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January 11, 2015

Does Affordable Housing Really Need to Be So Scarce in Most Big Cities?

By Richard Clark

Why is it that a growing percentage of urban men today can't afford to rent or buy a home that is as nice as the one in which they grew up? Meanwhile, there are plenty of rundown buildings in, or very close to, such cities . . as well as a huge supply of currently idle workers who would love to repair and refurbish such buildings, if it would eventually earn them a home of their own, from amongst those they help refurbish.


Why is it that a growing percentage (approaching 50%) of urban men today, ages 30-40, cannot afford to rent or buy a home that is as nice as the one in which they and their parents lived back in the 60s, 70s or 80s? Why is it that only a small and shrinking percentage of men in most cities can any longer afford to buy or rent a median-priced home there? The median income in San Francisco is . . less than half what's needed to buy a home there. Meanwhile, there are plenty of rundown buildings in, or very close to, such cities -- as well as a huge supply of currently idle workers (many of them long-term unemployed), who would love to repair and refurbish such buildings . . if it would eventually earn them a home of their own.

Problem is, except for a very few, isolated exceptions, people who are desperate for a decently paid job currently have no opportunity to work, in some efficient, well organized and cooperative way, on the refurbishing of run-down apartment buildings and other multi-unit structures -- in return for which they would eventually be able to win ownership of one of the units in one of the buildings they help refurbish. Therefore, in light of the huge reduction of income most of these people have experienced since about 1975 (even as worker productivity and top 1-percenter-incomes soared), why aren't such opportunities made available to these people? And why isn't the creation of such a program, as would provide such opportunities, a national priority? (A record 92,898,000 Americans 16 years and older did not participate in the labor force last month, according to the Bureau of Labor Statistics. Link)

How many duplexes, triplexes and stand-alone homes are being held off the market by the banks which, through the process of foreclosure, own them? (Why held off the market? It's to keep prices from falling as a result of the housing glut that would otherwise occur.)

Keep in mind that banks obtained these homes by foreclosing on the previous owners, often illegally. And yet, while banksters were bailed out with billions of our tax dollars, homeowners and workers got the shaft. So why shouldn't cities be granted the right to use the power of eminent domain to take these houses away from these banksters, compensating them by paying them something less than "fair market value" for such homes? (For more on this subject, go hereand here.)

Millions of jobs could be created by way of government-sponsored programs that allowed the unemployed and underemployed to refurbish (after suitable periods of on-the-job learning and instruction) all rundown or abandoned housing that's owned by banks and slumlords.

Even with nothing other than the installation of double-pane windows, panels of photovoltaic cells on the roof, and adequate insulation, we could provide jobs for millions of Americans, ages 16 and up, who now languish in poverty or near poverty, as a result of ever falling wages and the huge, upward transfer of income and wealth that has occurred over the past 40-50 years.

Plus, such programs would ultimately save many thousands of megawatts of electrical energy, and thereby greatly reduce the amount of coal that has to be burned in this country to generate electricity. Such saved electricity could, among other things, power many thousands more battery-powered cars, thus greatly reducing this nation's need for gasoline, diesel and oil.

More importantly however, the provision of millions of new employment opportunities like these could provide work for huge numbers of alienated young (often black) men who today turn to crime (selling drugs for instance) for lack of a decently compensated job. As a result, many of them spend much of their lives behind bars, at a cost of about $40K/yr to taxpayers. And, with well over 2 million Americans now behind bars, that adds up to more than $80 billion per year.

The U.S. incarceration rate is now about 240% higher than it was in 1980 (even though the crime rate has been falling the entire time). This means that a reduction by one-half in the incarceration rate, even if only among non-violent offenders, would lower correctional expenditures by at least $17 billion per year. So, what if we could instead spend that $17 billion on administering programs that would create millions of new jobs refurbishing and 'solarizing' run-down or abandoned housing? If such programs could halve the number of non-violent offenders in jail, we taxpayers would be money ahead.

Related fact: Free housing for the homeless is cheaper than only paying for the other kinds of maintenance and care they need.

(So why not also let anyone, who needs a job, work on the creation of the affordable housing that they and others like them personally need?)

In 2005, Utah set out to fix a problem that's often thought of as unfixable: The state had almost 2000 chronically homeless people, most of whom had mental health or substance abuse issues, or both. At the time, the standard approach was to first try to make homeless people "housing ready": You had to get these people into shelters or halfway houses and then get them into treatment programs, and only when and if they made progress with such treatment could they get a chance at permanent housing.

Utah, however, tried a new strategy and a new program. It's called Housing First and it consists of just giving the homeless the homes they need. Amazingly, this approach, in the long run, turned out to be much less costly than the traditional method of dealing with and helping the homeless.

How has Housing First saved Utah money?

Homeless people are not cheap to take care of. They are particularly vulnerable, and often sick, as a result of their homelessness. The cost of homeless shelters, emergency room visits, ambulances, police and so on, quickly piles up. The annual cost of caring for some of these individuals is nearly $1 million, with the average cost being more than $20K per year. But putting each of them, immediately, into their own permanent housing costs only $8K per year. Similarly, a Colorado study found that the average homeless person costs their state $43K/year, while housing that person cost just $17K/yr. So the returns on any housing investment up front, are considerable.

But the Housing First concept isn't just cost effective

It's more effective in other ways, as well. It turns out that if you move homeless people into their own housing right off the bat, and then also give them the other help they need, such help then proves to be far more cost effective and long lasting. More bang for the buck.

Why is this? Simple. People tend to do better, by every measure, if they have a modicum of stability in their lives and can avoid the extreme stresses of homelessness, or poverty generally. Accordingly, in the years since implementing this program, the number of Utah's chronically homeless has fallen by 74%. Similarly, a recent study in Georgia found that a person who stayed in an emergency shelter (with significant numbers of others) was 5 times as likely to end up back on the street as someone who had received immediate housing of their own.

As a result of these findings, the Housing First concept is being adopted by hundreds of cities around the country in states both red and blue. And quite interestingly, the first effort to get this practice going, nationally, came from the administration of George W. Bush. The rationale? The practice has _repeatedly_ been shown to save money.

Expending money now, in order to save money later, is not a new concept

For more than a decade, Mexico has been paying parents to keep their children in school. And studies have shown conclusively that the program is remarkably cost-effective, once you honestly take into account the society-wide economic benefits of producing a healthier and better educated population.

The USA is foolish to end up spending so very much on disaster relief when much of those huge expenses could have been avoided by spending up front on disaster preparedness. Similarly, the US spends enormous sums on treating and curing disease and chronic illness, yet greatly underinvests in the prevention and primary care that could have prevented many cases of chronic illness and advanced disease.

Similarly, Housing First is not so much a "give-away" as it is an investment in the future -- a cost-effective investment that benefits the entire society as well as each helped individual.

(What you have just read is a synopsis of an article on page 42 of the last September 22 issue of The New Yorker.)

The Implications of What You've Just Read

1. If affordable housing is so very helpful to the homeless, wouldn't it also be quite helpful to those who must, nowadays, work long hours, often at more than one crappy job, just so that they can afford to live in some second-rate dump instead of being homeless?

2. Why is it that about half of men (ages 30-40) today cannot, in most cities, afford to rent or buy a home that is as nice as the one in which they and their parents lived back in the 60s, 70s or 80s? For more info on this, go here and here.

To better answer the two questions just raised, . .

. . we need to develop a better understanding of what has happened to the cost of higher education and housing over the past 40-50 years, in relation to what has happened to the median wage and employment opportunities, over that same period.


In 1970, a year of tuition at a public university cost $1,207. In the most recent year of data available, 2007, a year of tuition at a public university cost $11,034. That represents an annual average increase of 6.2%, which, if you applied it to the 2007 price, gives you an estimated 2010 cost of a year of education as being $13,216. That's a 994% increase in the cost of a four year degree.

But now let's consider the young person who is earning minimum wage and trying to make it through college. In 1970, you could work 755 hours at a minimum wage job over the course of a year to earn enough to pay for a year of schooling at a public institution -- about 14 hours of work per week.

In 2010, however, you would have to work 1,823 hours at a minimum wage job over the course of a year to earn enough money to pay for a year of schooling at a public institution -- about 35 hours per week! Essentially a full time job -- just to pay for college classes! Want to eat & pay rent, too? Get a second job! No time to study? Tough luck.

In other words, in 1970, you could work a part time job as a cashier (or something similar), and easily pay for college, thus enabling you to work and attend college without going into debt. In 2015, however, you would have to work a full time job just to pay college expenses -- meaning you will either have to massively go into debt, or do without a college education.

Not only that, a college education is becoming much more of a requirement for employment than it was in 1970. (Many receptionist jobs now, absurdly, require a college degree.) In 1973, 72% of jobs available for workers in the United States, required no more than a high school diploma, and many such jobs were also open to H.S. dropouts. By 2007, that 72% had dropped to 41%, and future projections show it going lower still. The remaining jobs that do not require a college education are primarily service jobs that pay very poorly. (Question: Is the growing struggle for a college education becoming little more than an arbitrary sorting mechanism, the sole purpose of which is to help rationalize and excuse abnormally large numbers of unemployed and underemployed, e.g. those who don't have a degree, and who are therefore arbitrarily "not qualified" to work for anything more than a poverty-level wage?)


The median price of a home sold in the United States in January 1970 was $23,600. The median price of a home sold in the United States in January 2011 was $240,100. That's an increase of 917%, on par with the jump in education prices. Yes wages in that time period rose too, but not nearly as fast as home prices. In other words, even after the collapse in housing prices, the average home today costs more than twice as much as a home in 1970, in terms of average number of hours of work that is required to pay for the house.

The Full Picture

The minimum wage in the United States has gone up 353% since 1970, and average incomes have gone up approximately 500%. In that same span, however, the cost of basic household goods has gone up 482%, the cost of a four year education has gone up 994%, and the cost of an average home has gone up 917%.

In other words, in the eyes of an average worker from 1970, as compared to today, the prices at the grocery store have remained largely unchanged, but the cost of an education has roughly doubled (and a degree is now usually required if you want to earn a decent wage, while it wasn't in 1970), and the cost of a home (of some given size, location and quality) has more than doubled as well (in terms of the average number of hours that need to be worked to pay for it).

And if you look at the prices of these things through the eyes of a minimum wage earner (when comparing 1970 to today), the prices at the grocery store have gone up about 30%, the cost of education has roughly tripled, and the cost of a home has also roughly tripled.

Is There A Solution?

Like it or not, students of today are not going to be able to follow the comparatively fortunate path of their parents -- and especially not the path of their grandparents. If they want to have a financially successful life, they're going to have to compete their way into an ever more limited and smaller segment of above-average income receivers. (Example: today in San Francisco, as already mentioned, you have to be in the top 5% of income receivers to buy a median-priced home. This was of course not the case 40-50 years ago.)

(Source for these last 4 sections.)

(Article changed on January 11, 2015 at 11:38)

(Article changed on January 11, 2015 at 16:23)

Authors Bio:

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always been more interested in political economics and what's going on behind the scenes in politics, than in mechanical engineering, and because of that I've rarely worked more than 8 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.