Who Is Responsible for the U.S. Housing Crisis?

BIANNA GOLODRYGA, ANCHOR: We turn now to an issue that took center stage at this week’s presidential debate, and which our next guest describes as a national tragedy, that is the housing market in America. Atlantic staff writer, Jerusalem Demsas, has covered this at length, including in her new book, “On the Housing Crisis: Land, Development, Democracy.” She sits down with Hari Sreenivasan to discuss why it’s so difficult to find an affordable home.

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HARI SREENIVASAN, CORRESPONDENT: Bianna, thanks. Jerusalem Demsas, thanks so much for joining us. You watched the presidential debate, I’m sure recently, the first question out of the back — out of the box was about the housing crisis. You write about the housing crisis and have been for quite some time for The Atlantic. What went through your mind?

JERUSALEM DEMSAS, STAFF WRITER, THE ATLANTIC AND AUTHOR, “ON THE HOUSING CRISIS: LAND, DEVELOPMENT, DEMOCRACY”: It’s just remarkable to see this take such center stage at the debate. I mean, the first question wasn’t even about the housing crisis, and yet, you know, Vice President Kamala Harris, and Democratic nominee for president, I mean, her — right out the gate, her answer is about housing, and I think that that’s something that many people who have followed this space would not have expected.

SREENIVASAN: You call the housing crisis in America a national tragedy. Why?

DEMSAS: I think about housing as the fundamental building block of the economy and of people’s lives. When someone thinks about how they want to make their life work, when they think about the kids they want to have, they want to think about if they want to be close to their friends, their family, when they think about the types of jobs that give them dignity, meaning that pay them well, all of those things are predicated on the idea that there will be a home available waiting for them if they need to move. Americans move a lot. I mean, you know, one study showed that Americans move on average 12 times — over 12 times over the course of their life. We move when we’re kids to different school districts to get a better education. We move to go to, you know, college, some of us. We move for different jobs. We move when we get married. We move in with different partners. There’s lots of times where we have expectations that in order to make our lives work, there will be housing that we can afford and fits with what we need. And when that’s taken away, when that’s not available, it really undermines the quality of life that people are looking to create.

SREENIVASAN: Give us some scale or some perspective on how bad the crisis is. What kind of statistics leap out at you that you think people might not be as aware of?

DEMSAS: The core statistic I look at is this idea around a housing shortage, right? Right now, we have multiple estimates that put that number at around 4 million homes. To put that into context, the last time we saw a number like that was after World War II, when the vets were returning home, and we hadn’t built since before the Great Depression at any scale at all. That’s the kind of crisis we’re confronting right now. But at the very human level, most people watching this have themselves probably seen the housing crisis in their own lives. They’ve seen it in family members who have been unable to live near their parents when they have kids. They’ve seen it in their own lives as young people trying to move out of the parents’ house and start their own life fresh. They’ve seen it with seniors who have been trying to downsize it, but remain in their communities. In all these ways you see the housing crisis is really impacting people on a very human level.

SREENIVASAN: Let’s kind of just take a step back. How did we get to the situation where there is such a lopsided gap in the amount of housing available versus what’s necessary?

DEMSAS: You know, the housing shortage in the post-World War 2 era in the immediate aftermath, the answer is pretty simple, we don’t have enough housing. We need to build more housing. We built out the suburbs. You know, this is when, you know, baby boomers refer to as kind of the big wealth creation of their lives, is the creation of all of these homes that they’re able to buy into and get access to and begin jumping on that equity and home ownership ladder. But at some point, you know, you kind of build out the suburbs that are available. And what people want is they want more housing closer to the urban core because they want to be able to commute to work. And so, what we see happening is instead of accommodating that new growth, instead of building more densely, instead of building these smaller starter homes and single-family homes — smaller starter homes and multifamily homes that can accommodate lower-income and middle-income Americans, we’ve stopped allowing that sort of building to happen. And so, it’s really a very simple Economics 101 problem where we need more housing. We’re creating a lot of good jobs in America. We have them in a bunch of our urban centers, places like San Francisco, Seattle, Washington, D.C., Boston, Nashville, Austin, Miami, these cities are producing jobs at really, really high rates. But when people show up, there’s not building at the rates necessary to accommodate them. And that opposition has largely come from local governments that have been loathed to allow the kind of change necessary in order to accommodate that change and growth.

SREENIVASAN: So, let’s talk a little bit about it. Look, if it’s Economics 101, supply and demand theoretically even out, because the market solves for it, if there are not enough houses, one would think that builders would rush to build more houses so they can sell it to consumers who want them, right. What’s — what are the stumbling blocks?

DEMSAS: Developers are chomping at the bit to build, whether it’s, you know, private market developers. But also, I talked to affordable housing developers who are really, really wanting to build. They see this demand. They want to be able to do this. And often they have the money to be able to do this, but the laws make it very difficult to do so. And to give you an example, you know, starter homes are often thought to be around 1,500 square feet. You know, that’s the size of a starter home that, you know, baby boomers were used to buying into for their first house. Now, that kind of house is illegal to build in the vast majority of residential land in this country. You cannot just go as a builder buy some property, some land and decide you’re going to build a bunch of small starter homes. It’s illegal. Many places you’ll have to build something that’s at least 5,000 square feet, maybe even 10,000 square feet. In some parts of this country, houses are not allowed to be built on smaller than one acre of land. When you create those kinds of regulations at the local level that make it impossible to build smaller houses, you’re basically outlawing affordable housing that can be bought by people who are making a middle-income salary, even if they’re working two jobs, and that’s why we see, you know, home prices going from an average of, you know, $300,000 dollars across the country to $700,000 in some places, and even a million in other places. That’s not natural. Their — developers are motivated by a private market instinct to make a lot of money, and they’re being constrained from being able to chop up this land into smaller pieces by local governments that are often hostile to that kind of building.

SREENIVASAN: You mentioned the average size of a starter home, and it also makes me wonder, I mean, sometimes starter homes are just the right fit for kind of your — not just your first house, but also your last house. What about sort of seniors in communities that are kind of locked into where they’re living now, but they can’t really downsize because that kind of house isn’t around for them?

DEMSAS: Yes, this is some of the some of the sad stories I’ve heard about the housing crisis have come from seniors who have been locked in place. So, there are a lot of seniors, I mean, who, as they get older, a lot of people are unable to use the stairs the way they would, or it becomes much more difficult for them to do so. It literally becomes unusable for them to be in their own home. But then they have to make the very difficult of saying, do I stay in this house where it’s literally inaccessible for me to use the facilities I need, or do I have to leave my community? Because when they look around their neighborhoods, there aren’t the homes available to them that would actually meet their needs. It’s really, really devastating for someone kind of nearing the end of their life to have to move out of their community that they’re familiar with, that they’re comfortable in, and maybe have to, even early on in their life, much earlier than they expected, move into a residential facility and that can actually end up shortening your life or really impeding how you wanted it to go. And so, it’s really interesting to see AARP get involved in pro- housing legislation as a result of this.

SREENIVASAN: How much — when you mentioned the phrase affordable housing, you know, in conversations about real estate and about communities, that seems to sort of trigger other kinds of impressions right away for people. And how much, I wonder, are these policies from these local communities really a version of class segregation?

DEMSAS: Yes, that’s a really good question. So, zoning regulations — and that’s kind of the class of regulations I’ve been talking about. So, these are regulations that determine what sorts of things you’re allowed to do with land, how big you can build a house, how much you can cut it down, whether you can have a two-story house, all of these things are under the banner of zoning regulations. So, these regulations are created in the 1910s after the Supreme Court rules that it is illegal to explicitly zone areas based on race. So, you can no longer just say, here’s the area for the black people. Here’s the area for Chinese people. Here’s the area for white people. You’re not allowed to do that. And so, cities are very innovative. Racists are very innovative. And so, what they do is they decide they’re just going to create a facially racially neutral policy, which is to say, well, we’re not going to say no black people can live here, we’re just going to say the only types of houses that can exist here are ones that are affordable to millionaires. And what that does in a country that has created a bunch of set class segregation is, of course, de facto means that it becomes racially segregated. Over the course of the 20th century, we see a bunch of different developments that make it possible for people of color to also achieve wealth. So, you do see, of course, black, Asian American, Latino American people able to buy into these neighborhoods, but they don’t actually break down the class barriers. So, right now, middle-income, people who are just starting out in life, people who were used to being serviced by the private market and not needing government assistance in order to afford housing, no longer can do so in our most productive cities and suburbs in America.

SREENIVASAN: So, you know, there’s supposed to be a feedback loop from local communities where, if we don’t like the laws, we can change them, right? Why is that not working? If there is such a pressing need in different communities, why aren’t people able to go to the polls, so to speak, put up ballot initiatives or measures, go to City Hall and change things?

DEMSAS: Yes, I mean, I think there are a few different reasons for this. I think the first reason is that there’s often a disconnect to people between new buildings that are being constructed and the impact they have on the broader housing market. So, it can be hard to tell from your own personal perspective. Why is it that if a developer can’t build, you know, a few more houses on small lots of land, how does that affect my life? But what we know from economic research is that it’s really clear that when new homes are constrained, then rich people begin to occupy cheaper homes. I think the clearest place where this is most evident to people is places like New York City, where you see people who are making well into the six figures. Living in houses that are tiny, dilapidated, often they’re living in places that are, you know, fire unsafe. They don’t actually not up to code in a lot of places in the country would expect to have up to code. And the reason for that is because when you stop building enough, rich people still get the housing that they want, they just — or which people still get housing, but everyone else is then pushed into worse and worse units. But the other reason, I think, is the democratic problem. So, what we have in this country is the fact that most of the power around housing, around land, is at the local level, but Americans as democratic and by that, I mean, small democratic animals are not local political thinkers anymore. We don’t engage in local politics. We don’t vote there. But even if we did, it’s a real problem because how would you even, as an expert in this field really know who to blame? Do you blame your local city council member? Do you blame your mayor, your zoning commissioner, your historic preservation board? Do you blame the county? It’s actually becomes a situation where there’s so many different layers of government all responsible for different overlapping issues that it becomes difficult to have any kind of democratic accountability. And I think that really ties into why you see so much energy at the national level, finally, on trying to solve this issue, because this is a place where Americans pay attention.

SREENIVASAN: How much of it comes down to our sort of personal preferences when push comes to shove? Look, I want to have a good hospital nearby, but maybe I don’t want the sound of the ambulances, right? I’m for drug rehab centers. I just don’t necessarily need it down the block for me where people could be walking back and forth with drug paraphernalia. I mean, the sort of not in my backyard portion of this, how big is that in the hurdles to getting better housing policy?

DEMSAS: Yes. So, not in my backyard or NIMBY as you brought up is a real problem because it is very, very difficult for people when they’re asked, hey, do you want there to be homeless shelters? They’re like, yes, there should be a homeless shelter. And then you ask them, well, should it be cited a couple blocks from your home? And they’re like, no, I prefer it’s not going to be there. And if — you know, if every single community behaves that exact same way, then that means no homeless shelters ever get built. And you see problems like in Los Angeles, where they approve over a billion dollars for affordable housing construction in order to get homelessness off the streets, but they can’t cite that affordable housing at all because no one will accept that. And you have mass homelessness on the streets creating huge problems, both for the people who are experiencing homelessness, but for the city at large as well. And so, it is a really big problem, but I think often we can focus too much on individual people’s viewpoints about where they want stuff to be cited and not enough on the institutional factors that are creating the problem. All around the world you have people who would prefer not to have, you know, homeless shelters or drug rehabilitation centers or apartment buildings built near them. But in America, we’ve created different system of localism and decentralization that makes it really, really hard for governments to balance a bunch of interests. When you devolve authority to tens of thousands of local governments, no one can do that balancing, no one can say, here’s where development should occur, here’s where we should constrain development. It’s just a bunch of different entities saying no,

SREENIVASAN: There was a recent Pew Charitable Trust poll that said almost nine and 10 Americans would like to figure out ways to expedite the permitting process, right? So, why are we not seeing kind of more movement on the legislative front at the state level or in the federal level?

DEMSAS: I think it can be very, very difficult to — because it’s not a partisan issue, right? At the state and local level, usually partisan issues are actually the easiest things to get done because you often see partisan control of these state houses and of these governor mansions. But because this issue really breaks up the coalition, there are Republicans in favor and opposed. There are Democrats in favor and opposed. Essentially, no major bill on pro-housing issues has been passed without bipartisan support because you simply need to get all the support you can muster. The difficult politics of this are often because we’ve only just now recently begun addressing the role of these regulations to these elected officials. But we are seeing increased attention, states like Montana, like Oregon, like Washington, California, Arizona, Texas, Florida, this is a very wide range of political ideologies. All of these states have begun passing pro-housing legislation. Colorado where Jared Polis is the governor has been a leader on this. It’s a purple state there too. So, seeing that kind of coalition building in a bunch of different state houses, a bunch of different ideologies, shows the promise of this sort of approach. But, you know, it’s a big hurdle. When you’re 4 million homes behind, you can make a lot of progress without actually getting all the benefits you need to really reduce the pain.

SREENIVASAN: During the DNC, President Barack Obama during a speech says, if we want to make it easier for more young people to buy a home, we need to build more units and clear away some of the outdated laws and regulations that made it harder to build homes for working people in this country. You — I mean, you tweeted how surprised you were by that.

DEMSAS: Yes. So, Former President Barack Obama, when he was in office in his second term, you know, he’s a very wonky guy, very technocratic guy, as we all remember. And so, this has been a conversation, this conversation about these regulations, about local governments and their, you know, responsibility for the housing crisis has been something that academics and experts have known for a long time. And so, I’m not surprised personally, that Barack Obama knows this, but what I am surprised about and was excited and invigorated about is that now, finally, people at the national level are willing to take on the difficult politics of this issue in order to try and help solve this crisis. If you talk to political scientists or law professors from a decade ago, they would just tell you that this is an intractable problem, that Americans are just going to continue to have higher and higher home prices, higher and higher rents and all the problems that come downstream of that, because it’s too difficult to handle the political you know, breakdown at the local level. I mean, this is like one of the third rails of state and local politics alongside things like property tax reform. And so, because of that, seeing Barack Obama and also Democratic nominee for president Kamala Harris, both in her own speech at the DNC, and then in ensuing ads and at — you know, in the debate that we just watched with Former President Donald Trump, seeing that be foregrounded and the willingness to take on this thorny issue really showcases how far we’ve come and showcases how acute the pain has gotten for the American people that there’s no choice but to take on the difficult politics here.

SREENIVASAN: The new book is called “On the Housing Crisis: Land, Development, and Democracy.” You can see Jerusalem’s essays there. Thanks so much for joining us.

DEMSAS: Thank you.