The Progressive Ensign

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Category: Local Politics

Housing Has Not Recovered From the Great Recession

Image: 15146affordablehousing.weebly.com

As a percentage of GDP housing has not recovered from 2008.  Particularly, in two key categories: (1)  Furniture, Repairs & Maintenance and (2) Construction.  Additionally we know that appliance sales have been lagging as well due to tariffs and price versus worker wages being stagnant.

Sources: BEA, John Burns Real Estate, The Wall Street Journal, The Daily Shot – 10/18/18

Housing has not recovered from the Great Recession downturn from sub-prime mortgages and loose lending practices.  As part of the recovery, banks were made whole with billions of TARP funds, but homeowners who tried to write down their principal loss on their homes to reduce mortgage payments were not allowed in court.  Banks paid a small pittance of $50 million in homeowner relief that was distributed in a hazard manner.  Millions of homeowners lost their homes and more importantly lost their equity.  They could not replace their homes when the economy turned around, they had to take ‘make do’ jobs when they did finally find a job and are now left with little wealth to retire on except for Social Security.

Young prospective home buyers face a daunting affordability crisis as the inventory of affordable homes is low as builders focus on wealthy buyers, who buy high margin homes.

Sources: Scotiabank Economics, NAR, Haver Analytics, The Wall Street Journal, The Daily Shot – 10/17/18

In all regions of the country affordability continues to fall after reaching a peak in 2012.  Mortgage rates are at the highest level since the Great Recession, the inventory of middle class housing continues to decline and the commitment to homeownership is waning.  We hear more and more about how ‘renting is really ok’ – for who?  The wealthy landlords who continue to raise rents while raking in the cash.  What about families who want yards for their kids to play in, or to gain ‘sweat equity’ by upgrading the home they live in or landscaping the yard.  It is clear just looking at most neighborhood which homes are owned and maintained and which ones are rentals owned by an off premise landlord.

Next Steps:

Dropping the national commitment to home ownership is not the solution to the problem.  We need to ensure that the 80 % who do the heavy lifting in the economy can afford to buy a home on their incomes.  Corporations need to be increasing wages for workers at least as fast as their executives and more to ‘catch up’ to the raises and stock plans of the executive team receiving high compensation from stock and stock buybacks.

Reducing student debt, now at $1.5 trillion is critical so that prospective home buyers do not have student debt right at time they are starting families and purchasing a home.  We have proposed a far reaching program building on existing student debt forgiveness programs to more comprehensive service for debt forgiveness programs.

Builders need incentives to build lower margin homes middle class homes in new developments.  Local and state governments need to take on the charter of ensuring that affordable housing is a priority for zoning near commercial and business centers.

Fannie Mae and Freddie Mac need to be committed to focusing on first time buyers and lower income prospective buyers innovating ways to get them into homes while at the same time being financially responsible.  The Federal government needs to provide more funding for the two housing agencies to bring down rates to an affordable level.  Working in cooperation with groups like Operation Hope, banks need to make a new effort to make mid and lower income buyers financially literate and help them move into homes.  Think what a huge difference it would make for our cities and rural communities if people owned their homes and made improvements to their home and yards.

High Tech Behemoths Run State and Local Politics

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Image: youtube.com

Recently the high technology power houses like Google, Facebook, Uber and Amazon have appeared in the news related to national issues privacy, Russia hacking, driver contractors and conservative viewpoint censorship.  There is an even more troubling trend; major high tech corporations are controlling key decisions, policies and direction of development for many major American cities and states. Amazon is throwing its weight around the U.S. in search of a 2nd corporate headquarters.

Source: LA Times – 1/19/18

Amazon has already received millions of dollars in tax subsidies and compensation  for locating warehouses in some regions. The Governor of Maryland has offered a $5 billion package of transportation and tax breaks to the company to locate in Maryland, while Newark and New Jersey have offered a $7 billion package of subsidies.  Amazon has been adept at Seattle politics as well, when the city unanimously passed a $275 per employee tax on businesses to pay for homeless shelters and affordable housing. Amazon along with local businesses pushed back and the measure was repealed.

Apple purchased a site previously owned by Hewlett – Packard for its Apple Park spaceship headquarters.  The Cupertino city council was delighted with the plan to put 14,000 employees on the site, doubling the number of workers at the large parcel.  After the headquarters building was built the local council realized that the traffic congestion around the site and the city was going to be a major problem. The city then proposed a per employee tax to gain revenue of $10 million versus the present tax structure based on square footage would have netted only $800, 000. The proposed funding would have been allocated to buses, road widening, express lanes and other traffic flow enhancements. Apple and other businesses protested so the proposal was tabled until the 2020 election.

Uber has gone into cities all over the country from its base in San Francisco without authorization, creating major competition to local taxi companies.  Cab companies in most cities purchase a medallion from the city at great expense, some in the hundreds of thousands of dollars to license them to provide ride services in the city.  Uber has run into opposition in some major cities like New York, where the number of cars is capped.

Google has quietly purchased hundreds of acres of land in downtown San Jose, until newspaper stories began to spot light the land purchases.  The high tech behemoth plans on deploying up to 20,000 employees around the city hub and train station.  Planning for a huge employee center near public transportation makes sense, but local businesses and housing near purchased lots are under pressure to sell to make room for the corporate plan.  Local housing groups are concerned about the availability of affordable housing and small business.

Next steps

Our concern is that major corporations, their planning departments and executives have so much power that local elected leaders have little clout to push back on building or development that may not be in the interest of the local community.  As local government struggles to gain revenues lost to an Internet based economy, and stiff opposition from local citizens to raising taxes causes local city government power to decline.

Local leaders will need to rethink their base of power in the city, seeking alliances with local businesses while building a base of economic support for city services.  Cities and states often interested in luring businesses to their local regions spending hundreds of millions of dollars in the process maybe missing the point of their charter.  Building necessary infrastructure, affordable housing, fast transportation systems, healthcare for those not covered and safe streets are their mandate from local citizens. It is a challenging time for local and state governments, yet they need to take up the mantle and assert the policies and programs they were elected to implement.  Plus, corporations need to take responsibility for their actions and how they affect building the common good of the community.

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