 signatures is ongoing.  The ballot initiative would not be binding, but would state public interest clearly, and that is worrying builders and others.  Perhaps this is the kind of message we need to send everywhere in order to finally force some real attention to the issue and programs that deliver mass solutions for affordable and decent housing.

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