Real Estate Expert Answers US Housing Crisis Questions | Tech Support

I'm Kate Nelischer.

I'm a professor of urban planning.

Let's answer some questions from the internet.

This is Housing Support.

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@ethan_to_go says,

Why does rent have to go up every year,

but my salary doesn't?

Sad face.

That's really disappointing.

So if we look back to 1995 to now,

the percentage increase is almost a 100% increase

in the amount of rent people are paying,

but income doesn't increase as quickly.

Of course, rents increase with inflation,

but this is more than that.

It's a lot of the low cost units

are disappearing from the market.

Because they have transitioned to luxury housing,

landlords are charging more and more,

based on upgrades they've made

or they've transitioned to for-sale homes.

There's also been an increase

in what's called institutional investment.

These are corporations buying up homes,

and also multi-family residential buildings,

to rent them out to make a profit.

In 2001, only about 18% of rental units

were owned by corporations.

Today, that's about 50%.

So it's really likely that you are paying your rent

to a corporate landlord.

@garrethmcdaid asks,

Is there a housing emergency or not?

We are in a housing emergency,

and we're also in housing crisis.

Housing emergency is actually a legal term.

If a vacancy drops below 5%,

the municipality can declare a state of emergency,

and that allows them

to access all these different kinds of policies,

rent stabilization, rent control,

are examples of this.

A healthy housing market

has above 5% vacancy rate.

The vacancy rate in New York City

is actually 1.4% right now.

Anything that charges less than $2,400 a month in rent,

the vacancy rate is actually 0.4 to 0.8.

A very low vacancy rate.

@iloveb43 asks, Why are houses so [beeping] expensive?

Houses are really [beeping] expensive right now.

Number one, it's a supply and demand issue.

The US is short, about 4 million homes

to meet the current demand,

and a scarcity of any commodity

means the price goes up, up, up.

In fact, 2023 was the least affordable year ever

to buy houses in the United States.

Interest rates are increasing,

or it's very expensive to invest in development projects,

and it also encourages developers

to develop luxury housing

rather than more affordable housing.

Because this wealthy market exists,

developers are building to target that market.

They're building very expensive luxury homes.

That means that other housing isn't getting built,

so everyone's prices increase as a result

of more luxury development.

@TrueNYJetGS asks, Why are cities

not using these abandoned towers

to create affordable or homeless housing?

What the [beeping] is wrong with this country?

Depending on the age and condition of the building,

sometimes it can actually be more economically viable

to demolish the building and build something new.

Older office buildings

or pre-war office buildings,

ventilation required that windows

be provided for every office space,

so it's easier to convert these older office buildings

to residential because they're already laid out

like our residential buildings.

Newer buildings are very difficult to convert

to residential, and it's very expensive to do this.

If you wanna convert this into a residential building,

you have to replace all of these windows.

You can't have a bedroom without an opening window.

You wouldn't have to puncture a hole in the middle

of the building to provide window access,

reconfigure all of the plumbing in the building

to hook up to all of the individual bathrooms and kitchens,

change the electricity supply,

change the HVAC systems.

So this requires just completely transforming

the inside guts of these buildings.

In New York City, there's about 94 million square feet

of unused office space.

That's equivalent to all of the office space

in Dallas and Houston combined.

It's a huge amount of vacant space right now,

and we have to figure out what to do with it.

@hiveforhousing says What housing technologies

are here to stay? Modular?

Modular housing can also be referred to as prefab.

Different components will be manufactured

in different manufacturing sites.

They're all brought back to the site

and assembled kind of like a jigsaw puzzle.

The manufacturing can take place where labor is cheaper,

and it also doesn't disturb the neighborhood as much.

Another new-ish building technology

that I'm really excited about

is something called mass timber,

where wood is laminated together with a special glue

to create really large beams of wood that are very strong.

They're also fire resistant.

They have a lower carbon footprint as well.

Mass timber is now becoming stronger,

and so it can be used to build higher and higher buildings.

Previous to a couple of years ago,

the highest building you could build in the United States

out of timber was six stories.

Now, you can build 18 stories.

So we're going to start seeing high rises

built entirely of wood.

It's pretty amazing.

@ReadLyte says, It will be interesting to see

how the value of oceanfront property changes

as sea levels continue to rise.

This will be really interesting.

So far, though it really hasn't affected home prices.

@Shmoawkjg asks, What is redlining?

It's kind of come to signify any sort

of racial discrimination in housing,

but actually there's a really specific

history around redlining.

This is a redlining map from Cleveland.

In the 1930s, the United States federal government

decided to start a new mortgage program

to allow home buyers to access federally backed mortgages.

The government created these maps to determine

where their investments would be safe.

Green areas, where you see down here,

it's where the federal government felt

that their money would be well used.

They also created a D class or a red class,

which was really a no-go zone,

where the federal government did not want

to provide government backed mortgages.

These redlined areas are where black families lived.

It made it very difficult

for residents living in these areas,

predominantly black residents, to access mortgages.

Many of these maps exist

for communities all across the United States.

These maps were not made public

until 1978 when a historian stumbled upon them.

If you look at the neighborhoods

that were historically redlined,

these are still some

of the most racially segregated neighborhoods

across the United States,

and those effects are still felt today.

Many of the historically redlined neighborhoods

have experienced disinvestment,

and more recently,

many of them have become targets for gentrification,

displacing many of these residents as well.

@DonGhotti says, Is gentrification all bad?

Pretty much.

There's something called direct displacement.

People are directly displaced from their homes

because they can no longer afford the higher rents.

Something else happens as well

that's called indirect displacement.

The shops are different.

The community members are different.

And so this is kind of making you feel uncomfortable

in your own neighborhood.

Both of these things are bad.

I think a lot of people think about gentrification

associated with these kind of design choices

that hipsters make.

So you think of the Helvetica house numbers

or sometimes the gentrification fences around homes.

Really, these are kind of an effect of gentrification.

They're not causing gentrification.

Gentrification is really caused

by institutional investment in lower income neighborhoods.

Investors are coming in

and recognizing what's called a rent gap,

the gap between the current rents

that are charged in low income area

and the potential to charge higher rents.

These neighborhoods might be really centrally located,

might be near transit,

and so investors see an opportunity to buy up

and improve buildings

and then take advantage of that gap

by charging higher rents.

@Burns12Regina says,

I'm confused as to how exactly

are Airbnbs affecting the housing market.

A lot of rentals that would have been provided

for permanent residents have transitioned to Airbnb housing,

which means it reduces the amount

of total rentals available on the market

and drives prices up.

For example, we can look to London.

It is the city with the largest number

of Airbnbs in the entire world.

50,000 Airbnb units were previously long-term

rental units in London.

That means that 50,000 rental apartments

were taken off the market

and are no longer available to permanent residents.

Also, some research has shown

that Airbnb's increasing

actually contributes to gentrification

and raising home prices in certain neighborhoods.

@scottyzs_ says,

How the [beeping] did my parents buy a house

at 26 years old while I have $2,000 in my bank account?

I feel your pain, scottyzs_.

Really, things are much different

for millennials than they were for boomers.

When boomers were reaching the age to buy a home

around the late 80s, early 90s.

If you made about $50,000 a year,

the average home at that point was about $121,000.

So that's really only about a two times

increase from your income.

There is a little bit of a dip here

following the 2008 recession,

but it increased dramatically since.

The median home price increased by 43%,

where the median income only increased by 7%.

The average right now in the United States

is a home price that is about six times the median income.

If you think about very expensive places

like the California coast or New York City,

that can be about 11 times the median income.

@kevinvdahlgren asks,

What is the leading cause of homelessness?

There are a lot of common misconceptions

around people who are unhoused,

that perhaps drug use is involved,

that there are mental illnesses,

and these things do exist,

but they are not the drivers of homelessness.

Recent research from the University

of California San Francisco actually found

that the leading cause of homelessness

is a lack of access to affordable housing.

It's very easy to lose your home.

8.5 million Americans right now are at risk

of becoming homeless because rents are so high

and incomes are so low.

Any increase in rent

or perhaps a medical emergency could be the difference

between someone remaining in their home

and becoming unhoused.

@Nosemanoo says, Why are there so many homeless

in Los Angeles?

There's a common myth that

there are a lot of unhoused people in Los Angeles

because they move there for access to the good weather.

This is really not true.

Researchers have found that the vast majority

of people experiencing homelessness in Los Angeles

are from California,

and even from that specific county,

that they previously had housing in that area

and were then priced out of it and became unhoused.

California, as you can see here,

has the most number of unhoused people

of any state across the country.

This number has increased 40% since 2007.

New York also has a very high number

of about 103,000 people.

There are differences though.

Most of the unhoused people in California are unsheltered.

This means they don't have access

to temporary shelter facilities.

In New York, the majority of those people are sheltered.

That's a result of a policy in New York City

called Right to Shelter.

New York City is the only city in the country

that mandates the city to provide a shelter bed

to every single person who requests it.

@dawnjay_ says,

Why are corporations buying up houses just to rent them?

Why should any house be owned by [bleeping] Walmart?

I don't know about Walmart,

but corporations are certainly buying up houses.

There was a lot of internet speculation

about a company called BlackRock,

which is a private equity firm,

buying up single family homes and renting them out.

This isn't really happening.

However, BlackRock is investing

in real estate investment trusts that are investing

in apartment building acquisitions and rentals.

So BlackRock isn't buying up suburban homes,

but they are investing in the rental market,

and so corporations are recognizing real estate

as an asset class that they would like to invest in,

just like stocks and bonds.

This is a form of what's called

the financialization of housing,

and this really means the transition

of housing from a social good,

from something we need to live,

to something that can be bought and sold and traded,

and where people can make lots of money.

@HobeheidarAli1 asks,

Why are there so few houses on the market?

It takes a very long time for developers

to receive approvals to build their projects.

In Santa Monica, California,

the average development takes 48 months to be approved.

That's 48 months where the developer

is waiting for approval before they can begin construction.

Increasing interest rates are also affecting housing supply,

specifically for existing homes.

If you purchase your home prior

to the recent increases in interest rates,

you don't wanna sell and buy a new home

and risk getting a bad interest rate.

If we look at housing supply prior to the financial crisis,

it was pretty steady, but actually ramped up,

right before the financial crisis,

and then jumped off a cliff just plummeted.

6 million Americans lost their homes.

Housing production started up again,

but at a much slower rate

because developers were a bit scared.

Demand skyrocketed, but there wasn't enough supply

to meet it.

Some cities have seen actually a 50% reduction

in housing inventory since the pandemic.

@OurNewHomecoach says Serious question,

where in the world

are they getting housing policy right?

I'd love to learn from that.

One place that's getting it right is Vienna in Austria.

It's dense, it's lively, it's vibrant.

It's a huge hub of culture.

In Vienna, 60% of people live in public housing.

That compares to about 1.5% in the US.

This chart shows the available housing in Vienna.

As you can see, about 57% is market rate,

whereas a huge percentage

of the available housing is either public housing,

meaning it's owned and managed by the government,

by private nonprofit organizations

that receive government subsidies to provide this housing.

So if you're looking at an apartment in Vienna right now,

odds are that you would qualify for public housing

because in Vienna, public housing is not just

for low income families.

It's also for middle income families.

In the United States, it is only for low income

or very low income families.

@yourfakem0ther says,

What exactly are squatter's rights?

So what that means, in a place like New York,

is that if someone lives on a property

without a rental agreement for 10 years,

takes care of that property,

is known by neighbors,

is not doing that secretly,

they can claim that they have rights to that property,

that they are the owner of that property

because they have used and maintained it

for that length of time.

Just because you claim squatter's rights

doesn't mean that the property becomes yours.

It's a court mandated process.

When you go to court to claim squatters rights,

the original owner can, of course, come

and defend their right to own the property.

If you are successful, the property is deeded to you.

If you are unsuccessful, you have to vacate the property.

@chippitydooda says, Is there anywhere affordable

to live anymore?

Almost no.

Places like California, New York City,

these are places where the home price to income ratio

can be around 10 to one.

It would cost you about 10 times your income

to afford the median home price.

Things get a little bit more affordable

if you wander into smaller rural communities.

Some places in rural Texas as well

are a little bit on the more affordable scale,

but even these are becoming more and more unaffordable

because the housing supply is dwindling in these areas

because a lack of development interest.

For example, in a place like Buffalo,

which is usually pretty affordable,

housing is becoming a scarcity

because there isn't enough development,

meaning that it's becoming more and more expensive.

@Thoreeeee says, Should I buy a house on Amazon?

Let me know guys feeling impulsive.

I would say that's not a good idea.

The Amazon listing of housing is really part

of this broader trend of tiny homes.

These are very small homes

that can be built on very small plots of land

with just tiny homes.

These look like downsized mini versions

of suburban developments.

This is exciting, but it's not a huge trend yet.

Only about 1% of the current active housing market

are tiny homes.

It's not a solution to housing affordability.

@roseydell says, What are the policies

that would bring down housing prices?

What policies would help renters

to have enough access to affordable housing?

So when we're talking about housing prices,

we're really talking about increasing supply.

That is what is going to bring house prices down.

When you're talking about rentals,

there is of course, a need

for the increased supply of rental housing,

but policies can also be introduced.

The government gives tax incentives to developers

based on the promise that those developers

will include affordable units

within their new developments.

Rent control and rent stabilization

are things that are really helpful in certain contexts.

So there are about 16,000 rent control apartments

in New York City

and about a million rent stabilized apartments.

Rent control apartments are only those

that are built prior to 1947.

This means that rent prices are set

at what's called a base maximum,

which means that rent control apartments

cannot fluctuate above that maximum rent.

Rent stabilization means that there are limits

to how much the rent can increase year over year.

So those are all the questions we have for today.

Thanks so much for watching.

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