The Next Housing Crisis (And The Worst One Yet)

Abandoned-homes-in-Detroits-once-affluent-suburbs

What’s the opposite of gentrification?  That’s not a trick question, though it sort of sounds like one.  It’s “filtering” – the method by which many economists believe that the economy naturally creates affordable housing.  Basically, it’s the process of new housing naturally depreciating and being sold or rented to people with lower incomes than the original occupant.  In that sense, it’s not so much the opposite of gentrification as the other side of the gentrification coin.  It also explains why, as a poverty-stricken writer, every place I’ve ever lived has been paneled with hideous fake wood grain vinyl, and has had at least one wall that was crumbling inward.

Greenwich Village, in New York City, is a good example of filtering – and gentrification – at work.  After a long stretch as an affluent neighborhood, the Village fell into disrepair and abandonment, depreciating property values until it was affordable for artists to move in, back in the Seventies.  That led to the now-predictable process of revitalization and displacement, as filtering led to gentrification.  (The present-day DC real estate renaissance is the product of a kinda sorta similar process, though it was as much about regrettable cultural dynamics as it was simple economics.)  Regardless, the process was generally the same in both cities.

The problem facing future Americans is that so much of our new housing stock isn’t going to last long enough to filter down.  Right now, people are abandoning the suburbs in a reversal of Sixties-era “white flight,” in which white people fled the inner-city for the suburbs.  Shaw is the new Arlington.  Unfortunately, a significant percentage of the aging suburban housing stock being freed up is also at the end of its practical life span.  These dead houses fall into two groups;  foreclosures that, after years of abandonment and neglect, are only fit for demolition, and cheaply-constructed crap houses that were thrown up to meet the Baby Boomer-driven surge of demand, but have aged as badly as the “Nikey” knock-off sneakers you got at the dollar store.  And it’s not just the assembly-line tract housing, either – some of the worst deterioration is seen in once-expensive McMansions.  Since purchasers of McMansions were anxious status-seekers, many cared more about appearances than quality, and as a consequence, many of these houses are grade-D quality.  (One reporter found crown molding made of styrofoam and faux-travertine made of epoxy and marble dust.)

Economists estimate that depreciation happens at a rate of about one percent a year, so after fifty years, a housing unit’s value, absent any dramatic renovations, have declined by about half, putting it into reach of a whole new economic strata.  Historically, this has worked as an organic form of affordable housing creation;  Columbia Heights, for example, was created as an enclave for upper class managers employed by the federal government, but half a century later had become a middle class neighborhood.  This is the subtext when people say a rowhouse has “good bones” – it may have water stains and bad wall-to-wall carpeting, but underneath is a house that’s lasted a century and will easily last another.  But look at a suburban house that was built in the Sixties.  Even leaving aside the question of aesthetics (make no mistake, it will be hideous in almost every facet), the workmanship is markedly shoddier than in older houses;  wood has replaced brick, linoleum has replaced hardwood.  And consider that construction got worse with each successive decade;  do you really think the cookie-cutter exurban houses they were throwing up so quickly, right before the last crash, will still be habitable in 2055?  And even if they do hold up, how will lower-income families live in houses that were built with an utter disregard for energy efficiency, as the cost of energy skyrockets?  It’s a grim picture all around.

If there’s a silver lining here, it’s that if you bought a house in, say, Ledroit, in the past decade, your investment is even better than you realized.  Rather than there being some sort of semi-orderly cycle of one group moving out and another moving in, we’re all now just fighting over the same inner-city real estate.  City governments have responded to this logjam by stepping up rent control and other “set-aside” policies, which, while preventing some people from being displaced, has also decreased the available housing stock, and driven up prices.  Add to all that the fact that people actively do not want to live in the suburbs anymore.  No sidewalks, no convenience, long commutes – who wants that, even at a bargain price?  I’m just surprised that after all those years of reflexively talking trash about the suburbs because it was what all cool kids were doing, it turns out we were actually right.

One response to “The Next Housing Crisis (And The Worst One Yet)

  1. Franklin, your observation about the City and its enduring qualities are spot on. Your deep hatred for the suburbs is now well documented and likely with good merit but I must challenge you on the quality of the investment in purchasing a home in the ‘burbs. For those who don’t want to live in a shoe box, would like to raise a family and don’t have seriously deep pockets, the ‘burbs are the natural progression in growing up and the only reasonable choice. Look at Arlington for example, Curbed just posted an article this week (how timely) that millennial’s are leaving because their needs change as they grow older but their finances don’t keep pace with that change. These people aren’t, however, moving to Shaw- they are moving to the suburbs [note that Arlington is not the City so the example isn’t perfect!]. Hopefully they will take on the burdensome task of fixing the crap that’s been built over the past half century and in doing so will solve the issue of the aging housing stock. And on a finer point, sprawl aside the inner suburbs are largely built out so developable land is and will remain a finite commodity. As the population increases it doesn’t provide an opportunity for the simple laws of scarcity in supply and ever growing demand to be flipped because the City is now a better place to live than it was 20 years ago. are largely built out so land is and will remain a finite commodity.

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