Howdy! It’s been a while, and I hope everyone is staying safe and healthy. As we’re starting to talk about reopening (probably too early) and recovery, I wanted to share another very brief post about housing
The housing crisis is everywhere, and part of our Coronavirus recovery should address it.
In light of regions of the country becoming mini-nation-states including a pact of Midwestern States and in an effort to get some more data, I put together this map, which shows the jobs-housing mismatch for the five states that are definitely part of the midwest, the former Northwest Territories:
I outlined just how dire the housing numbers were in Ohio in a previous post. To summarize, the three largest counties in Ohio – Franklin, Cuyahoga, and Hamilton – are facing a housing crisis. The economies of these counties have grown rapidly in recent years, as evidenced by good jobs numbers, but housing has not kept pace. The result is a rapid increase in the cost of living right as wages have stagnated or declined for everyone but the most wealthy. On the surface the economy looks good. Thanks to income growth at the top of salary scale, average salaries look higher than ever and thanks to people leaving the job market and an influx of low-wage jobs, unemployement was down. Sadly, the gilded numbers can’t cover the truth: few people can afford to live in some of Ohio’s cities (and in many other areas). Those who can are the ones who are lucky enough to have owned a home before the boom, inherited wealth, or to have landed a high-paying job. Everyone else has been left behind.
From the map above, it’s clear that the story of unaffordability in Ohio’s cities would sound similar to many of our friends around the midwest. Minneapolis (Hennepin County, MN) and Chicago and its suburbs (Cook and DuPage counties, IL) have a greater mismatch of jobs and housing than Columbus (Franklin County, OH). Many other cities and counties are faring poorly as well. Check out the absolute mismatch numbers below – the chart shows the 10 largest counties in each of the six states I included in the map:
We have a massive mismatch of jobs and housing all over the Midwest, including major cities like Indianapolis (Marion County, IN) and others noted above. Counties with smaller cities like Grand Rapids (Kent County, MI) and Madison (Dane County, WI) are not immune either. The result of having lots of jobs and too little housing across the region is higher housing costs. The high housing costs are often accompanied by greater transportation costs, as folks sprawl into neighboring counties in search of lower rents or mortgages. We see this phenomena happening in Lake County, IN (a suburb of Chicago) and Lorain County, OH which, when I was growing up there, was home to several auto assembly plants and lots of jobs. But as the jobs disappear, it’s rapidly becoming a bedroom community for Cleveland and the Cleveland suburbs that are rapidly pulling white collar work out of the city. Again, I went into some more detail here.
(As a total aside, Detroit is really weird, with Wayne county, where the city of Detroit is located, having a large surplus of housing and some of its suburban counties, Oakland and Washtenaw counties having an even bigger housing deficit. I suspect the cause is a mix of redlining, the region’s massive automobile infrastructure, and the collapse of Detroit’s economy. It partly explains some of the stupidly long walks to work that some people in Detroit have to do. I’d love to dig into it, but it would be a whole post on its own, and likely a lengthy one at that.)
Rural areas and some smaller cities are hit-and-miss. Areas that that are doing well, where wages are high, see housing mismatches – others, where wages are low are clearly in decline. We see this in the chart below, which shows a negative correlation between the number of housing units and average salary. As you might expect, places with low wages, areas that are likely depressed, have a surplus of housing units. We need to help these places to improve their housing stock, in some cases, tearing down excess housing. In reality, these depressed areas need an economic stimulus: maybe jobs, maybe UBI.
However you spin it, we have a housing crisis in some places and a jobs and income crisis in others. The recovery efforts need to be targeted to address both problems.
But, getting back to housing, before COVID-19 struck, some places, namely Minneapolis, were starting to take steps to address the housing crisis. Many areas, particularly areas with a lot of job growth in the past decade, were not doing enough though. The economy was booming, and large swaths of the country were not building enough in housing. The high rents and booming real estate prices are a direct result of supply not keeping up with demand.
So, Now What?
We may be heading into a recession. Investment, and in particular housing construction, will likely plunge. This is bad news especially because housing investment was already lagging behind demand in many places. There’s a lot of blame to go around for why housing was getting too expensive, and if we are going to resolve the housing crisis in the long-term, we’ll need to sort it out. However, in the short term, we need to counter-act the coming decline in housing investment.
The federal government is already gearing up for Keynes-style economic stimulus, and it is sorely needed. For a stimulus to work though, we need to target it where it will have the most impact for people. As regions of the country band together to address the COVID-19 crisis and how to recover from it, they should respond by building more housing in counties where the jobs-housing mismatch is high. Doing so will create jobs and stimulate other construction, while at the same time providing affordable places for people to live. It’s a countercyclical action that would create enormous benefits.
As a part of any stimulus, recovery, or green new deal response to the current crisis, we should invest in building dense, affordable, energy-efficient housing along major transit corridors. We need to start thinking about how to avert the next crises, particularly the affordability and climate crises. Midwestern cities can lead the way. Many parts of the midwest were booming before and will boom again once it’s safe enough for the economy to start up. Let’s act now to ensure that when they do, the boom can be enjoyed by everyone.