Save Marinwood-Lucas Valley - our community, our future

A blog about Marinwood-Lucas Valley and the Marin Housing Element, politics, economics and social policy. The MOST DANGEROUS BLOG in Marinwood-Lucas Valley.

Pages

▼

Saturday, February 11, 2017

The High Cost of a Home Is Turning American Millennials Into the New Serfs



High Cost of a Home



The High Cost of a Home Is Turning American Millennials

 Into the New Serfs




by Joel Kotkin

American greatness was long premised on the common assumption was that each generation
 would do better than previous one. That is being undermined for the emerging millennial 
generation.

The problems facing millennials include an economy where job growth has been largely in 
service and part-time employment, producing lower incomes; the Census bureau estimates
 they earn, even with a full-time job, $2,000 less in real dollars than the same age group 
made in 1980. More millennials, notes a recent White House report, face far longer period 
of unemployment and suffer low rates of labor participation. More than 20 percent of 
people 18 to 34 live in poverty, up from 14 percent in 1980.

They are also saddled with ever more college debt, with around half of students borrowing 
for their education during the 2013-14 school year, up from around 30 percent in the 
mid-1990s. All this at a time when the returns on education seem to be dropping: A 
millennial with both a college degree and college debt, according to a recent 
analysis of Federal Reserve data, earns about the same as a boomer without a degree did 
at the same age.

Downward mobility, for now at least, is increasingly rife. Stanford economist Raj Chatty 
finds that someone born in 1940 had a 92 percent chance of earning more than their
 parents; a boomer born in 1950 had a 79 percent chance of earning more than their 
parents. Those born in 1980, in contrast, have just a 46 percent chance.

Since 2004, homeownership rates for people under 35 have dropped by 21 percent, easily 
outpacing the 15 percent fall among those 35 to 44; the boomers’ rate remained largely 
unchanged.

In some markets, high rents and weak millennial incomes make it all but impossible to 
raise a down payment (PDF). According to Zillow, for workers between 22 and 34, rent 
costs now claim upward of 45 percent of income in Los Angeles, San Francisco, New York,
 and Miami, compared to less than 30 percent of income in metropolitan areas like 
Dallas-Fort Worth and Houston. The costs of purchasing a house are even more lopsided: 
In Los Angeles and the Bay Area, a monthly mortgage takes, on average, close to 40 percent
 of income, compared to 15 percent nationally.

Like medieval serfs in pre-industrial Europe, America’s new generation, particularly in its 
alpha cities, seems increasingly destined to spend their lives paying off their overlords, and
 having little to show for it.

No wonder that rather than strike out on their own, many millennials are simply failing to 
launch, with record numbers hunkering down in their parents’ homes. Since 2000, the 
numbers of people aged 18 to 34 living at home has shot up by over 5 million.

One common meme, particularly in the mainstream media, has been that millennials don’t
 want to buy homes. The new generation, as Fast Company breathlessly reported, is part of 
“an evolution of consciousness.” Other suggest the young have embraced “the sharing 
economy,” so that owning a home is simply not to their taste. The well-named site 
Elite Daily asserts that the vast majority of millennials are headed to “frenetic metropolis”
 rather than becalmed suburbs.

And it’s not just ideologues claiming millennials have evolved out of home ownership. Wall 
Street speculators like Blackstone are betting that the young are committed to some new 
“rentership society,” with that firm investing $10 billion to scoop up existing small homes 
to rent, and even building tracks of homes exclusively for rent.


This isn’t about lifestyle choices. It’s about a system in which the boomers are protecting 
their wealth and views at the expense of the rest of us.

But it’s not a lifestyle choice but economics—high prices and low incomes — that are keeping 
millennials from buying homes. In survey after survey the clear majority of millennials—roughly
  80 percent, including the vast majority of renters – express interest in acquiring a home 
of their own. Nor are they allergic, as many suggest, to the idea of raising a family, albeit 
often at a later age, long a major motivation for home ownership. Roughly 80 percent of 
millennials say they plan to get married, and most of them are planning to have children.

Overall, more than 80 percent of millennials already live in suburbs and exurbs, and they 
are, if anything, moving away from the dense, expensive cities. Since 2010 millennial 
population trends rank New York, Chicago, Washington, and Portland in the bottom half of 
major metropolitan areas while the young head out to less expensive, highly suburbanized 
areas such as Orlando, Austin, and San Antonio.

Age will accelerate this process. As economist Jed Kolko notes, as people enter their thirties 
they tend to head out of core cities to suburban locations; roughly one in four people in
their mid to late twenties lives in an urban location but by the time those people are in
their early thirties, that number drops precipitously and continues dropping into their
eighties. In fact, younger millennials, notes the website FiveThirtyEight, are moving to
the ’burbs at at a faster clip than previous generations. What’s slowing that trend is
economics. Many can’t afford to move, or to transition into a traditional adulthood.

The millennial housing crisis is reshaping the geography of opportunity. Although millennial 
rates of homeownership have dropped nationwide, the most precipitous declines have been 
in such metropolitan areas as New York, Miami, San Francisco, Portland, Seattle, and 
Los Angeles. In all these areas, public policy has regulatory barriers in the way of suburban 
and exurban affordability. It is in these markets where such things as “tiny houses” and 
“micro-apartments”—not exactly a boon to people looking to start families—are being touted
 as solutions to housing shortages.

Nowhere is this dynamic more evident than in California, where the state government has all 
but declared war on single-family homes by banning new peripheral development, driving up 
house prices throughout metropolitan areas. Regulatory fees typically add upward of 
$50,000, two-and-a-half times the national average; new demands for “zero emissions” 
homes promise to boost this by an additional $25,000.

Due largely to such regulatory restraints, overall California housing construction over the 
past 10 years has been less than half of that it averaged from 195 to 1989, forcing prices up, 
particularly on single-family houses. The state ranks second to the last in middle-income 
housing affordability, trailing only Hawaii. It also accounts for 14 of the nation’s 25 least 
affordable metropolitan areas.

Home ownership rates in California are among the nation’s lowest, with Los Angeles-Orange 
having the lowest rate of the nation’s 75 large metropolitan areas. For every two homebuyers 
who come to the state, five families leave, notes the research firm Core Logic.

The irony is that the state’s progressive policies are contributing to a less mobile society 
and a potential demographic crisis. For one thing, fewer young people can form 
families—Los Angeles-Orange had one of the biggest drops in the child population of any of 
the 53 largest metros from 2010 to 2015.

This also has a racial component, as homeownership rates African American and Latino 
households—which often lack access to family wealth—have dropped far more precipitously 
than those of non-Hispanic Whites or Asians. Hispanics, accounting for 42 percent of 
all California millennials, endure homeownership roughly half that seen in other parts of 
the country.

This is not the planners’ happy future of density dwelling, transit-riding millennials but a 
present of overcrowding, the nation’s highest level of poverty and, inevitably, a continued 
drop in fertility in comparison to less regulated, and less costly, states such as Utah, Texas, 
and Tennessee that have been among those with the biggest surges in millennial migration.

Once identified with youth, California’s urban areas are now experiencing a significant 
decline in both their millennial and Xer populations. By the 2030s, large swaths of the 
state—particularly along the coast—could become geriatric belts, with an affluent older 
boomer population served by a largely minority servant class. How feudal!

***

Ownership of land has always been a critical component of middle-class wealth and power. 
Those celebrating the retreat from homeownership among millennials are embracing the 
long-term decline of that middle class, two thirds of whose wealth is in their homes.

The potential decline in ownership also represents a direct assault on future American 
prosperity. Jason Furman, who served as chairman of President Obama’s Council of 
Economic Advisors, calculated that a single-family home contributes 2.5 times as much to 
the national GDP as an apartment unit. Investment in residential properties has dropped to 
its lowest share of overall spending since World War II; by some estimates reviving that 
would be enough to return America to 4 percent growth.

With so many millennials unable to afford homes, or even to see a path to future ownership,
 household formation has been far slower than in the recent past. Rather than a surge of 
middle-class buyers, we are seeing the rise of a largely property-less generation whose 
members will remain economically marginal into their thirties or forties.
 Indeed by 2030, according to a recent Deloitte study, millennials will account for barely
16 percent of the nation’s wealth while home-owning boomers, then entering their
eighties and nineties, will still control a remarkable 45 percent of the nation’s wealth.

If this continues, we may have to all but abandon the notion of the United States as a 
middle-class nation. Instead of having a new generation that strikes out on their own, we 
may be incubating a culture that focuses on such things as the latest iPhone, binge watching
on Netflix, something they do far more than even their Xer counterparts.

Progressives who embrace these developments are abandoning one of the central tenets of 
mainstream liberalism. In the past, many traditional liberals embraced the old American 
ideal of dispersed land ownership. “A nation of homeowners,” President Franklin D. Roosevelt 
believed, “of people who own a real share in their land, is unconquerable.” Homeownership 
is not only critical to the economy but provides a critical element of our already fraying 
civic society; homeowners not only tend to vote more than renters, but they also volunteer
more and, as Habitat for Humanity suggests, provide a better environment for raising 
children.

On the flip side, high housing prices tend to suppress birthrates. Many of the places with 
the highest house costs—from Hong Kong to New York, Los Angeles, Boston, and 
San Francisco—also have very low birthrates. The four U.S. areas ranked among the bottom 
10 in birthrates among the 53 major metropolitan areas in 2015. Over time these can have a 
dampening impact on economic growth, as is clearly seen today in places like Japan and much
 of Europe, and increasingly here in the U.S.

It’s time for millennials to demand politicians abandon the policies that have enriched the 
wealthy and stolen their future. That means removing barriers to lots of new housing in 
cities and, crucially, embracing Frank Lloyd Wright’s notion of Broadacre Cities, with 
expansive development along the periphery.

These new suburbs, like the Levittowns of the past, could improve people’s lives, while 
using new technology and home-based work to make them more environmentally 
sustainable. They could, as some suggest, develop the kind of urban amenities, notably 
town centers, that may be more important to millennials than earlier generations. One 
thing that hasn’t changed is the demand for affordable single-family homes and townhomes.
 But the supply is diminishing—those under $200,000 make up barely one out of five new 
homes.

There are some reasons for hope. The soon-to-develop tsunami of redundant retail space
 will open up millions of square feet for new homes. A move to prefabricated homes, 
already common in Europe and Japan, could help reduce costs. Certainly there’s potential 
demand at the right price—ones that young people can reasonably aspire to and then build 
lives in.

The alternative is to travel back to serfdom and a society sharply divided between a small 
owner class and many more permanent rent payers. By then, the American dream will be 
reduced to a nostalgic throwback in an increasingly feudalized country.

This article was first published in Daily Beast






Save Marinwood at 12:00 PM
Share

No comments:

Post a Comment

‹
›
Home
View web version

About SaveMarinwood.org

Save Marinwood
View my complete profile
Powered by Blogger.