Читать книгу The Uprising of the Pandemials - Federico Dominguez - Страница 17

California, with its sunshine, organic food, massive tech companies, the Golden Gate Bridge, Hollywood, and so much more, is the most populated state with the largest economy in the United States. It is the state that has contributed most momentum to the American and global economies in past decades thanks to major technological advances achieved by its tech companies. It is also the most liberal state, with progressive laws and a population deeply committed to addressing climate change. However, not all is like the movies. It is also the state with the largest population under the poverty line in the United States, and one many choose –or are often forced– to emigrate from.

Since 2011, the US Census Bureau began to publish the Supplemental Poverty Measure (SPM), a poverty index that accounts for other factors related to the cost of living in each state such as the cost of housing, gas, food, payments from the state, and medical expenses, among others.

What is interesting about this indicator is that when poverty rates are measured through the traditional index, which only takes into account family incomes, not the cost of living in each state, Louisiana and Mississippi appear as the states with the highest poverty rates in the country, standing at 19.8%. (15) However, when we take the SPM indicator, which accounts for the cost of living in each state, the state with the second-highest poverty rate in the country is California, with 18.1% of its population below the poverty line. This is mainly due to the high cost of housing, which greatly reduces the middle and lower classes’ available income, many of whom spend more than half of their income on rent. Other relevant factors in California are the high cost of gas and electricity due to bad planning and new environmental regulations. According to the traditional measurement, California has a 12.5% poverty rate, but the relevant figure is the one provided by the alternative index. (16)

Buying a house in the United States is more expensive than ever before. In 1970, the average price of real estate measured in current US dollars was $50,222, in early 2020 that number was $327,000, almost five times more. (17) During that same period, the average family income grew by 37%. (18) It is no coincidence that the two states with the lowest poverty rates according to the SPM are Iowa (6.7%) and Kansas (7.8%), whose properties are among the cheapest in the US (43 and 44 ranked nationally).

The high real estate prices on the West and Northeast Coasts are driving significant migration to states such as Arizona, Idaho, Colorado, Texas, North Carolina, South Carolina, and Florida. (19) Homeownership is a middle-class symbol, and people’s inability to access housing speaks to a system that is not working properly.

In cities like San Francisco, Los Angeles, Paris, London, Moscow, Milan, Lisbon, Munich, and Rome, you need more than 15 years’ worth of average income to buy an average piece of property. Hong Kong sits at the top of the Asian ranking, with 47 yearly incomes needed to buy a piece of property. In Latin America, Buenos Aires tops the list with 26 years, followed closely by Bogota with 25 years of income needed to buy a home. (20)

The cost of housing is central to the issue of inequality because it is what those who earn the least spend the majority of their income on. It is also one of the main complaints of young people, and a crucial matter in the Pandemial Uprising. Homeownership plays a central role in the social order of many countries, tipping voters toward center and center-right parties and away from left-wing ideologies. In France, where the net average salary is 2,000 euros per month, the cost of a 30-year mortgage to purchase a 300,000 euro, 40-square-meter apartment is 1,183 euros. If we add in the cost of power, gas, water and property taxes (which add up to an additional 300 euros per month), this person is left with 517 euros a month to spend on groceries, transport, and any other expenses, which is clearly not enough. (21) This person has two alternatives: get married quick (assuming they will not get a divorce) to split the mortgage or rent a small apartment for 600 to 800 euros a month. In an unstable job market where freelancers are gaining increasing relevance, few people can commit to a 30-year mortgage for such large amounts.

The housing market is like any other. If there is demand but no supply, prices go up. Too many urban regulations prevent the construction of several floors and maintain single-family zoning districts. Also, in many states like California, environmental impact-related permits can delay new constructions for several months or even years. According to estimations by The Economist, the rate of construction of new homes in the United States is half of what it was in 1960. (22)

After World War II, governments intervened in the housing market by building millions of homes, which paired with new constructions by the private sector allowed families to acquire relatively accessible properties in terms of their income. In the United States, the construction of the interstate highway system initiated by President Eisenhower (for national security reasons) in 1956, and which continued until the 1990s, made possible the development of city suburbs. This caused a major rise in construction around cities. However, during the 1980s, with gradually less available land, the supply of properties became increasingly limited, significantly driving up prices. In many cases, the supply of homes is inelastic, meaning that a rise in prices does not necessarily mean a rise in supply, especially in cities with strict city codes.

Let us take a look at Germany: a very good example of a country where the housing market works properly. There, the government guaranteed a wide supply of new properties through regulations that promote construction. The rate of homeownership is low, a mere 50%, but thanks to long-term rental incentives and young people not feeling pressure to buy, (23) all these measures contributed to the price of properties being –on average– similar to 1980. (24) For instance, in 2018, Germany built twice as many houses as England, despite having a population only slightly higher and a lower demographic growth. (25) (26) In 2019, the city of Berlin decided to go even further by freezing rental prices for five years. (27)

At the other extreme are cities such as London, with some of the highest housing prices in the world. It is still surrounded by a green belt with strict building restrictions even though young people struggle to access property. (28) Increasing the supply of property in this city by clearing areas for new construction and rolling back certain urban restrictions could generate a strong impulse for the British economy at a time when it is reeling from the pandemic and its exit from the European Union (Brexit). It would also reduce traffic jams and the use of public transport by allowing people to live closer to their work.

In many major world capitals, very strict regulations protect an existing elite of property owners by preventing the construction of tall buildings demanded by the modern economy and needed by young people. We are witnessing a clash between urban aesthetics and the needs of the economy. Residents tend to get upset with the construction of new building complexes that increase the population of their neighborhoods. But unfortunately, we need more homes. We are no longer 3.7 billion people in the world like in 1970, but almost 8 billion people; more than double. And these 8 billion people need somewhere to live, for which urban planners are going to have to find a way to reconcile the housing supply with urban aesthetics. Urban planners specialize in how to allow for an increase in the supply of city properties without ruining the urban landscape or affecting public services. Solutions range from re-zoning old industrial, commercial, and single-family districts; to allowing taller buildings in certain areas, increasing green areas, and improving public transport so people living further away can get to work faster. Cities must have squares, parks, trees, and green spaces. Cities like New York are packed with skyscrapers but their citizens have access to plenty of green spaces.

Usually, the issue of real estate supply is not included in government agendas. The technocracy tends to face the problem from a demand standpoint, leading the US government to subsidize interest rates for buyers (by securing them) or increasing the supply of social housing, which is insufficient considering the scope of the problem. The solution lies within the private sector; by letting it do its job and build new homes. And to do so, it needs space, either to grow vertically through the removal of caps on construction, re-zoning or allowing higher buildings; or through horizontal expansion by freeing up new areas for construction.

Big cities are where young people want to live because that is where the best jobs and opportunities are. The 1980s and 1990s, a time when people wanted to live in the suburbs, are over; the new generations want to live in urban centers and this is where there needs to be a greater supply of housing. The revival of urban centers, congested highways, and the fact that couples have fewer children at a later stage in life leads young people to choose to live in urban centers where there is greater cultural and social activity. If only three cities –New York, San Francisco and San Jose– loosened their building restrictions, the American GDP could rise 4%, according to one study. (29) Globally, the impact could be similar thanks to an increase in the available income of young people and the expansion of business-friendly environments.

Although young people, in general, prefer city centers, in the post-pandemic scenario, two main factors will reinvigorate the suburbs. On one hand, the economy will not be the same, many people who shifted to working from home will never return to their physical offices. We will see a permanent trend toward remote work, which will allow people to live further away from the city centers. Others will take advantage of their online jobs to move further away for fear of a second pandemic. On the other hand, the widespread adoption –and acceptance– of autonomous vehicles (i.e., self-driving cars), which will take place during this decade, will have deep implications for the transformation in mobility and transportation. These vehicles are already a part of our reality, and it is just a matter of regulating them before they start roaming the streets. This will make it easier to live farther from the city center, allowing people to use their commute to do other activities.

The impact of the housing crisis on the economy, society, and politics is significant. Its main effects include: deeper inequality due to lower available income, high levels of mortgage debt, young people living with their parents for more years, and the resulting unhappiness contributing to the election of populist governments. Many analysts believe that what is truly happening in Hong Kong –aside from its citizens’ legitimate claims of the infringement on their rights against the Chinese government– is a profound unhappiness due to the astronomic cost of housing in the city. (30) Other studies speak of a correlation between the rate of homelessness and the increase in housing prices, an issue that strongly affects cities like San Francisco, New York, and Los Angeles. (31)

If a higher supply of properties could allow us to return to a relationship between the cost of housing and income similar to the 1980s, this would unlock a huge mass of income currently spent on mortgages and rent, which would notably increase the available income of the middle classes. Supply, supply, and more supply of real estate! Re-zoning, less regulation, and better transport are the keys to tackling the unhappiness of young people, low economic growth, and excessive family mortgage debt.