Understanding our Housing Problems

  • 1. What has caused housing to become unaffordable for so many people?Income inequality is worse now than it was since the 1929 depression.To make this a little easier to imagine, in 2016 let’s say there are 100 dollars of income in a room with 100 people. It would be doled out as shown in column 5 below.

Wealth inequality is even worse. Wealth is your total assets (house, savings, stocks, etc). If the same 100 people had $100 of wealth to share, the last column shows how it would be doled out.

If everything were equal, each person would get $1 of income and $1 of wealth. It’s even worse in 2019. Is there any question why the lowest 60% of Americans have trouble buying a house or paying rent

  • 2. For everyone except the top 5th of earners, buying power has gone backwards since 1970. Buying power has slipped the most for people under 45 years old. Minimum wage hasn’t kept up with inflation, and has lost a quarter of its buying power since 1970. 
  • 3. Full time jobs with benefits have become part-time jobs with no benefits and low wages. Automation, shipping jobs overseas, and union-busting have given American workers no job security and no ability to demand better wages over the last 40 years.
  • 4. HUD used to issue housing vouchers (rent and utilities subsidies) for those making much less than the median income. Funding for this has been cut every year since 2000. There are no more new vouchers.
  • 5. International investment groups began buying up owner-occupied  residential housing since 2000, and especially since 2009. They now buy almost a third of available houses every year. These properties are then rented out, renovated to high-end rentals, or torn down to make larger, high-profit multifamily housing.  This new ability to make a profit quickly increases the value of these properties, upping surrounding houses’ values. This has caused part of the residential housing price inflation. Original tenants are evicted and can’t afford the new, higher rents. Home ownership rates have dropped 10% since 2005.
  • 6. For the 9 years after the crash (2008 – 2016), the number of housing units built in Olympia was cut in half, leaving us with a shortage. After 2015 as the economy improved, all the people who had wanted to buy a house and now had more money, all wanted houses at once. Months of housing inventory (ready to sell) has dropped from 10 months in 2009 to less than 2 months  in 2019. Huge demand and inadequate supply drove up house prices by 70% or more in that time.
  • 7. Olympia rents have gone up by 25% since 2009. In the last 3 years they have increased by 5% each year. Although almost half of Olympia renters need to pay less than $1000 per month rent in order for it to be affordable, only a quarter of available Olympia apartments are in this range.
  • 8. Missing Middle will increase density, but it won’t create the housing we need most: low-income. Instead, it will increase residential housing prices and rents even more, as it has done in other cities.

To find the data to support the statistics above, go here.

Creating low-income housing that stabilizes residential housing prices

Everyone talks about the need for affordable housing, but what does it mean? HUD defines affordable housing as using no more than 30% of your income  – no matter what your income. 

In Olympia, about half of households own their own homes. Some pay more than 30% of their income in payments, but they can afford a house. 

The other half of all households rent, and most of these households can’t afford a rent over $1000. These renters are the households most in crisis, and they should be the focus of affordable housing in Olympia. But they aren’t. 

Development in Olympia since 2015 has focused on more-expensive apartments and condos. Missing Middle doesn’t create low-income housing. So how do we help the neediest 40%, while avoiding gentrification and displacement in the neighborhoods?

Here are some ideas from Samuel Stein’’s Capital City. But there are more ideas in the heads of Olympia residents, and I want to hear them. Together, we can come up with some solutions.

  • 1. Inclusionary Zoning Developers must include a certain number of low-income apartments in their otherwise market-rate buildings. In some towns, developers can choose instead to donate to a fund that would go to low-income housing, but in Seattle, out of $5.2 billion in housing construction, only 19 affordable units were built, and only $100,000 were deposited into the low-income housing fund. To work, building the inclusionary housing must be mandatory.
  • 2. Non-Speculative Housing (NSH)  For many wanting to buy a house in the last 3 years, with the small supply of house inventory and huge demand, prices quickly rose out of reach for most working-class families.

With NSH, the City owns a large plot of land, sub-divided into lots, supplied with streets and utilities. It may even build some low-cost houses or let individuals build them. A house buyer buys a house at cost, with a mortgage, but leases the land it sits on from the City. The homeowner builds a nest egg (equity) as with any house. 

When the owner wants to sell, to keep it affordable for the next buyer, the selling price can only increase by the inflation rate and 25% of the price increase due to market forces. This slows the rate at which housing prices increase due to market forces, but allows the owner a profit.

This can be done on a smaller scale on individual lots. When houses are foreclosed upon, usually the bank sells it at auction, where a speculator flips it and the price goes way up. What if, for a house in reasonable shape, the City buys it upon foreclosure, sells it at the foreclosure price to a low-income buyer who will buy it as their own private residence, or rents it at a reduced rent, where the land beneath the house is leased. The same rules as above apply when the owner sells it later.

  • 3. Many would-be homeless people live in RVs and trailers, which are parked on the streets. Instead, the county and Olympia, Tumwater and Lacey could coordinate to build a KOA-type camping areas, with showers and laundry facilities. There would be a limit to how many consecutive days any RV could stay, and an affordable nightly or monthly fee could be charged each RV to help with expenses. Or a private contractor could manage the RV area.
  • 4. Taxes that Encourage Occupancy and Compensate for Gentrification  Much useable housing is empty because a developer overbuilt for the market, or people have a second house they only occupy part-time, or because it is being used as an air-BnB. Have a higher property tax on the second house, and tax empty units.

If a luxury apartment or condo is dramatically higher in value than surrounding buildings, tax them at a higher rate. 

All tax money collected would go into a City fund to finance the low-income housing ideas above, or finance homeless facilities.

  • 5. Renting out a room or ADU in your house Many young people in their 20’s are least able to pay market-rate rents. There are increasing numbers of people 65 and older to want to stay in their houses, but have trouble maintaining them. In return for free rent, a younger person could keep the house clean and yard maintained, and generally help the older people do things the can no longer do.
  • 6. If the US Government decides to again help Cities in their struggle to create and finance housing the poor and homeless, then adequate funding can create real public and subsidized housing, along with amenities like parks, playgrounds and landscaping for its residents. These properties must never be allowed to be sold for speculative development by investors, as they have in the past.