Housing

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Housing in the coming federal election

Published by Anonymous (not verified) on Wed, 09/03/2022 - 4:58am in

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Housing, Politics

Very largely thanks to economic stimulus pumped into the economy to ward off COVID recession, Australia’s housing is now 30% more expensive than in 2019. Add to that, the recent spike in rent inflation greater than at any time since 2008, and it’s obvious that the pandemic has exacerbated this country’s longstanding housing affordability challenge. Continue reading »

Monthly digest on housing affordability and homelessness

Published by Anonymous (not verified) on Mon, 07/03/2022 - 4:22am in

Tags 

Housing, Politics

The latest monthly digest of articles, research reports, policy announcements and other material about housing stress/affordability and homelessness.   Making housing more affordable Brendan Coates, Economic Policy Program Director at the Grattan Institute, has authored a Submission to the Victorian Legislative Council inquiry into the protections within the Victorian Planning Framework. Coates argues the case Continue reading »

Empty thinking on housing

Published by Anonymous (not verified) on Wed, 02/03/2022 - 4:52am in

I see the Centre for Cities published an interesting article recently during what was apparently ‘Empty Homes Week’. There is truth in their contention that empty homes are a necessary part of the rental market not only in order to allow tenant changeovers, but also to have sufficient surplus that it is not a sellers... Read more

Cartoon: Pricing panic!

Published by Anonymous (not verified) on Sat, 26/02/2022 - 9:50am in

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A Major Barrier to Affordable Housing is Finally Falling

Published by Anonymous (not verified) on Fri, 18/02/2022 - 7:00pm in

For many, even those who make a decent salary, it’s harder than ever to buy a first home in the United States. The median sale price for a home has been climbing steadily for nearly a decade, and hit record highs last year, according to the National Association of Realtors. To ease pressure on prices, according to Freddie Mac economists, the U.S. needs another nearly four million homes — an injection of supply to meet the growing demand. 

Yet in most of the U.S., local rules stipulate how many new homes can be built on a property. And for many properties – even in cities – those rules come down to the loneliest number: one. 

Some cities are trying to change that. In 2018, the Minneapolis City Council voted to approve Minneapolis 2040, a plan that captured headlines around the world. Minneapolis had voted, in effect, to end single-family zoning, the common land-use regulation that keeps apartment buildings and multi-family dwellings out of certain neighborhoods. The city’s new rules would allow two- and three-family houses to be built in any part of the city, even in neighborhoods where they had previously been illegal. 

Minneapolis’s decision – the first of its kind on a citywide level anywhere in the U.S. – took aim at what has often been portrayed as the quintessential American dwelling. In recent years, the single-family house that sits alone on its own property has attracted fresh scrutiny for its physical and societal consequences. Indeed, single-family zoning sometimes has racist origins, designed in many cases to create or preserve exclusively white neighborhoods. In Minneapolis’s case, for instance, many homes carried racially restrictive deed covenants—documents explicitly preventing homes from being sold to Black people—in the early part of the 20th century. And even though those covenants have since been outlawed, research has shown that many of the neighborhoods where they were clustered remain largely white today. Single-family zoning “replaced [covenants] as a tool to maintain the status quo,” as one planner told the Minneapolis Star-Tribune last year. 

minneapolisA neighborhood in Minneapolis. Credit: Michael Comerford / Flickr

Single-family zoning also limits how much new housing that can be built, which drives up prices in in-demand neighborhoods. And it contributes to suburban sprawl, which carries all sorts of environmental impacts. Minneapolis was motivated, partly, by a desire to undo some of its legacy of segregation, and to promote a higher density of housing in all of its neighborhoods. 

“The idea was to essentially allow a wider variety of housing options throughout the city, including in areas that really had few options,” says Jason Wittenberg, the manager of code development in the city’s Community Planning and Economic Development department. “There was definitely a connection made to the history of exclusion of people through means that are no longer legal, but were a reality for years and years.” 

The rules allowing duplexes and triplexes on every property in Minneapolis went into effect at the beginning of 2020, and so far their impact has been relatively limited. During the first two years after the zoning rules were changed, 59 new duplexes and 15 new triplexes were permitted, according to data provided by city officials. Of these, 30 duplexes and three triplexes were permitted in areas where they weren’t previously allowed. 

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It remains to be seen whether this pace will accelerate. Just like many home-building markets, Minneapolis is feeling the strain of supply chain kinks and labor shortages. Remote work and other economic forces are changing once-predictable migration patterns. It’s a strange time to be evaluating any kind of new housing policy. 

But what is clear is that Minneapolis’s ban on single-use zoning is part of a growing movement as more and more places part ways with a type of land use that has long held back density and diversity. In 2019, the state of Oregon passed a law allowing additional units to be built on lots zoned for single-family homes in most of its cities. Its biggest city, Portland, implemented its own rules the following year. California, which has one of the worst housing shortages in the country, moved to eliminate single-family restrictions last year, after several of its cities had passed similar laws of their own. In New Zealand, where average home prices recently cracked one million dollars (USD $650,000), the government recently passed a law, backed by opposing political parties, allowing denser housing in single-family areas. 

The motives behind these decisions are varied. They seek to increase housing supply, promote racial equity, remove government regulations, or (particularly in Oregon’s case) protect the natural environment from sprawl. Though the number of jurisdictions that have eliminated single-family zoning is still small, Lydia Lo, a research associate in the Metropolitan Housing and Communities Policy Center at the Urban Institute, says it is “absolutely a trend,” and one with broad appeal across the political spectrum in the U.S. 

“It is a trend that we’re going to continue to see happen, and honestly the pattern is not going to be predictable because it’s such a cross-party issue,” Lo says. “There’s a lot of support and excellent arguments for it, using both parties’ rhetoric.”

single family homes“It is a trend that we’re going to continue to see happen, and honestly the pattern is not going to be predictable because it’s such a cross-party issue.” Credit: Thomas Hawk / Flickr

Andrea Brennan, the director of community planning and economic development in Minneapolis, says the goal of the zoning changes was to allow more housing options in the most exclusive areas. Perhaps predictably, this led to an outcry from certain homeowners in these areas, some of whom planted “Don’t Bulldoze Our Neighborhood” signs on their single-family lawns. But as Brennan points out, the law by no means outlaws single-family homes – if anything, it empowers the free market, opening the door to any kind of housing that meets local demand. In the city’s wealthier neighborhoods, the market for duplexes and triplexes is not well-established. “We didn’t think there would be bulldozers in single-family neighborhoods transforming them overnight,” Brennan says. 

One early study even found that the permission to build extra units on single-family lots in Minneapolis may have contributed to a small increase in housing prices relative to similar lots outside the city limits. In other words, the effects of zoning rules are dependent on market conditions, says Lo, and the argument that multi-family buildings bring down an area’s home values isn’t rooted in evidence or data. 

“The narrative of how we got here, and the case that really restrictive zoning laws created a shortage which drove up housing prices is a really easy causal narrative,” Lo says. “However, there is no good research showing that you can just reverse that process to get to lower housing prices.” 

Minneapolis officials acknowledge that eliminating single-family restrictions has had modest impacts so far. But over the course of the 20-year plan, they say, it could still produce hundreds of new housing units that otherwise wouldn’t have been built in low-density neighborhoods. And it’s only one aspect of the comprehensive plan that’s aimed at making housing more affordable. 

Cities are continuing to experiment with policies that permit more housing in hopes of bringing costs down and making it more accessible, even when they stop short of eliminating single-family zoning altogether. Massachusetts, for example, is currently implementing rules that require cities to allow multifamily housing in areas near transit stations. Connecticut passed a law last year allowing accessory dwelling units, also known as backyard flats or “granny pods,” on many single-family lots. The Biden administration has floated several policy proposals that would create incentives for cities that permit more housing density as well. 

There are good reasons to allow more housing in single-family zoned areas, and few good reasons not to, says Lo. If nothing else, the new laws will provide lots of new opportunities to study the effects of zoning changes on housing supply and housing costs. 

The benefits of ending single-family zoning may take time to come to fruition, as Minneapolis has found in the last few years. And so far, the movement to end single-family zoning is confined to progressive cities. The next frontier, Lo says, is wealthy suburban areas where affordable housing is especially scarce. Removing zoning barriers in those areas would create more housing choices for everyone, she says. 

“Breaking into exclusive suburbs—that’s where I think we’re going to find a lot more easy affordability,” Lo says. 

The post A Major Barrier to Affordable Housing is Finally Falling appeared first on Reasons to be Cheerful.

The Biggest Intergenerational Gaps in Modern Britain

Published by Anonymous (not verified) on Thu, 17/02/2022 - 8:00pm in

The Biggest Intergenerational Gaps in Modern Britain

Sascha Lavin considers the vast, unspoken inequalities that exist between young and old

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There is an unwritten rule of British society that has seemingly been shattered in recent years: the ideal that you can expect to be better-off than your parents.

The fortunes of young people now seem to have reversed, while well-heeled commentators suggest that we are feckless and wasteful; that our problems could simply be resolved by giving up on Netflix and avocados.

The reality of this situation is experienced intimately by the young and the old, as the prosperity of the next generation is reserved to those who can inherit it from their predecessors. Yet, with the senior ranks of the media still dominated by veterans of the profession, this broken British dream is rarely remarked upon.

To shed some light on this crisis, here are eight of the greatest intergenerational gaps in modern Britain.

Stagnating Wages; Soaring Property Prices

Between 1997 and 2020, the median cost of a property in England more than tripled, from £59,995 to £249,000. During the same period, average employee earnings lagged behind, increasing by 87%.

From 2010 to 2020, house prices increased across the UK by 33% (led by London, where property prices increased by 66%), while average real weekly wages were just £1 higher in December 2020 than in March 2008.

Therefore, in 1997, the average property was 3.54 times that of the average salary. By 2020, however, buyers were expected to fork-out 7.84 times their salary to buy a house.

Younger generations are more likely to acquire their first home in much the same way Kirstie Allsopp did when she was 21 – with help from the ‘bank of mum and dad’.

An increasing proportion of young people are receiving financial support from relatives – with the older generation contributing to 316,000 of the properties purchased in 2018, and 60% of first-time buyers now expected to be helped by family members. 

On the flip side of the wealth spectrum, of the 20 to 35 year olds who don’t yet own a home, nearly half have parents who also aren’t property owners. More than ever, your ability to vault onto the property ladder – especially in affluent, expensive areas of the country – is decided by the wealth of your parents.


A Portrait of Broken Britain
Sam Bright

Home Ownership

Perhaps unsurprisingly, therefore, half of all housing wealth has been accrued by baby boomers (46%), with the over-65s owning £1.7 trillion-worth of residential property. Meanwhile, millennials have 39% less property wealth than those born 10 years before them at the age of 30.

Home ownership is concentrated in the hands of the oldest generations: almost three-quarters of adults over the age of 65 own their own homes outright, while one-in-three millennials are expected to never own their own home. 

Food Poverty

Households headed by a person aged between 16 and 24 are the most likely to struggle to eat regularly because of a lack of money: nine out of 100 of these households have very low food security, where people are forced to eat less, skip meals or even go an entire day without eating because they don’t have enough money to buy food. 

On the other hand, in part protected by their pension, only 1% of households headed by a person aged between 65 and 74 years old have very low food security. This is reflected in food bank usage: the Trussell Trust reports that just 2% of people referred to their food banks were from pensioner households in 2019. 

Wealth

Older families, households headed by someone aged 65 or older, held 35% of the total household wealth before the pandemic and accrued 42% (£378 billion) of the total increase in British household wealth between February 2020 and May 2021.  

This trend is not new: between 2010/2012 and 2016/2018, the median individual wealth gap between the oldest and youngest age groups increased by 43%, from £208,000 to £298,000. 

Analysis of debt also shows a significant intergenerational gap, with three-quarters of people accruing debt by the time of their 22nd birthday, while only a-quarter of retirees owe money.


The Politicsof Porridge
Sian Norris

The Safety Net

For more than a decade, successive Conservative governments have slashed benefits for children and working-age adults, while protecting pensioner incomes. Children are £520 a year worse-off and working-age adults £260 a year worse-off as a result of Conservative changes to the benefits system, while pensioners’ incomes have been boosted with an extra £520 annually. 

As of 2019, the rate of the guaranteed pension income was more than double that of the main unemployment benefit.  

Pensioners in 2022 are also better-off compared to pensioners from previous generations. The average weekly pensioner benefit income of baby boomers aged 70 is 42% higher in real terms than that received by the Greatest generation – people born in the first 20 years of the 20th Century – at the same age. 

Jobs

The proportion of workers in part-time or temporary jobs has reduced since 2017 in all age groups apart from 18 to 29 year olds. 

A recent survey by the Royal Society of Arts think tank found that almost half of 16 to 24 year olds were unable or just managing to make ends meet each month, or had an income that varied significantly from pay-check to pay-check because they were on zero-hour contracts or working in the gig economy.  

Younger generations are also more likely to be overqualified for their jobs: in 2017, 22% of those who graduated before 1992 were overeducated, while 34% of graduates from the class of 2006 onwards possessed more education than required for their job.  

Child Poverty

Children born between 2016 and 2020 are facing the highest rates of child poverty since the 1960s, with more than 35% of children estimated to be living in poverty by the time they turn two.

The number of children living below the breadline – classed as below 60% of the median household income after housing costs have been paid – has surged in recent years: 100,000 more children lived in relative poverty from 2018/19 to 2019/20. 

Pandemic Aftershocks

Elderly people have been most at risk of dying from COVID-19 throughout the pandemic, with more than seven in 10 registered deaths among those aged 75 and older.

Both young adults and pensioners experienced the greatest decline in their mental health during the crisis. The share of adults with mental health problems increased by 80% among 18 to 29 year olds, and by 68% for 65 to 79 year olds. 

Additionally, according to a 2020 Age UK survey, a third of people aged 60 and over reported feeling more anxious since the start of the pandemic. 

Unemployment also increased for both the youngest and oldest working-age adults. In the first 15 months of the pandemic, more than half of those aged 18 to 24 and over 65 had either been furloughed or had lost their jobs.

However, younger workers have bounced back better than their older counterparts: the employment rate rose fastest among 16 to 24 year olds than any other age group between the winter 2020/21 lockdown and July 2021, although a third of these new roles are atypical and insecure – including zero-hours contracts and agency work. 

This article was produced by the Byline Intelligence Team – a collaborative investigative project formed by Byline Times with The Citizens. If you would like to find out more about the Intelligence Team and how to fund its work, click on the button below.

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The Rent Trap: Britain’s Broken Housing Market

Published by Anonymous (not verified) on Tue, 08/02/2022 - 9:42pm in

The Rent TrapBritain’s Broken Housing Market

Rachel Morris delves into one of the major causes of poverty, inequality and insecurity in modern Britain

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“I love them, I do, but they were going to be here for a month, tops, and it’s getting on for a year”.

Annie has shared her two-bedroom home in south-west England with her daughter and two grandchildren since they were forced to leave their rented home through a ‘no fault’ eviction.

The landlord claimed that he needed to move back in, but Annie claims that a couple with no kids live there now, paying more rent. Annie’s daughter is desperate to move, but can’t compete for a suitable property.

The gov.uk website makes transactions in the private rented sector (PRS) appear clear-cut. As a tenant, you have rights such as knowing who your landlord is; living undisturbed in a property that’s safe, energy-efficient, and in a good state of repair; seeing your deposit returned fairly when you move on. In return, you must allow your landlord reasonable access to the property, take good care of it, and pay your rent on time.

The reality for many, however, is more complex and unpleasant.

Housing support organisations say that the Coronavirus pandemic has exacerbated pre-existing issues. Given that people were confined at home for long periods, systemic housing problems were thrown into stark relief.

The Thatcher Government’s ‘Right to Buy’ sale of public housing stock is said to have shifted 100,000 properties from public to private ownership. Successive governments since have implemented measures to increase home ownership. Yet, the PRS has doubled in size over the past 30 years – now accommodating more than 11 million people, including around a quarter of families with children.

Despite the claims of Kirstie Allsopp, people are private tenants for many reasons: because they can’t get into social housing due to its scarcity or not meeting its conditions, because they don’t want to buy a property, or aren’t financially able to. Many are locked out of buying despite good incomes because they have no family support, can’t save a deposit, are single, or don’t have a great credit score.

Ruth Ehrlich, policy manager of leading renters’ rights campaigns at the housing charity Shelter, notes that 60% of PRS tenants have no savings to speak of.

Moreover, barriers to ownership exist simply because people rent. Private tenants pay an average of 40% of net pay in rent, compared to 19% for mortgagees. Yet, renters are glibly told to shop at value supermarkets, buy fewer or cheaper clothes and devices, take no holidays, and make their own coffee at home, to save for deposits. They are told to throw pebbles at a tidal wave.

The reality often goes something like this:

Bank: We have no way of knowing whether you can keep up mortgage payments of £650 a month.

Buyer: But I’ve been paying my landlord £950 a month for three years.

Bank: Save up and pay us a £30,000 deposit, so we know you’re good for the £650.

Buyer: I can’t, because I’m paying my landlord £950 a month.

It is common to see ‘inspirational’ stories of people in their 20s becoming homeowners, only for it to be revealed that they lived at home rent-free while saving, and/or received a substantial boost from the bank of mum and dad.

As a result, also thanks to Government policies, the situation continues to worsen. According to Halifax, in 2021 house prices rose at the fastest rate since 2004, up by 9.8%. Indeed, sales soared during the pandemic, due in part to a stamp duty holiday from July 2020 to September 2021.

Doris and Pierce sold their house in the south-east of England during that period, and moved into rented property while they bought their next home.

“You have a better chance if you can pay upfront, so you bank proceeds, then you pounce when you see a house you can afford,” says Doris.

Indeed, the rental market is bloated by landlords – second home owners, holiday property investors, and professional home owners – increasing demand and reducing supply.

Buy-to-let doesn’t meet rental needs, it creates them. In November 2021, property market website Home said that the rental supply crunch had worsened in every region of England, 46% down on the previous year – and down by 70% in some places.

London Zoopla listings doubled during COVID restrictions, but have now halved. This engenders rent rises, so finding ‘affordable’ rents – defined as not more than 30% of income – is challenging. People able to work remotely have also escaped to less expensive cities, pushing rents up elsewhere.


A Portrait of Broken Britain
Sam Bright

Moreover, application processes can be stringent and intrusive. Dan Wilson Craw, deputy director of the campaign organisation Generation Rent, describes the credit scoring system as “bafflingly opaque, a ‘computer says no’ situation”. Freelancers, people on zero hours contracts, and those claiming state benefits may face extra barriers.

Discriminating against benefits claimants is unlawful for landlords, but it remains an issue.

Setting an income multiplier, asking for six months of rent up front, or conducting the sort of bidding wars seen in house sales – such tactics are used by some landlords to rule out would-be tenants. Meanwhile, women are 1.5 times more likely to be on Universal Credit, while disabled people are three times more likely.

In short, millions of people pay more in rent than they would on a mortgage – to live less securely in smaller properties, too often in unsafe conditions.

They are vulnerable to deposit theft, may not be allowed to have pets, may face intrusive and controlling landlord behaviour with a low tolerance for the smallest misstep. Section 21 possession notices allow most landlords to recover a property quickly without formalities, as happened to Annie’s daughter.

A Ladder to Nowhere

Yet these aren’t just arbitrary facts – they fundamentally affect life prospects. The 2010 Marmot Review noted that housing is a “social determinant of health” that shapes health inequalities throughout our lifetimes.

One estimate puts the cost of poor housing to the NHS at £1.4 billion annually in England alone. The 2019 English Housing Survey stated that PRS homes were more likely to have at least one ‘category 1’ hazard under the Housing Health and Safety Rating System, and that 23% of PRS homes didn’t meet the ‘decent home standard’, compared with 12% of social housing and 18% of owner-occupied homes.

In a renters’ market, you can shop around for more satisfactory accommodation. But, when supply is down, urgency and competition can lead you to lower your standards and to take whatever you can get.

115 MPs across all parties, including 90 Conservative MPs (a quarter of their number), were landlords as of July 2021, according to openDemocracy. The property sector made 20% of all donations to the Conservative Party in the decade to March 2020.


The JackpotHow London Became aConcierge for Kleptocrats
Cory Doctorow

The 2019 Conservative Manifesto pledged a ‘Better Deal for Renters’, proposing the welcome abolition of section 21 no fault evictions and other strategies for a fairer market, while a Renters’ Reform Bill has since been promised. However, perhaps not coincidentally, the white paper has repeatedly been delayed, said to be due to the pandemic, and its publication is now promised for sometime this year.

So, still, renters are cash cows, in a for-profit sector that has somehow become the last line of defence against homelessness.

As Chloe Timperley says in her book Generation Rent: “Payment is obligatory, but service is optional.” Buy-to-let landlords don’t need licenses, qualifications, or references. They may be absent from the area, even from the country. There are arguably lower consumer protections for privately rented housing than for a pair of trainers.

With the pandemic ongoing, the impacts of Brexit yet to fully kick in, climate change, and domestic and global insecurity abounding, the future of the PRS is hard to predict.

A freeze on local housing allowance from the beginning of austerity in 2011 until it was lifted for the pandemic, notes Shelter’s Ruth Ehrlich, meant that it was no longer pegged to rent rates. And now, with the Government’s generosity waning, it is once again, says Ehrlich, “frozen in cash terms, so we’re going to see that gulf starting to increase again, which is just unsustainable for people”.

And while people criticise older generations for having pulled the ladder up behind them, unknown numbers of people like Annie have taken in their children and grandchildren, to prevent yet more cases of homelessness due to unavailable or unaffordable homes.

Renting used to be a rung on the property ladder. Now it’s a wobbly ladder of its own, propped against a crumbling wall, leading to nowhere.

Shelter offers free expert advice on this issue. Join its campaign for better renting here

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Why having more affordable sales than rentals is not always a good thing

Published by Anonymous (not verified) on Sun, 06/02/2022 - 1:00pm in

A cautionary tale! Georgia shares an easy trap to fall into when looking at affordable housing supply to the detriment of some of the most vulnerable in the housing market. She then shares why it’s a trap, and the importance of affordable rental supply.

Already know that affordable housing supply is an issue in your area? Our free guide might help. You can download your copy of How Councils can influence affordable housing here,

I fell into a trap recently. I was looking at the data for one of our housing.id clients, Albury City Council, and noticed that there had been more affordable sales in the last 12 months than there were affordable rental listings. As you can see in the charts below, in the 12 months to June 2021, 162 sales were affordable for very low income households, compared to 103 rental listings.

Great! I thought to myself – more people will be able to buy their own home. For most people, this is their preferred tenure type. But then I thought about it from a practical sense. Could these very low income households really purchase a house?

Buying a house requires a significant amount of money upfront, to cover the deposit, stamp duty and other fees. Many very low income households don’t have access to this level of savings. Take for example, the entry level (25th percentile) unit price in Albury of $220,000. In order to have a 20% deposit, cover stamp duty and other fees, $51,000 in savings would be required.

Based on the income of very low income households in Albury, of $32,135 per annum, and a standard household savings ratio of 15% a very low income household could save $4,820 per year. At this rate of savings, it would take around 11 years to save the necessary deposit for an entry level unit. The standard household savings ratio is problematic in this scenario – while its used by many major research bodies, including CoreLogic in the housing space – it’s unlikely that a very low income household would be able to save 15% of their income each year. If a more conservative (but still probably too high for this income group) savings ratio is used – for example 5% – a very low income household could save $1,610 per year. At this rate, it would take 32 years to save the $51,000.

As you can see, this house purchase is not really a practical solution, especially as the need for affordable housing is an immediate need for households – not something they can generally wait 32 years for!

This shows just how important it is to have affordable rental stock in your local area. Renting has fewer upfront costs and is a more practical solution for very low income households -some of the most vulnerable – in the short term. There are number of ways Councils can positively impact the supply of affordable rental housing in their area. You can read about them in our free guide. You can download your copy of How Councils can influence affordable housing here,

How Texas Bureaucrats Hacked Their Housing Problem

Published by Anonymous (not verified) on Wed, 02/02/2022 - 7:00pm in

Three great stories we found on the internet this week.

Texas house ‘em

Sometimes it’s the boring solutions that really work.

As part of its economic stimulus program, the U.S. government has given cities and states $5 billion in grants to spend on housing vouchers for people experiencing homelessness. The problem is, many landlords don’t like to take the vouchers because housing officials must first inspect the property and process the lease. Meanwhile, the home sits empty, not generating any rent.

The Dallas Housing Authority decided to fix this. Last summer, a dedicated team worked 13-hour days for a month to create a software program to streamline its housing voucher process. This software now seamlessly coordinates 15 agencies and some 100 caseworkers. Before, it took weeks or even months to get a voucher recipient into a property. Now? It takes a few days, which means landlords are less resistant to participating.

Could other cities design a similar program? According to Myriam Igoufe, vice president of policy and development research at the city’s housing authority, absolutely. “We knew we were designing something from scratch that other people were going to look at and say, ‘Look it could be done,’” she said.

Read more at the Atlanta Journal-Constitution

Reeling in relief

Covid hit Brazil’s fishing communities hard, but it would have been worse if not for the women fisherfolk who assumed new leadership roles, a new study has found.

As street markets closed and incomes from fish sales subsequently plummeted, in many cases it was fisherwomen — long marginalized in a male-dominated field — who spearheaded the relief efforts. Groups of fisherwomen organized to solicit aid from government agencies, establish relationships with NGOs, negotiate food exchanges with nearby communities, and implement “productive yards” policies in which residents used their land to grow fruits and vegetables.

These decisions helped to stabilize local economies at a crucial moment, the researchers found. What’s more, they may have a lasting impact, with women remaining in more prominent roles going forward, “leading to something of a shift in the balance of power,” reports Hakai.

“The women have organized to strengthen their movement, including in the fishing segment,” said the director of one fisherfolk group. “They have been protagonists during this serious crisis.”

Read more at Hakai

Swamp things

Water will soon flow naturally through parts of the Everglades for the first time in decades, thanks to an unprecedented restoration project just announced by the U.S. government.

As part of the recently passed infrastructure bill, $1.1 billion will be spent to remove levees, fill in canals and generally allow water to move freely through the south Florida wilderness. Scientists expect the effort to be transformative, restoring habitats for wading birds, alligators, panthers and an array of other wildlife. Much of the funding will actually push forward a plan that was approved over 20 years ago but never sufficiently resourced. It is sorely needed – about half of the Everglades have been lost to development, and many species that call it home have declined as a result.

“The Everglades is the lifeblood of South Florida,” said U.S. Rep. Debbie Wasserman Schultz, co-chair of the House Everglades Caucus, adding that the effort would be “the largest environmental restoration project in American history.”

Read more at the Tampa Bay Times

The post How Texas Bureaucrats Hacked Their Housing Problem appeared first on Reasons to be Cheerful.

Housing Returns in Big and Small Cities

Published by Anonymous (not verified) on Wed, 02/02/2022 - 6:41am in

 Aerial view of Washington Square in NY

Houses are the largest asset for most households in the United States, as is the case in many other countries as well. Within countries, there is substantial regional variation in house prices—compare real estate values in Manhattan, New York City, with those in Manhattan, Kansas, for example. But what about returns on investment? Are long-run returns on real estate investment—the sum of price appreciation and rental income flows—higher in superstar cities like New York than in the rest of the country? In this blog post, we present new and potentially surprising insights from research comparing long-run returns on residential real estate in a nation’s largest cities to those experienced in the rest of the country (Amaral et al., 2021), covering the U.S. and fourteen other advanced economies over the past century.

A New Regional Housing Return Database

For the analysis, we compiled a new long-run city-level data set covering annual house prices and rents in twenty-seven large (“superstar”) cities in fifteen OECD countries over the past 150 years. We borrow the “superstar city” terminology from the well-known paper by Gyourko, Mayer, and Sinai (2013) for the U.S., but take it global in the sense that we study the main economic agglomerations in each of these fifteen countries. For each national superstar city, we calculate long-run total returns on residential real estate investments as the sum of price appreciation and rent returns—and compare them to returns in the rest of the country. For the construction of the data set, we partly drew on existing historical research for individual cities. In most cases, however, we hand-collected new house price and rental series from city yearbooks or primary sources such as newspapers, tax records, and notary archives.

The data show that, over the long-run, superstar cities have witnessed lower total returns on residential real estate than other parts of the same country. The table below shows average capital gains, rent returns and total returns for the superstar cities (Column 1) and for the national housing portfolios as defined in Jordà et al. (2019) (Column 2). Column (4) shows the implied population-weighted return for the rest of the country, excluding the superstars.

City-Level and National Yearly Housing Returns (Log Points), 1950-2018

27 National Superstars

Cities
National
Difference
RoC
Diff. to RoC

Capital gain
2.25
1.82
0.43* (0.23)
1.64
0.61** (0.26)

Rent return
3.55
4.94
-1.39*** (0.04)
5.21
-1.65*** (0.05)

Total return
5.72
6.68
-0.95*** (0.23)
6.76
-1.04*** (0.26)

N
1767


Notes: The table shows averages of city-level and national log capital gains, log rent returns and log housing returns as well as the differences. National return averages are weighted by the number of cities in the respective country in the sample. Standard errors of differences (in parenthesis) and significance stars are calculated using paired t-tests. Rest of country (RoC) returns are calculated as national housing portfolio returns share after taking out the returns of the 27 national superstars. We use previous year population shares as weights of the portfolio share of our cities, such that the estimate should be interpreted a lower bound. ∗ : p < 0.1; ∗∗ : p < 0.05; ∗∗∗ : p < 0.01.

While house prices have grown faster in the large cities, the rental returns are substantially higher in more remote locations, leading to overall higher returns in the rest of the country. Average total returns have been 5.75 log points per year in the national superstars, compared to the national average of 6.68 log points. In other words, an investment in the most important cities within a country comes with a negative return premium of approximately 90-100 basis points relative to national average returns. We call this the negative “superstar premium.” The return differences are a robust feature of the data across countries and time periods, and statistically highly significant. A negative return premium of around 1 percentage point accumulates to substantial return differences in the long run. For instance, an investment in the superstar portfolio earned only about half the cumulative return of the national average portfolio over the past 70 years.

Housing Returns over the City-Size Distribution in the U.S.

To better understand the negative superstar premium we take a closer look at the U.S. housing market, for which we have comprehensive return data across the entire city-distribution since 1950. We combine the data compiled by Gyourko, Mayer, and Sinai (2013) with data from the American Community Survey for the 2010-18 period. The chart below shows average log total returns by increasing MSA size for the U.S. The key result is that in the postwar U.S., total returns to housing decrease with city size. There is an almost monotonic negative relation between total returns and city size with the biggest differences between the largest and smallest MSAs. We calculate a return premium of small vs. large MSAs in the U.S. of about 80 basis points annually. This estimate is statistically highly significant.

Total Returns for 316 MSAs in the U.S. (Log Points) by Population Size, 1950-2018


Notes: All returns are log returns. Cities are divided into bins based on the size of MSA population in 1950. The middle 8 bins cover size deciles 2 to 9. The 4 extreme bins split the smallest and largest deciles in half.

Risk and Return

Why are housing returns lower in large cities than in the rest of the country? Our key finding can be rationalized in a standard asset pricing framework where excess returns are a compensation for higher risk. Observable long-run return differences between different assets must be attributable to differences in risk, or to violations of standard assumptions (such as behavioral biases in expectations).

Now suppose that everything that makes a national superstar city–its diversified economy, its large market, its amenities, the international demand (Black and Henderson (1999), Desmet and Henderson (2015))–also makes it a safer place as an investment. A consequence would be that the present value of future housing services will be subject to less risk so that buyers are willing to pay a higher price and accept a lower return for housing investments in large agglomerations. In turn, higher returns outside the superstars would be compensation for higher risk. For remote locations to attract capital, they have to offer higher returns.

There is empirical evidence for differences in housing risk across locations. On the one hand, the co-variance between housing returns and income growth is lower in large cities. The table below shows the differences in the co-variance between large and small MSAs for the U.S. The co-variance between MSA-level income growth and MSA-level housing returns has been significantly larger in smaller MSAs.

Differences in Co-Variances between Income and Housing Returns by City Size, U.S, 1950-2018

Sample
Capital Gain
Rental Yield
Total Return
N

Large vs rest
-0.68** (0.317)
-0.65*** (0.126)
-0.75** (0.298)
316

Large vs small
-2.00*** (0.606)
-1.23*** (0.250)
-2.25*** (0.584)
31


Notes: The table shows differences in the co-variance between income growth and log excess total returns, log excess capital gains and log excess rental yields between large MSAs and the rest of the sample or small MSAs. Differences are measured as coefficients in a cross-sectional regression of the dependent variable (co-variance) on a large MSA dummy. Robust standard errors in parenthesis. Large MSAs are defined as being at or above the 95th percentile of the MSA population distribution in 1950. The second row shows the same, but comparing large MSAs only to small MSAs, which are defined as being at or below the 5th percentile of the MSA population distribution in 1950. Overall, we use estimates for 316 MSAs between 1950 and 2018. ∗ : p < 0.1; ∗∗ : p < 0.05; ∗∗∗ : p < 0.01.

On the other hand, households are also exposed to other risks such as lower liquidity outside large cities. Using U.S. transaction-level data from Corelogic, one can show that this so-called idiosyncratic component of housing risk decreases with MSA size. In the chart below we plot average house-specific risk by MSA size for the period between 1990 and 2020. Similar to the patterns we found for housing returns, idiosyncratic risk seems to decrease almost monotonically with MSA size. As liquidity is low, homeowners in thinner markets face a greater risk of not realizing the local market return at the point of sale. Real estate search engine data confirm a significant increase of housing liquidity with city size. These findings mesh nicely with recent work by Giacoletti (2021), Sagi (2021), and Kotova and Zhang (2019), who show a strong relationship between house-specific risk and housing market liquidity.

Annual Idiosyncratic House Price Risk by MSA Size in the U.S., 1990-2020


Notes: The chart shows average annual idiosyncratic house price risk for different MSA size groups for the period between 1990 and 2020. MSAs are divided into bins based on the size of MSA population in 1990. The middle 8 bins cover size deciles 2 to 9. The 4 extreme bins split the smallest and largest deciles in half. All series are real and annualized.

Conclusion

Houses are the most important asset for families. They typically hold nondiversified real estate assets in specific locations. The distribution of housing returns across space therefore plays a central for household finance and consumption, the evolution of household wealth and its distribution, as well as financial stability risks. Our study takes the first steps toward a better understanding of spatial risk and return patterns in housing markets over the long run.

In particular, this blog post presented a novel data set covering housing return series for twenty-seven superstar cities. The key finding across international and U.S. data is that the big cities tend to underperform the rest of the country in terms of total returns. On average, investments in residential real estate in a national superstar city (such as New York, London, or Paris) yielded lower returns than investments in the rest of the country. Investors buying real estate outside of the large cities earned higher returns. The reason is that superstar real estate is comparatively safe. The returns are less strongly correlated with income growth, and market liquidity is higher, leading to lower sales price uncertainty. Higher returns outside the big agglomerations are a compensation for higher risks.

Francisco Amaral is a professor at the University of Bonn.

Martin Dohmen is a professor at the University of Bonn.

Sebastian Kohl is a senior researcher at the Max Planck Institute for the Study of Societies, Cologne.

At the time this post was written, Moritz Schularick was an assistant vice president in the Federal Reserve Bank of New York’s Research and Statistics Group. He is currently a professor of economics at the University of Bonn.

Related reading:
Mapping Home Price Changes 

References: 
Francisco Amaral, Martin Dohmen, Sebastian Kohl, and Moritz Schularick (2021), Superstar Returns, Federal Reserve Bank of New York Staff Reports, no. 999, December 2021

Disclaimer
The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

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