Real Estate Expert Answers US Housing Crisis Questions | Tech Support | WIRED

Summary

In the video, urban planning professor Kate Nelischer addresses the pressing issue of housing affordability, discussing rent increases, the housing crisis, and the impact of institutional investment on the market. She highlights the scarcity of affordable homes, the role of supply and demand, and the challenges of converting office spaces into residential units. Nelischer also touches on innovative housing solutions like modular and mass timber construction, the history of redlining, and the effects of gentrification and Airbnb on housing availability.

Takeaways

• 📈 Rent prices have increased significantly over the years, with a near 100% increase since 1995, outpacing income growth.
• 🏘️ Low-cost housing units are disappearing, transitioning into luxury housing or for-sale homes, leading to higher rental costs.
• 🏢 Institutional investment in housing has risen, with corporations now owning about 50% of rental units, up from 18% in 2001.
• 🆘 The current housing situation is described as both an emergency and a crisis, with vacancy rates well below the healthy market threshold of 5%.
• 💰 The high cost of housing is primarily a supply and demand issue, with the US short of about 4 million homes to meet current demand.
• 🛠️ Converting abandoned office buildings to residential use can be economically challenging due to the extensive renovations required.
• 🏗️ New housing technologies like modular and mass timber construction are emerging, offering potential solutions for increasing housing affordability and sustainability.
• 🌊 The impact of rising sea levels on oceanfront property values is yet to be seen, but it hasn't affected home prices significantly so far.
• 🚫 Redlining, a historical practice of racial discrimination in housing, continues to affect neighborhoods and contribute to racial segregation.
• 🏛️ Gentrification, often driven by institutional investment, leads to displacement of residents and changes in community dynamics.
• 🛏️ The reduction of available housing, partly due to the conversion to short-term rentals like Airbnb, is driving up rental prices and contributing to the housing crisis.

Q & A

Why does rent seem to increase annually while salaries do not?

Rents have been increasing due to various factors including inflation, the disappearance of low-cost housing units as they transition to luxury housing, and an increase in institutional investment where corporations buy properties to rent for profit. Additionally, the percentage increase in rent from 1995 to now has almost doubled, outpacing income growth.

What is the current state of the rental market in terms of corporate ownership?

As of the information provided, approximately 50% of rental units are owned by corporations, up from only about 18% in 2001. This shift has contributed to the increase in rental prices as corporate landlords aim to maximize profits.

How is the current housing situation classified legally and what does it entail?

The current housing situation is considered both an emergency and a crisis. A housing emergency is declared legally when vacancy rates drop below 5%, allowing municipalities to implement policies like rent stabilization and rent control to address the issue.

What factors contribute to the high cost of houses?

The high cost of houses is primarily due to supply and demand issues, with the US being short about 4 million homes to meet current demand. Additionally, increasing interest rates make development projects expensive, encouraging developers to focus on luxury housing over affordable options.

Why are cities not repurposing abandoned towers for affordable or homeless housing?

Converting certain abandoned buildings to residential use can be economically unfeasible due to the extensive renovations required, such as replacing windows, reconfiguring plumbing, and updating electrical and HVAC systems. The age and condition of the building play a significant role in determining whether demolition and new construction is more viable.

What are some emerging housing technologies that could impact the market?

Modular housing, also known as prefab, allows for components to be manufactured off-site and assembled on location, reducing labor costs and neighborhood disturbance. Mass timber is another technology where large beams of wood are laminated together for strength and fire resistance, enabling the construction of taller buildings with a lower carbon footprint.

How is the rising sea level affecting the value of oceanfront property?

Surprisingly, the rising sea levels have not yet significantly affected home prices. However, this is a complex issue that may evolve as climate change impacts become more pronounced.

What is the historical context of redlining and its implications on current housing?

Redlining originated in the 1930s when the US federal government created maps to determine safe investments for federally backed mortgages, effectively excluding areas where predominantly black families lived. The impact of redlining is still felt today in terms of racial segregation, disinvestment, and gentrification in historically redlined neighborhoods.

What are the effects of gentrification on a neighborhood?

Gentrification can lead to both direct and indirect displacement of residents. Direct displacement occurs when people can no longer afford the increased rents, while indirect displacement is the result of changing community dynamics, such as different shops and community members, making residents feel uncomfortable in their own neighborhoods.

How does Airbnb impact the availability of housing for permanent residents?

Airbnb can reduce the availability of housing for permanent residents by taking potential long-term rental units off the market and converting them into short-term rentals. This contributes to higher rental prices and can also be linked to gentrification and increased home prices in certain neighborhoods.

What factors have made it more difficult for younger generations to buy homes compared to previous generations?

The disparity is largely due to the significant increase in home prices compared to income growth. For example, while the median home price has increased by 43%, the median income has only increased by 7%. This has resulted in home prices being about six times the median income in the US, making it more challenging for younger generations to afford homes.

What are the primary causes of homelessness according to recent research?

The leading cause of homelessness is a lack of access to affordable housing. Other factors such as drug use and mental illnesses exist but are not the primary drivers. High rents and low incomes make it easy for individuals to become homeless, with 8.5 million Americans currently at risk.

What is the situation regarding homelessness in Los Angeles and California as a whole?

Contrary to the myth that people move to Los Angeles for the weather, the majority of those experiencing homelessness in Los Angeles are from California, often from the same county. California has the highest number of unhoused people in the US, with a 40% increase since 2007. However, most are unsheltered, unlike in New York where the majority of unhoused people are sheltered due to the Right to Shelter policy.

Why are corporations investing in the housing market and what does this mean for housing affordability?

Corporations are buying up houses and investing in real estate investment trusts as they recognize real estate as an asset class similar to stocks and bonds. This is part of the financialization of housing, transitioning housing from a social good to a commodity that can be traded for profit, potentially impacting housing affordability.

What factors contribute to the scarcity of houses on the market?

The scarcity is due to the lengthy approval process for developers to build projects, increasing interest rates affecting the decision to sell existing homes, and a significant reduction in housing inventory since the pandemic. These factors have led to a supply that cannot meet the skyrocketing demand.

What housing policies are considered successful and where are they being implemented?

Vienna in Austria is highlighted as a place getting housing policy right. With 60% of people living in public housing, Vienna offers a mix of market-rate and subsidized housing, making it accessible to a broader range of income levels, unlike the US where public housing is primarily for low-income families.

What are squatter's rights and how do they apply in a place like New York?

Squatter's rights allow individuals who have lived on a property without a rental agreement for a certain period, in this case 10 years in New York, and have maintained the property, to claim ownership. This is a court-mandated process, and the original owner can defend their rights to the property. Success in claiming squatter's rights results in the property being deeded to the claimant.

Are there any affordable places to live, and if so, where?

Affordability is becoming increasingly rare, especially in places like California and New York City where the home price to income ratio can be around 10 to 1. Smaller rural communities and some areas in rural Texas may offer more affordable options, but even these areas are seeing a decline in housing supply, leading to increased costs.

What are the implications of buying a house listed on Amazon, and is it a good idea?

Buying a house on Amazon is part of the tiny homes trend, which involves very small homes built on small plots of land. While it's an exciting concept, it's not a significant trend, representing only about 1% of the active housing market and not offering a solution to housing affordability. It's also not recommended to make such a purchase impulsively.

What policies could help bring down housing prices and improve access to affordable housing for renters?

Policies aimed at increasing the supply of housing, such as offering tax incentives to developers who include affordable units in their projects, can help bring down housing prices. For rentals, policies like rent control and rent stabilization, which limit how much rent can increase annually, can provide relief to renters. New York City, for example, has about 16,000 rent control and a million rent stabilized apartments.