The Real Housing Crisis

Alec Dubro

April 26, 2007

There is a housing crisis in the United States, but it’s not the one you're reading about.

The news throughout the country was all along the lines of The New York Times announcement , “Sales of Existing Homes Plunge Steeply.” Most went on to say that sales hadn’t fallen this much in decades. So, did the bubble finally burst? Was there a bubble? And, what difference does it make?

Not as much as you might think.

For the nation as a whole, housing has stayed remarkably stable, with regional and neighborhood variations based on desirability. For instance, in 1964, existing homes sold for 3.32 times median income.  By 2005, the housing bubble had priced existing homes at 3.78 times median income. Not much of a bubble. Moreover, mortgage interest rates in 2005 were less than 1 percent higher than they had been in 1964.  That means that housing overall is about as affordable as it was 40 years ago.

And overall, housing got better a long time ago. In a 1978 Congressional Budget Office report to Congress, Assistant Director Robert D. Reischauer noted:

In 1950, among the poorest 40 percent of all households—which roughly corresponds to the population eligible for lower-income housing assistance programs—57 percent were living in units that were dilapidated and/or lacked complete plumbing; by 1970 the fraction was 14 percent.

Of course, it’s true that housing prices in the coastal cities have risen relative to the less dynamic areas, and urban neighborhoods that were once fearsome and cheap have changed hands. But, again, most of us find decent housing, if not exactly where we want to be.

The crisis, or persistent problem if you prefer, lies with those at the bottom third of the income scale. For the poor in major cities, the rent burden has increased to over 50 percent of income. Prices have increased steeply, and wages have not kept pace. Moreover, the mechanisms that kept a floor, so to speak, under housing—subsidies, rent control and union-driven wages—are either in decline or, in many places, have ceased to exist.

The result is chronic homelessness. But the swarms of battered, bereft indigents that roam the streets are only the visible part of the homeless. According to longtime housing advocate, Chester Hartman:

…to a large extent, the fact that one-third of the nation still is ill-housed is a hidden problem. Lack of affordability—our number-one problem—and its broader implications on poor people's lives is not something the fortunate among us experience or even know about.

Recently, the National Low-Income Housing Coalition told a House Appropriations housing subcommittee:

In the U.S., there are 9,022,000 extremely low income renter households and only 6,746,000 homes renting at prices these households can afford, paying the standard of 30 percent of their income for housing…

This lack of affordable housing forces 74 percent of extremely low income renters to pay more than half of their incomes toward their homes, compared to 26 percent of renters in any income group.

It’s clear that the private housing market alone is not going to address the problem without being forced to. So, Hartman argues for a constitutional right to housing, a goal that may seem unreachable. But, he notes, so were rights to voting, freedom from bondage and to organize. But why this right? Because:

Housing is more than four walls and a roof: It is part of a neighborhood and community, providing opportunities for positive social interaction and safety from crime. Housing location affects access to quality schools, jobs and community services.

Hartman notes that in the preamble to the 1949 Housing Act, Congress asserted the National Housing Goal, which called for "the implementation as soon as feasible of a decent home and a suitable living environment for every American family." Needless to say, Congress has not acted on this goal with any alacrity. In fact, it has become a non-issue. It needs to be one. Said Hartman:

We need to make politicians and candidates—for local, state and federal offices—speak to the housing problem and commit to effective ameliorative programs. And that in turn requires grassroots pressure.

We need to emphasize housing's links to problems in the areas of health, education, income support, food, crime, employment, immigration, economic and community development. In doing so, we will create coalitions of social justice activists whose power will grow exponentially.

Those should be the headlines about housing, not the ones about the fortunes of speculators. We who worry about our home values ought to recall that merely having a home is something denied to too many.