Real Estate Expert Answers US Housing Crisis Questions (Video)

Rising Rents and Stagnant Salaries

Kate Nelischer, a professor of urban planning, explains that rents have increased nearly 100% from 1995 to the present, while incomes have not kept pace. This rise is due to inflation, the conversion of low-cost units to luxury housing, and increased corporate ownership of rental properties. As of now, around 50% of rental units are owned by corporations, compared to 18% in 2001.

Housing Emergency and Low Vacancy Rates

The US is experiencing a housing emergency, a legal term indicating a vacancy rate below 5%. In New York City, the vacancy rate for rentals under $2,400 is as low as 0.4-0.8%, with an overall vacancy rate of 1.4%.

High Home Prices and Supply Shortage

The US housing market faces a supply and demand imbalance, with a shortage of approximately 4 million homes. The lack of affordable housing has driven up prices, making 2023 the least affordable year ever for homebuyers. High interest rates and development costs have pu<a href="shed developers to focus on luxury housing rather than affordable options.

Conversion Challenges for Abandoned Buildings

Converting abandoned office towers into affordable housing is often not economically viable due to the extensive modifications needed, such as installing windows, reconfiguring plumbing, and changing HVAC systems. Newer buildings, in particular, are difficult to convert.

Housing Technologies

Modular housing, or prefab, involves manufacturing components off-site and assembling them like a jigsaw puzzle, reducing costs and neighborhood disruptions. Mass timber, a fire-resistant, low-carbon material, is now being used to construct taller buildings, with recent innovations allowing for 18-story structures.

Redlining and Its Impact

Redlining, a discriminatory practice from the 1930s, denied federally backed mortgages to areas with predominantly black residents. These areas, marked in red on maps, still face disinvestment and segregation today. Gentrification often targets these neighborhoods, displacing long-time residents.

Effects of Airbnb on Housing

The increase in Airbnb rentals has reduced the availability of long-term rental units, driving up prices. In London, 50,000 former rental apartments are now Airbnb units, contributing to gentrification and rising home prices.

Generational Inequality in Homeownership

Millennials face a much tougher housing market than boomers did. In the late 80s and early 90s, the median home price was about twice the median income. Today, it’s about six times the median income, and even higher in places like California and New York City.

Leading Causes of Homelessness

The primary driver of homelessness is the lack of affordable housing. High rents and low incomes put 8.5 million Americans at risk of becoming homeless. California has the highest number of homeless people, with a 40% increase since 2007.

Corporate Ownership and Housing Supply

Corporations, including firms like BlackRock, are investing heavily in the rental market, viewing real estate as a profitable asset class. This financialization of housing has transformed it from a social good into a commodity.

Housing Supply Constraints

Developers face long approval times for new projects, sometimes up to 48 months. High-interest rates also discourage existing homeowners from selling, further reducing housing supply. Since the financial crisis, housing production has been slow to recover, contributing to the current shortage.

Successful Housing Policies Abroad

Vienna, Austria, offers a successful model, with 60% of its residents living in public housing. This includes middle-income families, not just low-income households. In contrast, only 1.5% of US residents live in public housing.

Affordable Housing Policies

Policies to increase housing supply and affordability include tax incentives for developers to include affordable units, rent control, and rent stabilization. New York City has about 16,000 rent-controlled apartments and a million rent-stabilized units, which limit rent increases and set maximum rents for older buildings.