Supply-side causes of Unaffordable Housing


The Housing Crash of 2007: Wall street trusts and funds (like Blackstone and Starwood Capital Group) have been buying up an increasing percentage of single-family homes every year since 2007. Price-wise, they can easily out-compete local would-be home-buyers or landlords. Especially the cheapest homes go first (an average of 20% of available homes in 2018. Go here.). This reduces the affordable housing supply, increasing the cost, and is one more force turning potential home-owners into renters. Home ownership has decreased proportionally by 10% since 2011. 

Many of these houses have been turned into rentals, and these profit-oriented companies make the least-responsive absentee landlords. Other houses are razed and replaced with large multifamily rental buildings.

Some of the cruelest abuses of homeowners and renters happened in the few years after the crash in 2008. Banks and LLCs (some owned by our current secretary of the treasury) bought foreclosed mortgages from the government with the instructions that they were to renegotiate the mortgages to allow people to stay in their homes. The banks'/investment groups' losses would be covered by the government and the profits would be kept by the banks/investors. Instead these investors evicted the tenants and rented the properties until they were worth much more, then sold some of them and made a huge profit.

To read an excellent (2019) book on housing and zoning practices in the US over the last century (really appalling) read "Capital City", by Samuel Stein. To buy it, go here. To read a summary (one eighth of the pages), hit these links:  Part 1 and  Part 2.

Housing as a speculative Commodity instead of a home

Making a Commodity of Single-Family Neighborhood Properties:   The value of real estate depends on the size and quality of the building and lot, its location, scarcity, and how much of a profit it can generate. Except for rental houses, houses in single-family neighborhoods aren't owned to make a profit. They are one of the few ways the average family can preserve wealth. Their housing payments go into building up equity, instead of covering costs and making a profit for a landlord. So allowing only smaller housing in a neighborhood holds down the profit margin, and also the prices of the houses and rents.

Some people can't afford houses, so they must rent. If you have a responsive, maintenance-conscious, probably-local, responsible landlord providing a housing unit, it's a great thing. But what if the landlord is Blackstone, and they employ a low-quality property management service to handle maintenance to increase profit? As mentioned above, the farther away a landlord lives from the rented property, the less responsive he/she/it  is likely to be.

When large multi-family, higher-profit structures are allowed in low-density single-family neighborhoods, investment groups and LLCs are suddenly interested, and can afford to build them. Any property now has a large profit-generating potential, so the prices of surrounding houses go up. New housing, per square foot, is more expensive than older housing. Rents in these places will be higher than in older houses. Prices and rents in near-by houses will grow higher, because they can. More homeowners will succumb to selling their house to investors because of the high offers they can field. More large multifamily buildings go in, and the neighborhood gentrifies. But the quality of life decreases: less green space, tall lot-filling buildings, and less parking. Zoning is the simplest tool to prevent this process.

Some neighborhoods going through this process have ended up with more corporate-owned rental housing than locally-owned housing. At this point, local control of neighborhoods erodes.


Corporations and Contractors Don't Want to Build Low-Income Housing: In almost every city that has tried to increase housing units by leaving it to the market, high-end (higher-profit) buildings go up in quantity, but added low-income housing is negligible, and sometiimes decreases because it is razed.

So rents go down for higher-end renters, but increase for lower-income renters.

This is seen in Olympia too. The City made it a goal a few years ago to increase housing downtown, for a variety of reasoins. Although this is a great move to build for more people to live more-densely in downtown, and some new buildings are very attractive, no market-rate housing for lower income renters has been included yet.

Some of the new buildings that have no affordable units have been given hefty tax breaks all the same. The City now needs to promote building of housing that is affordable to the 42% of Olympians who can afford less than $1100 per month in housing payments. The lowest-cost housing types to build would be smaller apartments in larger apartment buildings on main streets and in the nodes, followed by manufactured homes, tiny houses and some ADUs in the neighborhoods.

The apartments built downtown don't supply these lower rents. As an example, 123 4th Avenue has rents ranging from $1350 a month for 691 sf to $2700 for 1377 sf

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