The Affordability Crisis, Part 1: Housing and its Discontents

Whenever social ills are spreading, one can always look for the market to try to capitalize on the situation before looking to meet the fundamental needs of the consumers themselves. This phenomenon plays out in many areas of economic life; for example, affordable housing is increasingly difficult to come by, and while supermajorities of Americans now view young people’s goal of home ownership as unrealistic, ‘alternative’ forms of housing have recently grown popular as a means of addressing the lack of decent living options.. However, it generally appears that these new alternatives, rather than acknowledging this crisis of affordability, instead provide temporary solutions to a problem that is only getting worse, while actually trying to compel young consumers to accept an endless and foreboding economic landscape.

I recently learned that trailer parks are being pushed as a worthwhile investment for both renters and property owners. In a recent article, MHP Wealth claims that trailer parks “remain a recession-resistant investment that holds up in good times and bad.” For renters struggling to find affordable housing, trailer parks are meant to serve as an alternative. MHP claims that while the average rent for a one-bedroom apartment is $1,600 per month, renting a trailer in a lot only costs around $300 per month.

For most people, living in a trailer park isn’t exactly an enticing opportunity; perhaps more importantly, I’m not even sure it’s ultimately more affordable. It’s true that I live in a city where the rent is too damn high, but it also has above-average public transport that is easy to access (although the cost of this is also too damn high). Trailer parks, being overwhelmingly situated in rural areas, lack this easy access to public transport. Even if you somehow manage to purchase a car, paying for gas and insurance runs the risk of sinking you even further in debt. Still, I can understand why young people who have access to transportation but are otherwise desperate for affordable living accommodations may see trailer parks as an attractive investment. MHP points out that this is often the case for the elderly: older Americans, many of whom are retired and without a steady income or a decent pension make up a disproportionate percentage of trailer park residents.

The increased prominence of trailer parks in today’s housing market is somewhat similar to the rise of companies like PadSplit, which allows renters to pay a fixed fee each month for one room in a furnished apartment shared with 2-6 strangers at a time (for PadSplit, this can be as little as $200 a week). PadSplit may be an attractive option for those who cannot easily afford studio apartments or find enough roommates to bring their individual rent costs down, but a quick look at PadSplit’s page on Better Business Bureau offers a sense of the complaints directed at their operating practices. Users have accused PadSplit of predatory practices, including deceptive advertising, hostile/indifferent customer service, poor maintenance of units, and health and safety violations. One complaint on Facebook actually described PadSplit as “a middle man for slumlords to take your money and not provide safe and clean and working housing”. Furthermore, PadSplit users are not given actual leases to sign, making their status as tenants legally ambiguous. This allows owners to skirt numerous housing regulations, such as providing adequate eviction notice or adequate maintenance, all while residents are barred from contacting the property owner directly.

Americans’ search for cheaper, ‘alternative’ living conditions results partially from widespread housing shortages plaguing the United States. In few places are these shortages more pronounced than in New York and Newark, where housing supply has lagged far behind demand for new housing. Based on historical averages, 1 housing permit is issued for every 2 new jobs (this being the ideal ratio according to Housing Shortage Tracker). The current ratio for New York and Newark is 12.9 to 1.

A survey on Americanprogress.org found that 77% of Americans believe there is a housing shortage, with demand for homes outstripping supply “in nearly every community and every region of the country”. While overpopulation is an issue, it’s an exaggerated part of the problem. This same survey found that private equity firms and corporate property managers accounted for 1 in 4 home purchases in 2021. Wealthy investors purchased more than 30 percent of all single-family homes sold in Nevada, Georgia, and Arizona during the same year, while MetLife has projected that corporations and private equity firms could own as much as 40 percent of all single-family rentals by the year 2030. The article continues:

“This market concentration gives large corporate landlords substantial ability to limit competition, up to the point of price gouging renters. New algorithmic tools allow these landlords to seamlessly share market data to limit competition and raise rents. Seventy-eight percent of Americans support action to prevent this anticompetitive behavior, with 54 percent strongly supporting it, making it the most strongly supported policy tested in the survey.”

And further down:

“These proposals to eliminate tax breaks for investors who snap up homes to rent for profit and to crack down on the use of algorithmic price-fixing tools would bring greater accountability to the housing market, something Americans want to see addressed before the shortage of homes. More than 75 percent of Americans support these proposals, including strong support from 55 percent of Americans living in rural communities.”

The data assembled by Americanprogress.org also offers compelling evidence that corporate power and uneven distribution of wealth are significant factors in the proliferation of America’s housing shortage. Some scholars and researchers go further and argue that referring to this problem as a ‘housing shortage’ obscures the true nature of the crisis. For example, a recent study by the Association of American Universities argued that between 2000 and 2020, only four of the nation’s 381 metropolitan areas experienced a true housing shortage. To support this claim, the researchers pointed to a census taken at the end of 2020 which put the national vacancy rate at 9.7%, based on the fact that 14 million housing units around the country were unoccupied. Kiri McClure, a co-author of the study, concluded that: “Our nation’s affordability problems result more from [people with] low incomes confronting high housing prices rather than from housing shortages…this condition suggests that we cannot build our way to housing affordability. We need to address price levels and income levels to help low-income households afford the housing that already exists, rather than increasing the supply in the hope that prices will subside.”

We are often told that a more just allocation of wealth across this wealthiest of nations is impossible, and that redistributive economic policies are always the first step on a slippery slope to turmoil and instability. However, the solutions put forth by politicians and business leaders are forcing many young people to examine the status quo and the life that it’s preparing them for: seemingly, one of turmoil and instability! Americans in their 20s and 30s struggle to find affordable housing, and a record number now live with their parents, many of whom managed to own their own homes at their children’s age despite holding only “modest” jobs.

The obscene social inequality in our country has created an affordability crisis and a generational wealth gap that permeates numerous aspects of society, not just housing. Join me next week as I discuss how modern, highly financialized capitalism is affecting young people’s experiences with credit, and savings, and fostering an inescapable cycle of debt.