America’s housing market is crazy, which makes most Americans crazy. Fixing it would require something like 4 million new homes to drop out of the sky tomorrow. Or perhaps 7 million. And even that wouldn’t really restore the U.S. social contract with the middle class. If you really want to make America’s great cities — their culture, their smarts, their capacity to unlock human potential — available to all Americans, you might need as many as 75 million homes to magically appear.
These numbers have been haunting me ever since I read this great piece by Annie Lowrey in The Atlantic recently. For years, I’ve believed Americans have become an angry bunch, crushed under simmering resentments, with a vague knowledge that they’re being ripped off at every turn, but without knowing quite whom to blame. And that anger has, dangerously, turned to rage.
I’ve read that rage is merely anger faced with helplessness — when there’s no solution, there’s nothing left to do but scream. There’s a lot of screaming right now.
How did this happen? It’s simple, really — America has spent the last generation creating far, far more people and jobs than homes. Some data points from Lowrey:
- In New York, San Francisco, Boston, Los Angeles, Miami, Chicago, and other cities, just one new home is getting built for every 20-plus jobs created.
- New York City issued fewer new housing permits in the 2010s than it did in the 1960s.
- California built between 200,000-300,000 homes per year from the 1960-1980s. In our time, even during the recent boom, California built no more than 100,000.
- Meanwhile, half of Americans are housing burdened, meaning they spend more than 30% of their income on rent or a mortgage; and one in four renters spend half their income on shelter.
More than five years ago, I began a failed book project that turned into a series of essays called The Restless Project where I tried to explore this rage. I’ve long believed it boils down to this: Regular people with regular jobs can’t afford regular homes in America. I’ve sliced and diced housing market data from zip codes across America for years, but I doubt I need to prove that statement to you. Talk with any young family about their search for a home near any decent-sized city in America and you’ll hear the same lament — the two-hour commutes, the two-income traps, the massive compromises, the families kept small because there are no larger homes to trade into. The absolute destruction of the starter home market.
I spent a lot of time trying to find markets that bucked this trend. At one point, I called them “sane circles” — places where ambitious families willing to exercise economic “portability” could move and keep their monthly rent or mortgage under that traditional 30%-of-income threshold (ha!). They did exist. Until everyone else had the same idea. We’re all far too late for Nashville, or Knoxville, or Missoula, Montana, or Boise, Idaho….or….
I knew it then: making such a move might be a winning lottery ticket for a lucky family with good timing, but it wasn’t going to solve the national housing crisis. It just shifted the problem around. Now, 1-bedroom condos in downtown Durham, N.C., cost about as much as 1 bedroom apartments in Manhattan. Well done! Now we can all be miserable together.
I’m writing this piece now because we are, allegedly, in the middle of a major housing market correction. Mortgage rates are higher than they’ve been in 20 years!
Prices fell….1.3% from June to August of this year. Put in real-world turns, raging price increases have simply been put on a temporary pause. Even if a worst-case-scenario-10%-drop eventually comes to pass, that just puts prices back to 2021 levels or so. Higher mortgage rates and the pause on price increases simply mean families that were about to throw everything they had — borrowing every last penny — to sneak into that first home must remain renters instead. Meanwhile, pent-up demand is so high, and investment returns are so strong (especially for corporate and foreign owners!) that sellers simply move to the next buyer.
As for the national affordability crisis? The impact of this correction will be like a whisper at a rock concert.
I write in these stark terms because America has an enormous problem on her hands that just about no one talks about. The solutions are complex and will require everyone to compromise. Builders will have to build. They’ll need labor. We’ll all get new neighbors. Homes will need to be smaller, and cheaper. But we need more homes for people. Millions and millions of new homes.
And, the solutions will take time. A lot of time. Even *if* we could magically drop 7 million homes out of the sky, demand is so backlogged that the wrong people would initially benefit, and the desired lower-middle-class boom would be so delayed that it might never happen. (Lowrey does a better job of explaining why than I could, and I really do hope you read her story, even if you hit the paywall).
Suffice it to say America is not great at solving thorny problems that require generation-long commitment. (Not great, but you can’t say we haven’t done it before). It’s easier to argue about identity politics instead. That’s a dangerous road, however. I don’t want to mention what comes after anger turns into rage.
Naturally, people lucky enough to own homes now don’t feel quite the same urgency — they have a vague sense that they’re building generational wealth, though what many of them really have is golden handcuffs and high property tax bills. Meanwhile, corporations and people with real money from grandpa and grandma (and most of the land!) are more than happy to have the rest of us blaming each other for this mess.
But the next time you read an angry Tweet or have a crazy conversation with a neighbor or feel the urge to blame someone because that independent coffee shop in your neighborhood just became a bank, ask yourself: Why are they so mad? Anyone who spends half their income to have a home has the right to be mad. And will be mad, until there is hope, somewhere, somehow, that things could get better.