Everywhere I go it seems there’s some kind of housing crisis. In some places home values are dropping precipitously, people are unable to sell and move on, and formerly middle class homes are being abandoned or converted to poorly maintained rental properties. In other places home values and rents are obscenely high and ordinary people and essential workers are being driven out of whole cities and counties. The national economy has bifurcated and the shrinking middle class is reflected in a two tiered housing market. I’d like to explore the root causes of the situation.
Our current real estate schism is based on two forces. First, we as a society decided decades ago that we didn’t want to be shackled by the social conventions and obligations that hindered individuals in their quest for personal fulfillment and private gain.
For liberals this took the form of women’s liberation, black liberation, gay liberation… Everyone wanted to throw off the yoke of conformity. For conservatives it took the form of tax revolts, rebellions against regulations of every kind, a search for open space, cheap labor, and new markets.
These two groups were in no way mutually exclusive. Both the California Hippy and Evangelical Christian from South Carolina were pushing the country in the same direction for decades whether they knew it or not. Everyone was rebelling against social constraints and dismantling the old system that created the broad stable middle class in the first place.
The second force in the housing crisis is based on physical mobility made possible by car culture, affordable commercial aviation, containerized cargo shipping, and modern telecommunications. Geography stopped being a material limitation for the last few generations. As a result, people have self segregated. The rich have congregated in a handful of premium locations and radically driven up the cost of living in those spots. The poor have been left to their own devices in economically and culturally abandoned regions. And the ever diminishing middle class has leveraged itself into a thousand little niches in an attempt to keep up as their incomes and status decline.
I was recently at a meeting in Northern California where government officials, local business people, and community organizers all gathered to promote their various objectives. These were all incredibly kind, decent, responsible people who truly cared about their town. The difficulties on hand will be familiar if you live in one of the more expensive parts of the country.
There’s a desperate need for affordable housing. There’s huge pressure to preserve productive farmland and the natural landscape. There’s fierce NIMBYism that stops new growth of every kind. There’s serious money pressing down on the scarce property that is available. There’s a water shortage brought on by years of drought. And there simply is no culturally or politically tolerable mechanism to reconcile any of these conflicting forces. Honestly, for the people who already own property in the area the situation is pretty sweet – so long as the authorities manage to keep the ever growing homeless camps out of sight. The default setting is to simply let things fester and muddle through.
Just a month earlier I was at a different meeting in another town where the problem was reversed. A formerly prosperous town was hitting an economic wall as growth and development had come to a complete halt with unpleasant consequences. There was plenty of cheap land all around and everyone was desperate to see it covered in new homes, shopping malls, and office parks as quickly as possible. But market demand evaporated. Developers couldn’t justify building much of anything because there were no buyers on hand. Too much of the existing building stock was already sitting vacant.
You’d think these two problems could solve each other. Why don’t all the people desperate for affordable housing in one place simply move to the place with abundant vacancies? Of course, it doesn’t work that way. Communities are more than a pile buildings. People need the right mix of employment, education, culture, and so on. You can’t live in a cheap place if you have no access to jobs. And you can’t take a job in a place where there is no available housing.
Let’s go over some of the particulars again. Mass motoring allowed almost everyone to move away from the things and people they didn’t like. If your taxes went up you moved away. If “undesirables” arrived on your block you moved away. If you didn’t like the snow you moved away. Cheap private transportation on America’s highways made it possible for the vast 20th century middle class to remove itself from traditional communities and find bliss is splendid isolation.
Affordable commercial aviation let people migrate to previously remote locations. A car could get you from New Jersey to Florida in a couple of days, but a plane could get you there in a couple of hours. Air transport preferentially poached the affluent, the young, the educated, and retirees from established towns and delivered them to previously obscure destinations. The ability to hop quickly and cheaply from place to place was a tremendous boon to some lucky towns, but the death knell to others.
Containerized shipping brought raw materials and cheap manufactured goods in from every corner of the globe. If workers threatened to strike you moved your company away. Far away. If you found a better tax deal you moved away. If you needed the authorities to turn a blind eye to your company’s waste stream you moved away. The toaster ovens, refrigerators, and steel belted radial tires could all be made somewhere else for a lot less money. And along with those jobs went a big chunk of the old middle class.
Information technology has added a new layer of mobility to the population. It’s now possible to use your mobile phone to turn your home air conditioner on and off from six thousand miles away. On the one hand this sort of technological magic allows millions of people to earn a living remotely. An accountant from Albuquerque can live in a beach cabin in Hawaii while still drawing her livelihood from New Mexico.
On the other hand, what happened to blue collar jobs in the past is now happening to white collar jobs. Your CT scan or X-rays can now be sent via the Internet to a technician in the Philippines who will interpret your medical condition remotely. Film editing can be done entirely online from Brazil. Computer code can be written in India. Architectural and engineering work can be done digitally in the Ukraine. If a job can be scanned, or Skyped, or pushed through a fiber optic wire somehow it will eventually be sent to a low wage region to be done by someone who is smarter, faster, and more desperate for work than you are.
And this isn’t factoring in the jobs that will soon be done entirely by machine intelligence. That accountant in Hawaii needs to pay attention to what she’ll do when her clients all switch to the cheaper advanced computer program that can wiggle around the tax code better than she can. Then again, the guy who writes that computer code will become very rich and might be able to move to Hawaii himself.
So what are the options here? First, we can allow the already stressed middle class to continue to shrink so that the U.S. becomes a two tiered society of haves and have nots – with many more losers than winners. Inevitably this will require an increase in both government police and private security to keep the wealthy protected from the pissed off impoverished masses. There are plenty of examples of what that looks like around the world.
Or, we could tax the rich and redistribute the funds to the formerly middle class population that has trouble feeding itself and keeping a roof over their heads. We also know what that looks like.
Or we could create a new social, political, and economic national compact that restructures absolutely everything. Some old fashioned societal constraints might be a prerequisite for equity and a renewed middle class. Rights come with responsibilities. Aging Baby Boomers will fight that sort of thing tooth and nail. But Millennials will likely grab at it with both hands. Toss in fuel supply disruptions and a break down in international trade relations and American society might find itself coalescing in very different ways.