Yves here. While this story gives some good date on how squeezed renters are, particularly low-income tenants, I’m surprised at its failure to mention the decline in homeownership, which is due in part to foreclosures, as leading to increased demand for rentals, as well as the role of private equity buying (and the aggressive rental increases they try to attain) as contributing to the pressure on affordable housing.
By Steve Steven Rosenfeld who writes about America’s retirement crisis, democracy and voting rights, and campaigns and elections. He is the author of “Count My Vote: A Citizen’s Guide to Voting.” Originally published at Alternet
On Monday, New York City took a dramatic step that highlights just how out of control rental housing costs have become in the Big Apple and in many cities nationwide. For the first time, New York froze rents for one-year leases on a million rent-stabilized apartments.
“Today’s decision means relief,” Mayor Bill de Blasio told reporters. “We know tenants have been forced to make painful choices that pitted ever-rising rent against necessities like groceries, child care and medical bills.”
Landlords balked and citicized City Hall, calling the move an “unconscionable, politically driven decision.” But Rent Board chair Rachel Godsil was having none of it. Her staff had found that landlord incomes had grown for nine years in a row, including by 3.4 percent last year, while costs only grew by 0.5 percent. In contrast, a majority of most stabilized renters faced continuing income stagnation.
New York City’s struggle with affordable rental housing is part of a nationwide trend that has seen rental housing costs skyrocket in recent years as the housing market has mostly recovered from the 2008 recession, which was in part fueled by real estate speculation and Wall Street aggressively repackaging and reselling risky high-interest mortgages.
According to a new study by Harvard University’s Joint Center for Housing Studies, vast stretches of the county are facing a rental housing crisis marked by big rent spikes. “The number of cost-burdened renters [paying more than 30 percent of incomes]… set a new high in 2013 of 20.8 million, totaling just under half of all renter households,” Harvard researchers found. “Although the number of severely burdened renters edged down slightly, the number of moderately burdened renters climbed by a larger amount.”
Most low to moderate income households are feeling a very big pinch. The researchers said that 80 percent of households with annual incomes under $15,000, three-quarters of renters with incomes up between $15,000 and $29,999, and 45 percent of households earning up to $44,999, are all “severely burdened,” with non-whites and single mothers facing the greatest financial stress.
“Minorities and certain types of households are especially likely to have severe housing cost burdens,” the report said. “Indeed, 26 percent of black households, 23 percent of Hispanic households, and 20 percent of Asian and other minority households were severely burdened in 2013, compared with just 14 percent of white households. Nearly a third of single-parent families also had severe burdens, compared with a tenth of married couples with children. Finally, more than half of households headed by an unemployed individual in 2013 were severely housing cost burdened.”
Cities where these pressures are prevalent include Los Angeles, New York, Honolulu, Miami, Las Vegas and Orlando, they said. “Moreover, affordability pressures in the 10 most expensive markets reach further up the income scale. In fact, nearly half (48 percent) of households with incomes of $45,000–74,999 were housing cost burdened in these metros—more than twice the share (22 percent) nationally. As a result, the nearly 20 million households living in the 10 highest-cost metros must earn well above the national median income of $51,900 to live in housing they can afford.”
The causes for these spikes in rent come from a mix of private and public sector trends. On the private sector side, the housing market crash has led to a slowdown in building or improving rental housing stock in many regions, which has boosted rents when housing becomes available. Meanwhile, government affordable housing subsidies available for renters have effectively shrunk, because they have failed to keep up with increases.
“Unmet need has continued to grow despite real increases in federal appropriations for two of HUD’s largest programs—housing choice vouchers and project-based rental assistance—between FY2005 and FY2015,” it reported. “But instead of serving more households, most of the increased funding was offset by the higher costs of assistance due to rising market rents.”
One major consequence of a costlier rental market is that recent efforts to find housing for the homeless is backtracking in some regions, the researchers said.
“The lack of affordable housing in the United States continues to leave nearly 600,000 people homeless,” they wrote. “More than a third are people in families, including 130,000 children under the age of 18. By comparison, chronically homeless individuals (those who have been without a place to live for at least a year or have had repeated episodes of homelessness over the past few years) account for a much smaller share (15 percent) of the homeless population.”
The researchers said homelessness is on the rise, even though “recent increases in federal funding have aided progress in reducing both homelessness overall and among the most vulnerable groups.”
“The national reduction in homelessness is not apparent in all markets,” it said. “Rising rents and a dwindling supply of affordable rentals continue to put people at risk, especially in high-cost locations. Indeed, total homelessness jumped by 29 percent in New York and 40 percent in Massachusetts between 2007 and 2014. The increase in the District of Columbia was even larger, at 46 percent. Family homelessness is particularly acute in major cities, which were home to 45 percent of this population in 2014. New York City headed the list with 41,600 homeless people in families, or nearly 20 percent of the national total.”
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At what point do we acknowledge that this is just the very predictable side effect of the uncontrolled quantities of free scrip emanating from the Marriner Eccles Building?
(At the risk of offending the MMT audience yet again…I still don’t get how infinite quantities of scrip representing finite quantities of labor and raw materials…won’t have this obvious kind of result. Enlighten me.)
I won’t argue with you here. It is certainly because our financial industry is in the business of asset inflation, which includes home prices. The federal reserve has made it mission critical to re-inflate the housing boom. This makes it increasingly unaffordable to rent or own homes.
When the middle and lower classes get excess* money you get inflation in the prices of things that are part of the CPI. When the wealthy get excess money you get inflation in asset prices…
*in the sense of being more than the increase in GDP
It is interesting, though, that this post is about as close as it gets to acknowledging that easy money exacerbates social problems like homelessness and substandard housing without saying it explicitly.
Access to decent housing has always been a handy retort when someone says inflation or inequality aren’t problems.
In the end the problem with housing is one of supply.
The only real way, that i see, to fix the issue is for some entity to build a bunch of houses to a fixed template at a fixed price, and make them available at cost.
This will then fix a price floor in place, as people can always grab that house at that price if the rest of the market is getting too expensive.
I love this idea. Available affordable housing would improve SO many lives and as you say affect the WHOLE market.
I’d say the problem in housing is distribution, not supply.
But regardless, why go through such a complicated process to reduce housing prices when we can just end the underlying subsidies that cause the artificially high prices in the first place?
P.S., just to make sure that’s clear. The issue in housing is not that there is widespread shortage. Rather, the issue is that low-income people can’t afford to pay for housing. You can move essentially anywhere in the country and obtain decent housing. All it requires is enough currency units.
One potential approach is simple, conceptually:
1) Stop subsidizing higher income people buying housing, and
2) Start giving currency units directly to lower income people
1. Subsidizing? How? Perhaps you mean the mortgage interest deduction and property tax deduction on Schedule A. But that will have a very dampening affect on the middle class. In fact we’de have a deflation in housing…like 2008.
2. Well Obama phones aren’t exactly “currency units”, but EBTs are.
There are enormous quantities of easy money that go disproportionately to the more affluent, from the Fed buying mortgage backed securities to the tax code making home mortgage interest deductible to the exclusion of a significant amount of housing sales profits from income taxes. And then there are the GSE bailouts and tons of specific tax credits influencing real estate development and so forth.
Deflation in house prices is exactly what digi owl was advocating with the make a bunch of housing at cost idea.
As far as EBT, that’s exactly what’s wrong with our present system of welfare. Instead of having all these disparate systems handling specific areas, we should instead have one universal system of unemployment insurance handled by the Social Security Administration. Any week you earn less than some minimum threshold, you are entitled to a check from the government.
That would allow us to get rid of the inefficient bureaucracy in everything from SNAP to LIHTC to TANF to Section 8 and on and on…
As usual, I like the way you think. For a variety of reasons I’m drawn increasingly toward some kind of BIG as a requirement of social justice.
Thanks Mike, I think it will be very interesting to see where conversation moves over the next couple years. I feel like discussions of expanding unemployment insurance and looking at UBI/BIG and so forth are right on the cusp of being mainstream topics.
Did you see the DOL has a public comment period out about raising the salary threshold for overtime exemption under the FLSA?
This is the Obama Administration(!). If they are willing to entertain tentative steps in these kinds of direction, just about anything is possible, bubbling up there just underneath the surface.
http://www.dol.gov/whd/overtime/NPRM2015/
I assume the FED buying securities having a stimulating effect by throwing cash into the economy and resulting in asset inflation is what you are talking about with regards to helping the wealthy, correct? If so, you should realize that this is a house of cards, and certainly no way to build long-term wealth.
Eliminating mortgage interest deductions will never happen. That would have a significant dampening effect on housing which would ripple across the economy to other sectors. As far as avoiding capital gains on the sale of a home, please explain how I could pull this off. I have a house I will be putting on the market shortly.
I like your idea of unifying all the different forms of handouts into one system, but I doubt that the “inefficient bureaucracy” will suddenly ever go away. Our federal system is just too freaking big.
Agreed. I think we’re past tweaks. We need more radical rethinks, and I think it is important to be intellectually honest in acknowledging when we advocate something more radical. I have no illusions about this all being a big clusterfuq. Quite the opposite, I have felt that a lot of more comfortable and educated liberals have been slow to acknowledge how terrible our system has become over the past couple decades for households not in the top 20% or so.
Agreed, it’s a political barrier, not a technical one. That’s part of the point of pointing it out – to show there is no technical barrier. It’s simply a handout that goes predominantly to higher income households encouraging them to over consume housing. This both deprives lower income citizens of their fair share of decent housing and advances environmentally destructive forms of development.
That’s what digi owl was advocating. I’m okay with a plan to maintain nominal house prices since things like that tend to be sticky in practice – so long as that is accompanied by much larger nominal cash payments to low income households. It’s the real effect, the distribution, that matters. The nominal price level is irrelevant.
Ah, one of the challenges of mixing public policy with personal finance. The former is about what should change; the latter is about how to take advantage of the present system. The formal answer is consult your financial, legal, and tax advisors. The informal answer is the first $250K in profits from a primary residence are usually yours with no take from the IRS. That is thanks to a 1997 act I believe.
I’m with you there too. But the inefficiency is not generally speaking the federal system itself. Most of it is in the outsourcing. That’s why I’m a big fan of simply using SSA to make cash payments to people in need. It’s incredibly more well run than a hodge podge of municipal governments and nonprofit organizations – not to mention the increasing amount of contracting dollars that end up at for profit entities.
It’s simply a handout that goes predominantly to higher income households encouraging them to over consume housing.
The vast majority of homeowners belong to the middle class. It’s the American dream and you want to kill it? And on the 4th of July no less.
With regard to cap gain on selling a home….my sale is on a second home in Florida. In reality, I will not have to pay a cap gain because Florida was hit hard in the real estate collapse and I will be fortunate to break even. Interestingly with real estate, I must be taxed on any gain (unless it is my primary rersidence). But I cannot write of a loss. Also gains are not indexed for inflation. So if I had a 10% gain, but the cost of living went up by the same amount, in reality I have zero gain….yet I am still taxed.
The problem is simple math; affordability. It used to be 2.5X gross income. The current median new home price is around $230k; the median household income is less than $50k (and falling).
The problem in many places is the cost of the LAND on which to put them, so make houses as cheap as you want (Buckminster Fuller was not wrong in trying to mass market there), but land prices will still get you (so maybe neither was Henry George!).
Don’t forget the bribes paid to county/city officials just in order to be able to develop a site. My mother was willing to GIVE a home site to my daughter and son-in-law in order for them to slap down a modest manufactured home. Total take for the city for hookups and fees? $30K. Not happening.
And then along comes Maggie Thatcher who privatizes the council housing because “TINA.”
No one could be offended by raising legitimate questions. I have three counters for you to consider… but I don’t claim to be able to put your concern to rest.
1) There are no “uncontrolled quantities of free script”. If there were, I should be able to get my hands on as much as I want, and I can’t. The debt hawks, the debt ceiling enforcers and the sequester legislators are making sure of this. So, while I don’t doubt your good faith, I think you have badly framed the question. If there is “free script” it is, at the very least, being released under extremely controlled conditions, at least for the present. Therefore, “uncontrolled quantities of free script” cannot be the cause of asset inflation since we have the later but not the former.
2) Similarly, there are no “infinite quantities of script representing finite quantities of labor and raw materials”. However many dollars are ever actually issued will always be finite. No infinite dollars ever have been or ever will be issued. That’s just impossible. The unlimited ability to issue dollars is not the same as the issue of unlimited dollars. Dollars will always be limited, no matter how many there are. So again, I think you have poorly framed the question.
3) As I understand the MMTers, they have consistently stated that potential growth of the money supply is limited by inflation. In other words, it is no part of MMT that infinite quantities of script either can or should represent finite quantities of labor and raw materials. What I read most consistently is that the Fed should issue sufficient dollars to create full employment. Because full employment is the point at which inflation becomes a possible concern, we need not be too worried about inflation before that point.
There remains a serious question of what causes asset inflation and how an economy can experience asset inflation under conditions of less than full employment, i.e., what’s the difference between asset inflation and commodity price inflation (what the typical “man on the street” thinks of as inflation). In other words, is there a difference between buying goods and paying rents such that these two activities could be affected differently by the size of the money supply? Several differences spring readily to mind that bring into question how asset inflation ever could be a “just the very predictable side effect” of growth in money supply.
I think it is clear that asset inflation could be one possible side effect of money supply growth beyond full employment in an environment of general inflation. But I think it is equally clear that asset inflation could occur even in a generally deflationary environment. Inflation is all about demand. Apparently, the demand for assets is not directly linked to the size of the money supply in the same way that the demand for goods is. It seems to me that the demand for assets is more directly a result of the concentration of capital than the total amount of dollars in the economy.
Agreed. That’s what the original comment is describing. Many of the posts drawing upon MMT ideas place the primary emphasis on the total amount rather than the concentration.
Well put! I’ll remember that point. It is the concentration of capital, not the total amount, that is a critical factor.
I am going to have time in August to read a couple books. Are there any accessible MMT books for someone with a minor in econ? I never took econometrics in college. But I have the math background to handle a model and stats but I’d prefer an overview.
I’m finally going to take the time to read Hudson’s Super Imperialism. So I probably only have time for 1 maybe 2 more books in August.
I always recommend starting with Professor L. Randall Wray (Larry is his first name; goes by Randy professionally). He’s pretty direct for an academic, generally telling you what he really means. I find that refreshing and thought provoking.
And also interesting when other writers rely upon ideas from the sort of core trifecta of contemporary state money or MMT or neochartalism or whatever (Mitchell, Mosler, and Wray). Many of the posts from authors using their ideas have focused on the quantity of currency units, like Firestone’s platinum coin idea and usage of Sector Financial Balances (SFB), or have suggested we don’t need to worry about the distributional consequences of the wealthy controlling lots of resources, like when Alt offered the provacative idea of forgetting the 1%.
There’s a lot of stuff on Amazon, and if you read on electronic devices, you can actually start with Wray’s general overview of Public Sector Employment on the web and then can go to the detailed notions at NEP (kind of home base for modern money expositions).
http://www.cfeps.org/pubs/wp/wp3.html
http://neweconomicperspectives.org/modern-monetary-theory-primer.html
First, asset inflation is a concern when the dollars created go directly to the asset markets (see QE).
…and one side note: Local governments now appear to know that “housing first” is not only a more compassionate way to handle the homeless, as opposed to rousting them out with police, it’s actually cheaper than the police and emergency room visits. When the locals start to wake up to this–that it’s not just more compassionate but cheaper–look for movements to make rehab, rather than incarcerate, and employ rather than punish the unemployed.
…
I understand you argument, but I feel compelled to post this anyways.
http://www.federalreserve.gov/releases/h6/discm3.htm
Think of it not in numbers, but in flows.
Money is the blood of the economy. Too much and you get high blood pressure. Too little and you get low blood pressure.
Right now the economy is heading towards low pressure, after having battled a case of high pressure (and possibly an aneurysm).
The MMT approach is not about unlimited money, but about using government spending and taxation to maintain stable pressure by counteracting swings in the private sector.
Too little spending (low pressure) in the private, increase government spending.
Too much spending (high pressure), increase taxation.
And frankly, the economy has been running “steroids” (private debt) For so long that people has become accustomed to it.
And no, banking is not just some intermediary as “loanable funds” claims. Every time they approve a loan they inject new money into the economy. And their reserve requirement does nothing to curtail this.
“Too little spending (low pressure) in the private, increase government spending. Too much spending (high pressure), increase taxation.”
The macro economy is all about demand AND supply. I have no objection to Keynesian spending to stimulate demand…especially if there are deflationary pressures. But the mistake policy makers have been making is that they ignore supply. A tax increase will negatively affect the supply side. We need both (supply & demand) working for us if we want a robust economy which will mitigate issues that have been discussed in this article.
Who is on the receiving end is what matters. Tax breaks and direct subsidies are the tools used by governments to shape the nature of the society. Equality is engineered. In the natural world, extreme inequality takes care of itself with mass die-offs or extinction. Natural systems will eventually reach an equilibrium. Human societies are not “natural” systems- they are consciously created.
Our current “masters of the universe” are having difficulties because they believe they can create a system of extreme inequality and somehow maintain it. They are mistaken. Inequality is what causes the turmoil.
If MMT provides a road map or tools to enable the more equitable distribution of wealth and resources within the society whats wrong with that?. If MMT helps to explain how a government by and for the people can better function without the support of a wealthy elite, sounds good to me.
If MMT clearly shows how the Peoples Trust in themselves and their society can form the basis for a financial system it deserves our support.
Shouldn’t the question be- what type of financial system do you have in a Democracy?
Humans are a part of Nature, and human societies are indeed natural systems. Animals (bee hives, ant nests, chimpanzee troops etc.) social systems are natural, so why wouldn’t humans’ be? And while human societies are driven by purpose and can therefore be changed (by collective action, not so much by individuals), they are also largely a result of unconscious factors as well.
Consciousness and free will are the major factors which differentiate humans from the rest of the animal kingdom. Surely, the level of consciousness a living organism displays can be used to make value judgements about that organism. The problems we face today are exacerbated by our current relationship to the natural world which is one of antagonism and separateness.
The powerful remain powerful because of their ability to maintain a certain level of “Unconsciousness” in the people they would like to exercise control over.
This is why it is so difficult to change an existing social construction.
Unconsciousness is the easy way. Deliberate conscious action a bit harder.
Any monetary policy managed by a secret cabal of bankers is going to be a disaster. Its not the money supply that’s the problem it’s who has it (bankers) and what they are using it for (unproductive speculation). In the utopian world of MMT a wise and prudent government would spend new money directly into the economy by paying for/gifting the public with useful infrastructure projects which would quickly flow to the people doing the work. These regular Joes would buy regular Joe things like lunches, trucks, shoes etc. The completed public works project would then have a powerful economic stimulus effect of its own and everyone lives happier ever after. As long as there is adequate demand and a need for the money being printed into circulation inflation is not an issue. Conversely when a bunch of yield hungry speculators get their hands on boat loads of free Fed money, the first thing they want to do is bid up a nice, fat, yield-generating bubble on some necessary but unproductive asset class like housing. Inflation and pain ensue.
My take on MMT. How’s that?
Thanks, that’s enlightening.
The exact problem with MMT is that it has no theory on how to get from the one place to the other. Understanding money is one thing, but understanding politics and society in order to effect change in them is another. MMT without being married to a concrete program of political action is useless.
Unfortunately, if they did associate with a program of political action, UMKC would probably show them the door.
I think the UMKC Department of Economics should keep doing what they’re good at, which is graduating and placing heterodox economists, since neoliberal economists are a social evil.
You may think they should learn how to do something they don’t know how to do, and for which academic life has not prepared them, as opposed to doing what they are already doing, and are good at. That’s fine, but have you considered the opportunity costs?
No, it has a very good theory: guaranteed minimum income. Set a floor on the portion of society’s resources allocated to every individual, and you thereby drive up the cost of labor over and above this, forcing the rentier class to shift a larger share of profits to the workers and greatly improving the distribution problem.
There are also proposals to pursue certain broad categories of public investment (free college, necessary maintenance on infrastructure development, stuff like mass transit expansions, low-carbon economy, etc.) without letting cost be a barrier to undertaking the project. (Which does not mean that you’d let some private contractor write his own blank check, just that you build the solar network even if it’s going to raise the deficit a little.)
If your complaint is that MMT economists don’t have a foolproof plan for displacing monied interests, putting a coherent five-year-plan before the people, and winning elections on massive voter turnout, I think you might be asking a little much of an economic theory. The only economic theory with a coherent how-do-we-achieve-it political plan that I’m aware of is crony capitalism, and its plan appears to be “shape our economic theory to whatever the monied powers that control our politics want it to be,” so that’s kind of a non-starter there…
No, they want to set a floor on the price of labor via a job guarantee.
That’s like saying the “exact problem” with plumbing is that it doesn’t have a theory of architecture.
This hardiness of this perennial talking point never ceases to amaze me. It places the agency for political change in the theory as opposed to where it ought to be: Political action by citizens. So in addition to being a category error, it’s disempowering.
My take on MMT. How’s that?
I like it, although the fly in the ointment is the “wise and prudent government” part.
. . . uncontrolled quantities of free scrip emanating from the Marriner Eccles Building?
That isn’t MMT. It is pure corruption.
Could you spell out the prediction, please?
It seems to me that if rents are too high, that means that renters have too little money (and that landlords have too much money). How does that follow from “uncontrolled quantities of free scrip”?
People always think it is somehow about the numerator in the equation (“price of a house’) versus the denominator (“quantity of scrip required”).
When scrip is free and unlimited (to those closest to the spigot, that is, including the lovely new class of slumlords like Blackstone) then the “price” can grow. But the punters must pay their rent in the required scrip that they have very limited access to, and unless the quantity available to them (wages) rise as fast/faster than assets…they’re stuffed.
So we get houses in Mayfair for 100 million pounds, zombie stocks at 22X earnings, art works for $100 million, 5th Ave penthouses for $200 million…and other forms of “proto-money”, all *denominated* in…confetti.
So your point is that scrip makes it easier for those with connections to get their hands on it than for them to get their hands on other forms of money?
I dunno. Didn’t inequality increase also in depressions under the gold standard? In fact, doesn’t it tend to increase under recessions, as well? Regardless of the monetary regime?
Come on, you people are smarter than that.
You do know that 70% of the nation is living in poverty right?
Declining wages, and increasing food prices are hurting.
Have you seen what the states are doing? Take Kansas as an example. Lower taxes for the rich, then cut welfare and increase the sales tax to plug that massive hole.
State after state is doing this, and by lowering taxes on the rich, and increasing them on the middle and the poor, they have reversed progressive taxation. We have regressive taxation at the state level.
By increasing sales tax across the board and lowering high income tax rates, the politicians have created a stealth flat tax across the nation,
The best analysis, on – how bad regulation got us into the global crisis and the American “contribution”, and why the political aim of “high homeowner ship” led to the bubble…
Seriously, I’ve read a lot of the crisis literature, but this one is still outstanding. (h/t kyle bass)
Bethany Mc Lean : All the devils are here
Merely one aspect of the trend to hoover up as much money from those who don’t have it to give to those who have more than they know what to do with it.
Similar situation in the U.K., where those who can afford to buy second properties get tax relief on “Buy-to-Rent” financing. There is no such tax relief for the renters themselves.
Millions homeless and millions of empty homes.
The refer to Jefferson quote re: banks and corporations making evertone homeless
One important trend this article fails to mention is the demographic surge in Millennials who have reached the age of moving into their own space. Just as with the Boomers 50 years ago, this is creating a boom in apartments and condos. Follow the links in this article and you can see how that surge played out in the late 1960s and 1970s, and subsided since the 1980s:
http://bonddad.blogspot.com/2015/06/the-fed-vs-millenials-inflation-and.html
This surge in demand is both causing rents to spike and spurring a boom in multi-unit construction.
Yeah, but the reason people are renting, doubling up with roommates, staying with family, etc., is not because people love temporary housing arrangements.
Rather, it’s because they can’t afford more permanent housing arrangements. The difference between the wages of young workers today and the price of housing today is much larger than it was, say, 30 years ago. What is happening today is very different than what happened when Boomers were in their 20s and 30s.
I tend to think mostly about outcomes, we have worse inequality today than the peak of the Robber Baron era…or the Great Pyramids for that matter. Back then you could revolt and eventually throw the bums out, with today’s TMC (Total Mind Control) and pervasive police state that seems like a remote possibility. What about voting? All Hilary has to do is outrun you, she doesn’t need to outrun the bear.
Watch the Bernie Sanders rally from last night. Second coming of FDR…
FDR saved capitalism, i believe that time has come again. The pendulum has swung too far in one direction.
“majority of most stabilized renters faced continuing income stagnation”
Do they mean to say plunging wages? Because that’s the reality.
I suspect housing policy is to blame in some sectors. In Massachusetts nearly every town will fight tooth and nail to prevent affordable housing from being built in their towns. This is for a few reasons. The first is the perceived “quality” of the town by current homeowners who don’t want their house values to decline. Poor people are so undesirable. The second reason is budgetary. In my own town the desire for any new development is to target it to the over 55 set and to smaller aparments or condos, nothing above two bedrooms. The town budget takes a rather large hit every time there are more students in the district. Because of the way we fund school budgets (principally out of town budgets), small changes to the student population have big effects on the town budget. Especially if the students have special needs. Unfortunately in this state (and many others) we do not equally share the burden of educating our students across towns.
The lord made the earth and He’s not making anymore — just lots more people. The landlord reaps what he does not sow.
The only quick help I can see possible is making impossibly inadequate paying jobs more adequate. $300/wk jobs got to go to $600/wk — $400-500/wk jobs (most retail) got to go to $800/wk. The money is there — shift a few per cent of GDP to lowest paid 45 percentile to make minimum wage $600. How much we grow every couple of years. Top 1% not taking double the income share that the bottom 50% take.
Quick reform: multiply union density to European levels. Quick way to do that: make union busting a felony. Every other form of market muscling and fixing is treated as a felony — an idea whose time has come. It is not in our culture yet but institute it in our most progressive states and watch the legislation spread like a grass fire across the prairies. State legislation invokes federal and state RICO prosecution.
I, too, am disappointed they missed a huge point, by not raising the foreclosure issue as a major contributor to increased need for rental housing.
Having had parents that taught me home ownership was the best investment, I bought my first home by the time I graduated HS in 1969. (It wasn’t much, but I continued to upgrade into nicer ones).
I’d continued to own a home ever since, til now.
I’m now renting for the first time in my almost 64 years, thanks to HAMP (Hellbent At Making Profits). Chase Bank stole my home, but it’s the same story as most who applied for a mod.
I could not afford rent in the state of Colorado that I’d called home, by choice, since 1978, since rents (& homes!), have skyrocketed there. I was forced to move to another state in a poor area, & rent a tiny place with no BR, no kitchen cupboards, & no septic system, even (composting toilet), as it’s all I can now afford. (Basically one big room).
The owner refuses to give me a lease, as she said she won’t fix anything if it breaks (so therefore, no lease to bind her to do so).
I remain grateful to have any roof over my head, & must just suck it up in order to survive.
I haven’t seen my only child in over 3 years now, who was raised & remains with his wife, in CO, since losing my home (tho’ we keep in frequent contact).
It’s all a direct result of foreclosure, & I don’t see that the banks are done with us yet.
I remember reading recently that the 3 major credit reporting agencies are being talked into (or have?) adding rental history to folks credit reports now. Encouraged by the banks, no doubt.
The way I see it, the banks stole our homes, & are now intent on being our landlords by renting us the very homes they stole from us—if we qualify. Which, of course, many of us don’t, having a foreclosure now on our record.
And they control our cost of living in them, on their whim.
Once again, they are pulling the strings. (Purse strings, that is)
And this is my retirement I worked a lifetime toward?
I remain disgusted with our govt for selling out us citizens, for their personal gains of cushy jobs once they leave govt, by refusing to enforce the laws against the banks. Shame, shame, shame! Most should not even be entitled to call themselves US citizens, IMO.
So the banks are done with me?
Well, I’m not done with them, & continue to sign petitions, voice my opinion, & contact attys, (tho’ Statutes of Limitations have run out on most things they did to me). I’m heartbroken, yet remain pissed. How could I not, waking up in someone else’s “home” each morning? At my age? (It’s also up for sale, so if it sells, I will then be completely homeless).
Do you mind if I ask why you got foreclosed on? Personal stories are always tricky, and it’s okay if you don’t respond, but I’m confused by that timeline.
I don’t follow what this means? If you have been a homeowner since 1969, and in Colorado since 1978, you have enjoyed a huge runup in housing prices. Especially in the eastern Rockies that has seen such growth. The fact that homes have skyrocketed made your net worth go up, not down.
So it sounds like you ran into problems unrelated to housing and refinanced to take cash out of the equity. Perhaps medical bills, job loss, supporting a family member, etc.?
I apologize. As I reread it, it is confusing, so let me try to explain: (Sorry it’s so long, but may answer your question)
Following marriage I eventually sold my original home so we could afford a new one in CO all those years ago. Several years later we divorced, sold the mutual home, & I began again with a smaller home, & our son.
When he graduated HS, I sold that home, making a little profit after ten years, but not that much, as homeowners in my neighborhood who had loans @ 14% interest prior to my buying (early 80’s) were losing theirs. I’d hung on a few extra years to realize any profit on mine, but homes weren’t appreciating as quickly back then. That’s when I purchased & moved to my humble ranch (that was foreclosed upon).
I got in trouble from both job loss, & illness. While unable to work, I was forced to use cc’s to pay basic bills, such as utilities & food. That, of course, got me in trouble.
Rather than declare BK, as most would have done, I felt obligated to pay them. (I was brought up that if you owe a debt, you pay it, so I tried to do the morally right thing. Ha!). That’s when I refinanced, to pay off my cc’s. (Dumb!) I never took a penny above what was needed to pay off my old loan, & cc’s. (Should I mention I’m still driving the same car I got new in ’86, my only one, now with over 315,000 miles on it?). No frivolities.
After all, they appraised my ranch at $260,000, so when I refinanced for $140,000 I thought I still had well over $100,000 in equity in my home. (Ha, ha. Not!)
I recovered physically, got a new job, & even started a small wholesale business. Things were looking good.
Then cheap knock-offs from China put me out of business in just 2 years.
Then I got laid off from my job. Now I had trouble making that increased mtg pymt, so went for a modification under HAMP, (There’s at least 5.5 million of us who can tell ya how that went!), after I had secured another job. I should have easily qualified for a mod at that time, with the income I once again had. I was getting back on my feet.
I was making those modified pymts for a full year, under the “90 day trial period”, with them delaying giving me a permanent mod, of course.
I was actively making those pymts when they foreclosed on me (dual tracking). Chase Bank actually began sending my pymts back!
Even prior to this, I had been trying each month to get a statement from Chase.
Yes, just a simple mtg statement, like you’re supposed to receive each month!
They never complied. Instead, all I received for years, were what I refer to as those “15 day” letters. A form letter in which they state they need an additional 15 days to fulfill my request.
FOR A STATEMENT! (I should mention I continued to receive those letters long after they had taken my home, until the PO stopped forwarding my mail, I suspect).
I filed complaints with the OCC, FDIC, AG’s ofc, my State Rep, HUD, etc, on down the line. Each & every one told me to hire an atty, as they couldn’t help individuals. (In other words, they make the laws, but you must hire an atty on your own to enforce them).
The Consumer Protection Section of my AG’s ofc was the only one to take an active part in helping me, yet they, too, were unable to secure a statement from Chase, after mths of trying. (CFPB was not yet active).
What they finally received on my behalf was a partial statement, missing at least 2 yrs in the middle of the 5 yr refinanced loan, along with a letter from Chase saying that “due to our records retention policies, this is all we have.”
Even that partial statement was so jumbled up, it was all but undecipherable.
When I pointed those facts out to the AG’s ofc, I was told, “Sorry. You may want to hire a lawyer, as we don’t have the resources to help individuals.”
Back to square one. (NO, this is not BS. I have it all in writing, from both Chase, & my AG’s ofc. I still can’t believe it, myself).
I contacted dozens of attorneys. None would take on contingency, of course (which I fully understand). I was quoted litigation costs far above what I owed on my property. (If I’d had that kind of money, I would have just paid off my home!)
Therefore, I lost everything.
CO is a non judicial state, that’s unique among the nation.
A scumbag atty who was appointed a trustee years ago got a bill passed (sneaked in with another), that makes it so all that is required to foreclose is an attys signature stating they have seen all the paperwork & it’s correct. No wet signature or any of that other “silly” paperwork of holder in due course or anything else required.
Despite the fact I included a copy of a letter I’d written to Chase’s attys (to which I never received a response), with my request for a statement, & copies of those “15 day” letters, in addition to disputing the amt supposedly owed on my balance (having never received a statement) in my Ruling 120 Response, the judge struck my response (because I only disputed the amt, & not the debt itself), & they were allowed to take my home without me ever getting one day in court.
Freddie Mac “bought” it at auction for the more than $187,000 Chase then said I owed (WHAT?!), & then sold it on the open market for a mere $65,000!!!
I had been making pymts of much more than twice those of the new owners, when they took it from me.
Last week I received a copy of my credit report from Experian.
All is in good standing, with exception of Chase, of course. And what do they show? Only 3 mths of “ok”, with the rest of the mths showing “no data”, for the life of the loan, until foreclosure! (If I hadn’t lost my home, how would that credit report have helped me?!)
Chase kept my acct active & open until recent mths, showing me behind in pymts (long after my home had sold twice, by then).
One law firm that was active in my foreclosure was put out of business by the AG’s ofc, for numerous crooked dealings on their part (like charging $100 above the going rate, for posting notices).
The real kicker? After I lost my home, I declared BK on it, fearing they’d come back on me for the rest of my life (wishing I hadn’t now, since I have nothing they can take), so I wasn’t eligible for any of the $7.7 million the one foreclosure firm involved in my case was required to pay back to former homeowners they screwed.
I will never understand how Chase could take my home, when by their own admission (in writing), they lack complete records of my pymts?
Regarding facts & figures, I’ve noted that of the cases won, it’s only by those who can afford attys, & seem to have had loans of over half a million or more (so I guess they can afford $200,000 for an atty), that got modifications.
Silly me. I’d believed the BS that the HAMP program was for the struggling “middle class”.
The figures I’d like to see, are how many of us with mtgs of less than $140,000 (less than the cost of a foreclosure defense atty), got permanent mods without aid of an atty?
I’m bettin’ the number is close to zero, due to the cost of an atty.
Other figures I’d like to see, are how many of those homes currently being bought now that the housing crisis has “recovered”, were purchased as full time residences?
What I’ve noted, is that there’s still many of us former homeowners renting, while the upper middle class are buying homes as their second (or even third), vacation homes.
So THAT’S the basis for the “housing recovery”?
Sorry. I’m not buying it. From figures I’ve read, there’s another 5 million losing their homes as interest only loans have matured with interest now being due (doubling pymts), wages have failed to increase, or even keep up with the cost of living, & many still suffering job losses as more jobs are outsourced.
If you’d like some interesting reading, verifying many of the things I’ve said, check out columns written over past years by award winning journalist for the Denver Post, David Migoya.
He did extensive articles on atty Lawrence Castle of Castle Law Group (formerly Castle Stawiarski, in his articles), the atty who got laws changed in CO, only for his own benefit. (He was involved in other dirty dealings, as well).
His firm worked in cahoots with the other foreclosure firm that was put out of biz & ordered by the AG to pay those fines of $7.7 million.
Larry Castle is still fighting the AG over putting his firm out of biz, but they did already lose all their accts for Freddie Mac, due to their dirty dealings.
I fought my foreclosure as best I could, but figure they illegally added thousands to any “cure” on my loan balance, due to their unscrupulous practices. That would account for some of that over $47,000 above my original loan balance in fees added to my loan, with Chase stating my balance was only $137,000 when I inquired.
I have yet to wake up from this nightmare, & am forced to live it every day.
As a former peace-loving, non-confrontational, now “little ol’ lady”, who lived among ranchers for decades & attended many brandings during which they castrate the young bulls, I would now have no problem doing the same to certain attys, as well as the big banksters, & would feel no guilt as I sat down to my meal of Rocky Mtn Oysters afterward!
There you have it. My sad story of my own stupidity, that cost me everything.
Yeah, I figured there was more to the story. Thanks for sharing, and best wishes with everything.
May I add, I disagree with their assessment that, “the housing market has mostly recovered from the 2008 recession”.
In whose world?
Only that of govt propaganda, as seen from my view.
Houses prices have, maybe not in the rust belt. In California sure, they are back up to those levels and higher.
Where I live (by virtue of buying cheap in 1978) prices are absurd. My neighbor is moving to Dallas. Sold current small 1,300 sq ft house on postage stamp lot for north of the $750K asking price. Getting much newer 5-bed/4 bath two story place in nice Dallas suburb with quality grade school right across the street for 2/3 the price. Older homes nearer the beach here at being bought for up to $6 million as “scrape-offs” to build $10-$18 mil mansions.
Hey, I agree govt propaganda is a problem. But the propaganda is usually about what the data means. Are you suggesting the numbers themselves are a lie? You can see the run-up in prices, decline, and then second run-up without even looking the specific figures.
http://research.stlouisfed.org/fred2/series/HOSMEDUSM052N
[oops, this was meant for crittermom]
Meanwhile, construction of new luxury condos continues at a feverish pace. Let them eat…
I don’t know if this is the norm nationwide, but in my burg the trend is for the landlords to add an ever-increasing amount of fees on top of rising rents. As a working stiff, I don’t have the time to question or fight their nickle and dime tactics.
My mega-plex apartment Hell just added a new “amenity:” valet trash service. For a compulsory $35 a month, I get the privilege of having my bagged trash picked up from my apartment unit. I don’t know what problem this is supposed to solve, other than opening another revenue stream. And what a revenue stream this must be, since my apartment complex is huge.
At least in California, urban redevelopment has in effect meant the demolition of huge numbers of the SRO housing, and replacement with condos and relatively upscale and more expensive housing. There has also been continual pressure on the building codes to force standards upwards – not necessarily required by health and safety. Today’s new house will be much larger than the house I live in ( built 1950). It is hard to delineate how much this reflects consumer choice, and how much reflects FIRE ‘s imperatives. The mentality that sees real estate appreciation as the road to personal wealth is still very strong.
Good news everybody. The legal clinic where I volunteer represents tenants who are being evicted, and it just recorded its busiest month ever! Of course, this isn’t just a function of tenants who have been whacked by economic conditions, it is also a function of having a lot of unemployable lawyers to staff the volunteer clinic. Yay! Lots of people are walking the plank in the Puget Sound area. Rents are through the roof here and so are property prices.
The reason why rents are rising in my area are multiple. First yearly property tax increases. These have been rising faster than rents. This is the third rail of owning a building. Second local communities are also using water rates as a source of revenue for their “general fund”. Water use to be an almost non-expense. Now it’s a significant per unit yearly cost factor. Third seven years ago at the height of the crisis you could get a plumber/electrician/carpenter at reasonable rates. Today rates have gone way up and they are all busy, all the time. Roofing rates are sky high also.
If this offends landlords I apologize ahead of time (with a sliver of sarcasm) but a big issue is landlords that don’t do their own work that can be done within codes and regulations. If every job has to be contracted out then the costs get moved to the tenant or the job isn’t done and the rental becomes a hellhole rented at market rate anyway. My mom was recently in the hunt for a place and landlords were (with smiles plastered on their faces) presenting horribly conditioned apartments for rates well beyond what they should have been. Considering most of the labor could have been done on their own time it was either, they were cheap or they were lazy.
If landlords don’t have time to do the work or they don’t want (or have the money) to have the rental in good condition they shouldn’t be landlords and that should be law enforced through yearly inspections. Also, just to make clear I’m not speaking from left field. I work with a guy that has 10 properties (I do home repair work myself off-and-on), he does all the work he can himself, and his properties are in excellent condition. He sands/cleans the floors after every tenant, repaints the walls, etc. He respects the fact that this will be someone’s home and not just a profit pump.
None of this: the rape of New Orleans, the carpet-bombing of Detroit or the uber-gentrification of NYC is an accident. All of this has been carefully planned for decades, on the backs of the american taxpayer, to enrich the FIRE sector, the elites and to press the workers into debt slavery.
I have an in-law who benefited from huge housing subsidies despite his $200,000 + income in NYC banking. Mortgage interest tax deductions, the notorious 421-a New York City tax deferrals and housing price appreciation due to 6 years of ZIRP policy.
After sale of his boxy little, brick-wall facing harlem condo, he likely realized $400,000 in “profits”–while living effectively rent-free–entirely attributable to government subsidies, that he thinks is the result of his savvy investing. At the same time, he excoriates people receiving food stamps as leeches, including his own disabled sister who lives in poverty. A big Obamabot.
This is the kind of idiots we are dealing with in the enforcer class of technocrats who slavishly cater to every whim of their plutocrat overlords.
As Doug Henwood wrote after Robert Fitches death in 2012:
“So many of the things that were attributed to anonymous global forces, like the deindustrialization of the city and its transformation into the prototype of the globally oriented post-industrial metropolis, were consciously guided by bankers, developers, and their hired hands. They used all the instruments of state power—subsidies, zoning laws, eminent domain—to get their way.”
So, yeah, the first thing is to kill housing subsidies for the affluent.
I’ve got a unique perspective on this topic. I was a real estate professional in the epicenter of the Chicago residential market from 2000 – 2008. I saw it all. To this day I still don’t like to bring it up much because there was so much fraud, greed, and avarice present; very few people I’ve told these stories to believe me, much less comprehend it. If I do bring it up, I’m usually labeled a pessimist or cynic and lose a friend.
My bottom line: there is extreme pressure instigated by the upper class and finance industry to raise prices of their real estate assets and this pressure, mostly fraudulent and illegal, is having very detrimental effects on society as a whole.
Here’s just some of the ways that they’re doing it:
In Cook county if you’re rich and can afford more than one property, just fill out a few affidavits for the tax assessor and say that they are both owner occupied. You can save tens of thousands! The county never checks and even if you get busted, it’s only a civil penalty:) Most people put one in each spouses name. I actually tried to bust someone doing this and got nowhere because there was a different name for each tax assessee even though they were married and living in the same home. This is a really common tax avoidance scheme and pretty much everyone gets away with it. They changed it recently so that now you don’t even need to file it every year.. it extends automatically after the first year you file!
http://www.cookcountytreasurer.com/homeownerexemption.aspx
In 2008 there was a Illinois Supreme Court ruling that basically made a mockery of the foreclosure process. The foreclosure system is designed solve lots of problems when it works properly. It’s not perfect, but when a bank is allowed to basically destroy the entire sales process and deter neutral third parties from bidding in the highest court of the land, I think there is a problem. Some readers might not be able to connect the dots here, but what this case did was make it almost impossible for anybody to bid at the foreclosure sales. It’s kind of a problem to put up a huge amount of money at an auction only to have a bank swoop in and tie up your funds indefinitely. The banks were behind this so they could further manipulate mark to market. If nobody buys the stuff at auction, they can take it back and book it however they want to… After they bank takes the property back, a shadow company buys it up under secret terms and conditions and then sells it to Blackstone or another party for secret terms and conditions.
http://www.illinoiscourts.gov/Opinions/SupremeCourt/2008/May/104826.pdf
That’s extraordinarily interesting, especially this part:
Just… Hmm. I’m sure Rahm (and Obama (and Penny Pritzker)) understand all this quite well.
Yeah, that Supreme Court case is very special. I’m curious if there were similar rulings in different regions during that time period. They had to close that door because it could have ruined everything for them and exposed the whole thing. Generally, the foreclosure sales system is very efficient and based on sound precedent. When working properly, it is capable of moving an extraordinary amount of real estate at fair market value to the general public. There’s a lot more to how they priced the assets for sale and who bought them but this is probably easiest for a layperson to comprehend.
Another way banks inflate assets is through BPO’s or Broker Price Opinions. Banks hire real estate professionals to complete mark to market studies. These professionals fill out forms for the banks and then the banks use them for accounting purposes. I tried doing a few of these in 2006 and simply couldn’t depreciate: The online forms forced me to inflate the price of the property!! It was also a requirement that I had a special insurance policy too to prepare these forms. A company named Ocwen was quite famous for brokering these kinds of services and is probably still doing it. I don’t know exactly what the current trends are but I’m sure banks are “shopping” for the right professionals with the right insurance policies like they always have to keep their books in line.
Some more things inflating the rental market are low tax rates and contemporary legal structures. Currently, passive income is taxed at a criminal %15. Combine low taxation with LLC’s, with pass through income and the ability to shield yourself from liabilities, and you’ve got a perfect storm.
On a higher level of the food chain, you’ve got things like mezzanine capital and god only knows what else. Heads we win, tails you loose!!
https://en.wikipedia.org/wiki/Mezzanine_capital
I am on a rental buying spree. I can get 10%-15% annual return on my 25% downpayment on many properties in seattle and this payout starts on day 1, with costs fixed and inflation pushing up future returns. And we got 50 people lined up for an open house for a rental. This is a generational distortion in pricing.