Homeownership has historically been the primary way wealth is accumulated in America (for white people, anyway). The story of housing in foundational to understanding both the literal and prospective fortunes of Millennials. Land use rules have a huge part in generational wealth. Yet, there is little out there these days in terms of comprehensive analysis of the problems of affordable housing.
According to a 2018 study by the Joint Center for Housing Studies at Harvard, renters' median earnings have gone up 5 percent while rents have increased by 61 percent since 1960; home prices have gone up 112 percent while homeowners earn 50 percent more in that same period. We know that Millennials are far less likely to own homes than their parents were, and also that in some places it can take up to 19 years to save for a downpayment at current average wages and property prices, while it took boomers on average 3.1 years.
Generation Priced Out examines the particular ways in which public policy under the sway of Baby Boomers has worked to limit housing access for Millennials across a dozen cities in America, through a series of case studies from San Francisco, Los Angeles, Austin, Seattle, Denver, and New York, demonstrating some truly egregious ways in which housing restrictions are used to keep out the young, and in the case of Boulder, Colorado, with a side benefit of suppressing voters as well. This tome is heavy on the local policy determinants of the housing crisis.
Zoning restrictions, under the guise of "neighborhood preservation", Shaw argues, have transformed affordable communities into luxury neighborhoods, while simultaneously promoting racial and economic segregation (consciously or not). Single-family-home zoning ensures that the nuclear family model can't expand to a tiny house in the backyard for the adult child or grandma. Restrictive height and density limits ensure few new housing units can be built in existing neighborhoods, as do large minimum lot sizes; and overly stringent occupancy restrictions again ensure that extended families and young people don't settle in such neighborhoods. These measures, Shaw asserts, are the main components of a "neighborhood preservation" agenda pushed often by progressive boomers to maintain their neighborhoods as they are.
Boomers have the incentive of maintaining their neighborhoods as means to maintain their property values. (As any number of mainstream advice peddlers insist on reminding people, your property value can be harmed by who your neighbors are – an Americanism that is historically fraught ). A huge part of the generation's wealth has derived from rising property prices in the last 20 years. Consider that a national study found from 1983-2013 housing wealth accrued "almost exclusively among the wealthiest, older Americans."
Older people have always had more money than young people, yes. But the differentials are much wider than they've ever been thanks to structural changes in the economy and policies that favor the old over the new. In 2013 older families had 15 times the wealth of younger ones (compared to 8 times more in the early 80s.) Meanwhile the over 65 section of American have seen their incomes rise by 24 percent, while 25 to 34 year olds saw a 2 percent fall.
The divergence in perspectives on housing policy cleaves nicely between generations, says Shaw, as Millennials did not get a chance to buy houses 30 years ago when they were much more affordable. And Boomers now are doing all they can to preserve the financial gains that they've seen through homeownership. Increasingly, the two groups find themselves at odds around policies that would allow for more affordable housing and particularly for more housing units to be built.
According to Shaw, progressive boomers who oppose new building often say that housing is not simply a problem of supply but involves a "complex interplay of forces largely beyond our direct control," as a city council member in Cambridge, MA, is quoted in the book. Shaw points out this is a convenient way for community leaders to not change what they can, policy-wise, at a local-level.
Shaw cites a citizens advocacy group in San Diego that opposed raising building heights in their neighborhood, arguing that "the newcomers will add more traffic, more demand for park and outdoor space, and more stress on infrastructure in an area where the infrastructure barely supports the existing population and the people who come to shop, dine, and visit." This statement underlines not only the Boomers reticence to allow new development but also their collective failure over 30 years to invest in critical infrastructure.
Sounds like the opposition to the Amazon HQ2 in Long Island City in New York, does it not? The opposition to that project purported that the LIC infrastructure was already stretched beyond capacity and need of serious repair; and giving tax incentives to Amazon to add 25,000 people to the strain was the wrong approach. Yet, infrastructure funding has never been sexy, and Boomers collectively have rarely wanted to pay for something they inherited from their parents for free. In these cases, the failure to invest in critical infrastructure then becomes the excuse why development can not happen – sorry, we're all full up.
In Boulder, Colorado, home of the University of Colorado and its 34,000 students and a largely single-home-property town, a city ordinance in the 2000s banned more than three unrelated people living in the same household in much of the city (in a few parts of town the ordinance allows four unrelated people). This act of not-in-my-backyard-ism was aimed squarely at students and young people in their midst (never mind that the University is the number one contributor to the city's economy). A Democratic Party member then set about using voter registration data to bust "illegal" households – making many people afraid to register to vote for fear of getting in trouble with their landlords and losing their housing.
Policies like these, Shaw writes, enforce "a sort of spatial class privilege" across "progressive" cities in America – and are often lead by Boomers who consider themselves progressives who feel their environmental values include opposing development wherever it may occur.
Shaw feels solidly that the biggest issue with housing and its affordability is the supply of available housing stock. Yes, as he reports, San Francisco added 546,000 jobs while only adding 76,000 additional housing units between 2010 and 2017. In Palo Alto between 2014 and 2016, only 44 new additional housing units were built. Yet this focus on supply as the key issue is colored by Shaw's time and experience fighting the housing fight in the Bay Area, where a shortage is particularly acute.
The idea that there just isn't enough housing, and there are too many restrictions on building new housing in most cities, has become the popular narrative for why housing has become so expensive and difficult to access. This narrative says in essence that there's a housing supply problem, and government is to blame. (Supply and demand are also the standard explanation on offer for why rents have skyrocketed in the last 20 years while wages have stagnated.) Economists call the phenomenon where people boil a complex subject down to basic economic concepts that don’t capture the full issue Econ 101ism.
"Supply is the problem" does not address the issue of the fact that most new housing in urban areas is built as "luxury housing" with median purchase or rental prices far above the "affordable" line, that many times affordable housing is bulldozed to build said luxury housing, that small site housing development faces many more hurdles than does large luxury developments, but most importantly, that the rise of "housing as an asset class" or business model has come to dominate large swaths of the housing sector.
The rise of "housing as an asset class" business model has come to dominate large swaths of the housing sector.
Yet despite this argument that supply is the #1 problem throughout the book, other examples within it illuminate the "housing as an asset class" issue. Consider New York, where small development projects are rare and new housing is generally built by corporate conglomerates that build housing to make money, not to house people. In his example of Crown Heights Brooklyn, a neighborhood that experienced dramatic gentrification this decade, he shares how Mayor de Blasio made a campaign promise to build affordable housing on a parcel of city land known as the Bedford Union Armory. Yet once in office, de Blasio transferred control of the site to a private developer to build 56 condominiums (projected to sell for $1 million dollars each), and 330 rental units (18 of which would affordable for those earning the neighborhood median income – $40,000). Then, to address the issue of some 5,000 Crown Heights residents displaced by condo conversions and other tricks, the city instead opened a homeless shelter that had in it a few low-income, longer-term units inside. As you'd expect, many residents opposed the shelter’s construction.
As Paul Collier elucidates, those for whom houses are an asset want to maximize the gains they can make on that asset. They build luxury developments atop former affordable housing sites. They find clever ways to oust rent-controlled and rent-stabilized tenants from buildings and convert them to condos or other properties for sale. They convert apartments to condos, hotels, or offices; or demolish them (since 1990, in excess of 2.5 million apartments renting for under $800 have disappeared.) Housing prices in poor urban areas rose 50 percent faster than in wealthy ones in the last decade. This sector of the economy sees an opportunity in the truth that everyone needs a place to live, and have found ways to eek out increasing returns from this truth.
This sector of the economy sees an opportunity in the truth that everyone needs a place to live, and have found ways to eek out increasing returns from this truth.
Developers argue that the cost of materials have spiked, there's a nationwide shortage of construction workers, and delays and obstruction to development caused by NIMBY activism have made it so that developers can only make money on luxury building and home developments. According to that Harvard study, only 22% of homes built in 2016 were of the starter home variety. None of this bodes well for young adults now.
But Shaw largely ignores the role of finance and the growth in the "houses as assets" sector of the economy as a cause of the housing crisis. This is a disservice to the cause of affordable housing. Some people are making a lot of money from housing humans, and this sum makes the money individual boomers have made defending the appreciation of their homes look like a drop in the bucket.
The methodology of this book, composed as a series of interviews with different groups with skin in the game (homeowners, tenants, politicians, developers and activists) is more anecdotal than evidentiary. There's always an argument to be made that anecdotes do not a reality make, but there's another truth that humans are hard-wired for story and often find it more swaying than data. It seems Shaw is following the advice of one the activists featured in the book, Laura Loe, who in "How to Talk to Your NIMBY Parent" advises to not use data to argue a point, but to use anecdotes instead.
Generation Priced Out is a fascinating look at some of the existing fights and facets of local policy around housing. There is more work yet to be done about the bigger forces at play.