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Climate Change Is Already Amplifying the Affordable Housing Crisis

When Hurricane Michael tore through the Florida panhandle last October, it killed at least 43 people, caused an estimated $25 billion in damage, and destroyed thousands of homes. In Mexico Beach, Florida, where the storm made landfall and the damage was concentrated, nearly half the homes were destroyed and almost all of them were damaged.

Many residents were still living in substandard housing six months after the storm, and competing for a shrunken pool of rental units with workers who had come to town to assist in the storm recovery, according to a report in The Washington Post. Other areas of Florida were already facing challenging housing shortages. And earlier this year, as Next City reported, the state legislature once again pulled money from an affordable housing trust fund to pay for other programs, including disaster relief.

Housing damage from extreme weather events like Hurricane Michael “further compounds the nationwide affordable housing crisis,” the Center for American Progress, the left-leaning D.C. think tank with close ties to the Democratic Party, wrote in a report released earlier this month called “A Perfect Storm: Extreme Weather as an Affordable Housing Crisis Multiplier.”

“Efforts to address the devastating impacts of natural disasters … have thus far failed to consider the threat multiplier effect that more extreme weather and scarce supply of affordable housing has on frontline communities — those most likely to experience the worst and first climate impacts,” the report says. “Solutions that offer only temporary relief in the wake of disasters and/or are directed to wealthier households and homeowners will perpetuate the loss of affordable housing stock that, when damaged, is often demolished rather than rebuilt. Moreover, they will increase displacement, housing poverty, and homelessness.”

Catastrophic weather events are becoming more frequent. In the last three years, for example, weather events like storms, floods, and wildfires that caused at least $1 billion in damage, adjusted for inflation, doubled the yearly average during the period between 1980 and 2018.

“One of the reasons we wanted to write something like this was because, I think, people get caught up in thinking and hearing that climate change is some kind of distant threat,” says Heidi Schultheis, a co-author and senior policy analyst in the Poverty to Prosperity Program at CAP. “It feels a little bit intangible. We don’t see it affecting our day to day lives. We really wanted to bring home to people that this is not a distant threat. This is very much happening right now.”

The report cites a March study from the National Low Income Housing Coalition which shows a nationwide shortage of 7 million housing units for low-income renters. That shortage disproportionately harms low-income communities of color and people with disabilities. Natural disasters not only exacerbate homelessness by destroying existing housing, but they also have outsized mental and physical health impacts on people who are already experiencing homelessness, the report says.

The report, which was published six months after the United Nations Security Council held a discussion about climate change as a global “threat multiplier,” makes a number of recommendations for ways that the federal government as well as state and local policymakers can “build strong, healthy, fair, accessible, and affordable communities that are resilient to future climate change impacts.” Congress, for example, should direct HUD and FEMA to coordinate evacuation efforts and housing assistance in the wake of national disasters in racially equitable ways and in compliance with the Fair Housing Act, the report says.

Congress should also expand federal funding for rental assistance and homelessness services programs, it says. In addition, leaders at the state, local, and federal levels should invest in climate resilient infrastructure and community development projects that don’t create displacement, while adopting design guidelines that account for greater extreme weather risks. Specifically, the Center calls on Congress to pass the Reforming Disaster Recovery Act of 2019, which would address the equitable disaster funding recommendations, and for HUD to fully implement the Affirmatively Furthering Fair Housing rule, which would require housing authorities to address local segregation.

States and cities also need to acknowledge the increasing frequency of extreme weather events and plan for them, says Valerie Novack, the 2019 Portlight Fellow for the Center’s Disability Justice Initiative, and a co-author of the report. For many cities, damages from weather events that impact housing aren’t even big, headline-grabbing tropical storms or hurricanes, but more workaday floods or storms that can happen on a regular basis, Novack says. And governments also need to acknowledge the time it takes to recover from the biggest disasters.

“If it really takes us a decade to recover, and these events aren’t going to slow down, then what’s the reality of the scope of recovery year to year?” Novack says.

Heidi Schultheis says that while the authors didn’t conduct original research for the report, they sought to compile existing information in a way that emphasized the racial justice and disability justice aspects of the climate-change and affordable-housing challenges.

“The people most impacted are really those with the least power,” Schultheis says.

Guillermo Ortiz, a research assistant for energy and the environment at the Center for American Progress and lead author of the report, says the report is meant to build a case for federal action on the twin crises of climate change and affordable housing so that cities and states can respond more quickly and holistically to extreme weather events.

“We can develop recommendations and solutions, but ultimately, we need political will here in D.C.,” Ortiz says. “Eventually folks on the ground are going to have to deal with these things one way or another, and we want to make sure they have the resources to act at the local level.”

Source: nextcity

Affordable housing crisis spreads throughout world

Cities around the world, from New York to London to Stockholm to Sydney, are struggling to solve growing affordable housing crises.

California home prices are soaring. Here’s why

Acute shortages are persisting despite millions of dollars invested and hundreds of thousands of units built. Some countries have focused on solutions promoting unshackled free markets while others have turned more to rent control and subsidies

But no approach has solved the crises and most have other negative ripple effects.

Across 32 major cities around the world, real home prices on average grew 24% over the last five years, while average real income grew by only 8% over the same period, according to Knight Frank, a London-based real-estate consulting firm.

Economists say it is striking that affordability has worsened even during a period of global prosperity over the last six years. But income growth has been unable to keep pace with a rapid run-up in home prices.

Inflation-adjusted home-price gains have outpaced income growth over the last five years in 18 out of 25 world cities in the Knight Frank report. In two other places—Dubai and São Paulo—real incomes have fallen more than home prices, creating similar challenges.

Migration patterns have been partly to blame. Cities have thrived over the last decade, as jobs and people have migrated back downtown from far-flung suburbs.

“Global cities are suffering from affordability issues, partially as a result of their own success,” said Liam Bailey, global head of research at Knight Frank.

Soaring prices are also being fueled by increasing demand from investors.

These have included domestic “mom-and-pop” investors buying second homes and foreign investors taking advantage of new technologies and an increasingly globalized financial system.

Governments haven’t had the money to subsidize new supply. Most budgets are strained by an aging population with growing pension and health-care needs.

The private sector has also fallen short.

In numerous hard hit cities, developers have built hundreds of thousands of units but most of them are priced at upscale buyers and renters, not the middle and working class people who are being priced out of the market.

Tokyo is one of the few cities in which supply has kept up with demand, keeping a crisis from developing. But that is due largely to deregulated housing policies that other countries would have a hard time reproducing.

“It goes against the notion of planning and developing cities in an orderly fashion,” said Laurence Troy, research fellow at the City Futures Research Centre of the University of New South Wales, Australia.

To keep a lid on prices, governments in some countries, including Canada and Australia, have added taxes aimed at curbing purchases by investors or foreigners.

Buying by Chinese investors, who have been particularly active during most of the decade, has declined because of recent capital controls in that country.

These trends, coupled with a glut of luxury supply, have damped prices in some of the frothiest markets.

In Sydney, the median house price at the end of last year was about $1.1 million Australian dollars ($780,000 U.S.), down about 11.3% from the peak hit in 2017, according to CBRE Group Inc.

A few years ago, prices in Vancouver and Toronto were growing by up to 30% annually.

But today they’re virtually flat, thanks in part to a steep sales tax aimed at foreign buyers and tightened rules to make it more difficult for families to qualify for mortgages.

“Basically what we are doing now is we are undoing crazy years,” said Benjamin Tal, deputy chief economist at CIBC World Markets Inc.

Still, while these markets have cooled, prices are unaffordable to middle-class families. In Sydney, they’re still about 12 times the median income, compared with eight to 10 in markets where prices are considered more affordable.

“When you’ve gone up 90% and you come down 10%, you’re still up 80%,” said Bradley Speers, head of research for CBRE’s Australia business.

The public and private sectors are searching for new solutions. Cities such as London and New York have rezoned swaths of land to allow for more high-rise construction or relaxed rules to allow for smaller unit sizes.

Architecture and construction firms are trying out new construction techniques made possible by advances in technology.

For example, U.K. architecture firm Rogers Stirk Harbour + Partners is looking at ways to expand to the suburbs the modular construction techniques it pioneered with its pilot Y:Cube development.

“A lot of the neighbors looked at these and asked where they could get one in their backyard for their parents,” said Ivan Harbour, senior partner with the firm.

Meanwhile, housing is becoming an increasingly charged political issue, with proposals to expand rent control cropping up in places such as California, Germany and London.

Affordable housing has also become a big issue in the coming Australian election, with the Labor Party advocating measures intended to boost new supply and reduce speculation.

Opponents of these measures warn that they could send the softening market further into a tailspin.

In Sweden, Stefan Löfven was able to eke out reelection as prime minister earlier this year but only after agreeing to numerous policies of other parties including one involving deregulating rents for tenants in newly constructed buildings, to encourage new supply. But many don’t expect any action soon because the government coalition is tenuous.

“Given the government we have in place, it unfortunately looks like it could be another four years without anything really happening,” said Albin Sandberg, an analyst with Kepler Cheuvreux, a financial-services firm.

Housing Crisis Grips Ireland a Decade After Property Bubble Burst

DUBLIN — For generations, the Irish took for granted that affordable, plentiful housing was the bedrock of their economic security and government policy. Not long ago, Ireland had one of the world’s highest rates of homeownership.

The last several years have torn up those assumptions, leaving the country in the grip of a worsening housing crisis. Homeownership has dropped, evictions and homelessness have climbed sharply, surging demand for rental units has led to a shortage, and soaring rents are fodder for daily conversation, political campaigns and street protests.

In the last few years, Dublin has become one of the world’s 10 most expensive places to rent, ahead of cities like Tokyo, Sydney and Singapore. Deutsche Bank reported in May that typical rent for a midrange, two-bedroom apartment in Dublin was $2,018 a month, 23 percent more than in 2014 — the biggest increase of any city in the top tier.

“Almost everybody I know who is renting has been given notice to quit at some point. It happens so often it’s scary,” said Carly Bailey, who had been homeless twice before she was elected to Dublin City Council this year. “I don’t know where to put my daughter down for school. People like us just don’t know where we are going to be in a few months’ time.”

“The crisis has been particularly severe for young adults who see little choice but to spend much of their incomes on rent, and little prospect of being able to save and buy later on.

“You have a generation being locked out of the Irish social contract,” said Rory Hearne, a lecturer in the sociology of housing at Maynooth University. “A lot of young people are now realizing they will never own their own home, and that is a particularly terrible outlook when you live in a country where a house is usually your main asset for retirement.”

The chief executive of Ires Reit, Ireland’s largest private landlord, said in late 2016, “We’ve never seen rental increases like this in any jurisdiction” and “I truly feel badly for the Irish people.” Over the next two years, rents nationwide rose about 14 percent, the government reported.

The Irish division of Savills, an international property company, predicts that rents will increase an additional 17 percent over the next three years.

“The social and political risks are very high,” said Orla Hegarty, a professor of architecture at University College Dublin. “The high cost of housing is now a barrier to inward investment, to emigrants returning with skills, to people hoping to start families and who want to move. We’ll see that soon in lost growth and a falling birthrate.”

For those struggling to pay rents or unable to find homes, the risk is not in the future, but now.

After nine years renting a house in northern County Dublin, Sabrina Farrell and her three children, aged 4 to 16, were evicted in April when their landlord decided to sell. Unable to find a home they could afford, even with public rent assistance, they now share a single hotel room paid for by the local government, with no place to cook or play.

“The kids are living off McDonald’s,” Ms. Farrell said. “A couple of weeks ago, my older boy started self-harming because of the situation we are in.” “I have to be strong for them, and try my best,” she said, “but when you see your children suffering, it’s hard to cope. I started having panic attacks. I’m on medication now.”

Homelessness in Ireland has nearly quadrupled in the last five years, according to the government. Official figures for May showed 10,253 homeless people, including 1,700 families with 3,749 children. Many more, who emigrate or move in with parents or friends, go uncounted.

 

Even those who can afford their rents find that they have little security in a rising market. Leases can be for as little as six months, and Irish law allows landlords to evict tenants if they want to sell the property, renovate it or move in a family member.

Much of the anger in Ireland has focused on foreign-owned companies like Ires Reit, whose largest shareholder is a Canadian company, or Kennedy Wilson, a California firm, that have bought or built thousands of units in a few years and are expanding their holdings, while paying little or nothing in Irish taxes.

Such companies, often backed by foreign banks, pension funds and real estate companies, have been dubbed “cuckoo funds,” for birds that lay eggs in the nests of other species and crowd out their young. But they own fewer than 5 percent of the rental homes in the country, concentrated at the high end of the market.

Homeownership was long something of a national obsession in Ireland, where memories run deep of 19th-century tenants suffering at the hands of landlords, many of them British. After the country gained independence in the 1920s, its government went on a building campaign, and later sold many publicly-owned homes to their renters.

But by the last decade, Ireland, like the United States, had a property bubble built on debt, fueled by reckless lending and tax incentives. When the bubble burst in 2008, starting a deep recession, real estate prices plunged, people defaulted on loans, construction came to a halt and Irish banks, deeply indebted to foreign banks, flirted with insolvency.

Homeownership fell from about 80 percent of households to fewer than 70 percent — still ahead of peers like Britain, France and Germany, but lower than it had been in Ireland in four decades.

Source: nytimes

Flatpacked Homes: Can Modular Buildings Solve the UK’s Housing Crisis?

Emerging players in the construction sector are introducing greater numbers of factory-built homes into the UK market, but experts say this needs to be accompanied by industry-wide reform

Modular housing is on the brink of a major milestone. Construction is under way of the world’s tallest towers built using modular manufacturing, a method by which houses or blocks of flats are built in sections offsite in a factory. Rather than gracing the skyline of Singapore or Beijing, the two towers, which will be 38 and 44 storeys high and contain 546 flats, are to be built in the London borough of Croydon.

Ben Derbyshire, the chair of HTA Design LLP, the architecture practice behind the Croydon towers, and president of the Royal Institute of British Architects, believes modular construction in the UK is at a turning point. “Confidence is now building and the capacity to construct homes in this way is emerging. So we will see it becoming less niche and more mainstream,” he says.

Modular construction, which is popular in countries such as Japan, Germany and Sweden, has been slower to take off in the UK. Of the 200,000 homes built each year in the UK, about 15,000 are modular, according to a report by law firm Pinsent Masons. Factory-built housing has had negative associations with the low-quality prefabricated homes of Britain’s post-war era.

Modular housing’s proponents are understandably keen to avoid the “prefab” label. The construction method is billed as an entirely different proposition in that it produces high-quality, cost-efficient homes designed and manufactured using the latest technologies. “The buildings look and feel very solid and there’s no sense they have a transient or temporary quality,” says Derbyshire.

Recent investment in the UK sector has boosted prospects for modular housing. This year, Japan’s biggest house builder, Sekisui, entered a venture with the UK government expected to result in thousands of modular homes across the country. Ikea has been given the go-ahead by Worthing council to build affordable modular homes in the south-west and one of the UK’s largest house builders, Berkley Homes plans to open a factory in Kent with the aim of producing 1,000 homes a year.

Factory-built housing is seen as a way of speeding up productivity and efficiency in construction, a sector that’s been singularly resistant to modernisation. The government aims to get 300,000 new homes built a year by the mid 2020s to fix what it admits is a broken housing market. To help meet that target and boost affordable housing supply, the government wants to increase the number of modular houses built in the UK a year to 100,000 by 2020.

Despite pressures on traditional house builders to meet demand, they’ve been slow to adopt new methods of construction. Conventional builders produce homes at the same rate at which they sell them in order to protect their profit margins, so there’s less of a financial incentive to pick up the pace. This is why modular housing has been used primarily for affordable housing schemes, hotels or properties in the rental market.

Construction cost for factory-builds is also about 12% higher, according to a report by JLL, the property consultant that led the deal between Sekisui and the UK government. While new entrants to the housing industry are more likely to drive innovation in construction methods, established house builders would have to come on board in order to effect real change, the report says.

Whether the big players like it or not, a shake-up is coming. The housing industry has an ageing workforce and relies on migrant labourers from Europe to shore up its skills shortage. Rising labour costs will eventually force a shift towards new construction techniques, Adam Challis, head of living research at JLL, says. “[The industry’s] not recruiting anywhere near the rate people are retiring,” he says. “We will need to switch to modern methods of construction as a way of offsetting labour irrespective of Brexit, but there’s no question that any labour scarcity from the continent will only exacerbate the problem.”

Factory-built homes not only require less labour, they can be built much faster than traditional homes. Though the speed of delivery varies, they can take less than a week to build in a factory. They also have the advantage of being constructed indoors in a controlled environment as opposed to a building site exposed to the elements. Luke Barnes, the co-founder of Ideal Modular Homes, a Liverpool-based manufacturer, says quality is a key differentiator.

“You wouldn’t buy a car that’s been built outside in the rain and mud,” he says. “We’ve got a digital quality control system that follows every process in the factory so it leaves with zero defects, unlike traditional builds where after people move in there’s consistent snagging that has to be rectified.”

But the technology is not without risk. When it comes to the mass production of anything, from homes to electrical appliances, there’s always the potential for any error to be replicated. “If you make a mistake once in construction it’s an isolated issue. In a manufacturing process, you make a mistake once, you make a mistake every time,” says Challis. “Managing systemic risk is the most important upfront issue.”

Modular buildings have a lower carbon footprint because there are fewer lorry deliveries to the site, cutting emissions. People living nearby are also less affected by noise, pollution and disruption. Marc Vlessing, the founder of Pocket Living, a London-based affordable housing company, says the method’s eco credentials will be a key driver of demand. “As residents understand this more, I believe they will press local authorities to ensure homes in their neighbourhood are delivered in this way.”

Vlessing, whose firm uses modular construction, believes factory-built housing will have a big part to play in getting people on the property ladder. “We are in the midst of a housing crisis and we have to find new solutions to break out from the practices that have contributed to it,” he says.

But fixing the housing crisis will take more than a government push to increase the number of homes or a switch to speedier new construction methods. “Anything that fails to [address] the power dynamics in the housing system, that fails to address inequality or land ownership, is not going to speak to the real problem,” says David Madden, associate professor in the department of sociology and the cities programme at the London School of Economics. “Modular housing could make things more efficient and bring down building costs, but it’s not going to change anything on its own.”

Source: theguardian

4 California Leaders Endorse Senate Bill Aiming to Address Housing Crisis

Lt. Gov. Eleni Kounalakis, Controller Betty Yee, Treasurer Fiona Ma and Insurance Commissioner Ricardo Lara were among those who announced their support for the bill, which outlines a targeted, pro-housing approach to addressing California’s housing crisis.

The More HOMES Act would encourage cities to promote housing development near public transit hubs and job centers. It would also end apartment bans and legalize multifamily homes while protecting renters and adding provisions for affordable housing, according to the press release.

“(The More HOMES Act) is the most impactful attempt to date to deliver more homes to Californians while ensuring that every jurisdiction across the state absorbs a fair share of the burden,” Kounalakis said in the press release.

Based on data from academic and private-sector researchers, California currently has a shortage of 3.5 million homes, equal to the housing shortages of the other 49 states combined. According to the press release, while California’s population has tripled since the early 1960s, its housing production has declined by almost two-thirds, and it ranks as the second-lowest state in the country in per capita housing units.

According to the press release, the More HOMES Act would create new incentives for housing construction within half a mile of existing transit stations in California’s cities in hopes of reducing pollution and commute time. Cognizant of renters and sensitive communities, the bill also includes protections against displacement in those development areas.

“As we build the millions of new homes we know we need, we need to ensure that we avoid endless and environmentally destructive sprawl,” Wiener said in the press release. “We should focus new housing near jobs and transit.”

Recent wildfires in California have served as an environmental catalyst for public debate over the housing crisis. The decimation of communities living in areas with high fire risk over the past few years is a “clear sign” that California’s leadership needs to examine the process and the location of housing development, Lara said in the press release.

Lara added that a current lack of affordable housing options in cities pushes people to rural areas, where they face higher environmental risks in general.

In terms of the economy, leaving the housing crisis unsolved will eventually pose a threat to fiscal stability, Yee said in the press release.

“If policymakers do not act in a stable economy to address our housing challenges, housing costs could continue to rise even amidst lay-offs and furloughs,” Yee said in the press release. “With less revenue to spend on important state programs, policymakers will be confronted with difficult choices between housing assistance and other critical social safety net services.”

The More HOMES Act is backed by a number of organizations advocating for affordable housing and community equity, such as Habitat for Humanity.

Additionally, the bill currently has bipartisan support in California’s Legislature, along with endorsements from local mayors and city council members — including San Francisco Mayor London Breed and Oakland Mayor Libby Schaaf.

“California’s severe housing shortage is harming millions of Californians,” Wiener said in the press release. “It’s time to stop kicking the can down the road and instead do what Californians want us to do: address our housing crisis now.”

Source: dailycal

Hard times, string of bad news leave Kenyans wary about real estate sector

Until two years ago, the narrative was that Kenya’s real estate sector was the best investment vehicle. Everyone who had some cash to spare wanted a piece of the pie – either as a developer or a prospective homeowner.The story is slowly changing and the sector has come under sharp scrutiny due to an upsurge of claims against developers and land dealers.From outright fraud to poor financial management practices, the sector has left many Kenyans bleeding after losing their lifetime investments in land buying companies, Saccos, and property developers.

 

In the wake of these challenges, the government got into the mix by promising to build 500,000 houses in five years. The idea ran into headwinds after the courts stopped statutory deductions from both employers and employees. Home & Away sought to find out what Kenyans think of the local property market.Eliud Njuguna, tour driver and guideI am worried about the things I am readingI have been watching the local real estate market for some time now. Although I have a home, I am interested in the sector because I would like to make some investment in it. However, I am worried about the things I am reading in the media about these big companies that promise big things but do not deliver. I will need to survey the market further before I decide on what to invest in. I have keenly followed the new government plan to build affordable houses in different places. I have registered for a home that I intend to bequeath to my children as an investment. I hope the government will follow through on the projects so that it does not become like those other projects we are reading about in the media.

Annastacia Ngina, businesswoman The loss of my land, money was painfulI tried to invest in Kenya’s real estate without much information on how things work. Through a friend, I invested about Sh600,000 in a plot in Syokimau several years ago. What I did not know (and my friend did not know either) was that the land we invested in was earmarked for the expansion of Jomo Kenyatta Airport. One day, bulldozers descended on palatial homes and demolished them. I had not erected anything on my land but the loss of such amount of money is still painful. I failed to do due diligence on the property on offer. I would handle things differently if a similar opportunity arises. Though I lost money, investing in real estate is a risk like in any business. I counted my losses and moved on.Joseph Kioko, Nairobi Market trader

My investment in Ekeza Sacco going up in smokeLike many Kenyans, I wanted to make some investment in real estate. Ekeza Sacco was the perfect choice as the terms they were offering were favourable. In fact, I can also say that their spirited campaigns and media advertising took me in. Reaping three times the amount I was saving was hard to resist. I can say that my investment is going up in smoke as the company seems to have fallen on hard times. The last time I visited their office, they promised to call me. I am still waiting for the phone call. I hope the affordable housing model by the government will work. I am willing to contribute for the houses. I trust that the government will not give empty promises to Kenyans.Benson Mwangi, phones dealerI have adopted a wait-and-see attitudeThe real estate market in Kenya is tricky especially to the common man. I have seen many people lose their hard-earned cash in the sector. Most of us just want to buy some land, build and live with family. However, the many cases of fraud are discouraging. I have not yet decided whether I want to invest in this sector. I have adopted a wait and see attitude. Some of my friends have adopted radical measures to ensure that their investments in land are guaranteed. I have a friend who bought a plot in Joska recently. Although he intends to develop it permanently, he first decided to build a temporary home out of iron sheets as “security” in case someone else lays claim to the plot. There had been many cases of buyers being allocated the same piece of property. Although that is investing in fear, that is the nature of Kenya’s property scene.

 

Maureen Mwangi, stall operatorWe need assurance that things will be differentIt is difficult to navigate the real estate sector in Kenya. It is hard to know who is genuine or not. Through friends, we have travelled to different regions to view property for sale. However, in most places, you are offered a certificate instead of a title deed. These certificates can be made anywhere, even in Nairobi’s backstreets. My advice? Leave it out if not sure. And that goes for the government’s Affordable Housing scheme too. Invest if you are 100 per cent sure of getting a house. Similar homes built in the past have been allocated to undeserving ones, especially the well connected. We need strong assurance from the government that things will be done differently this time round.Charles Muraya, clothes traderA friend lost Sh1 million in housing scamI am wary of the real estate sector in Kenya. I have a friend who lost a million shillings in a housing scam. I think one should take time to know the history of these property dealers. Today somebody comes and says that he is selling some property, gives you favourable terms and you fall for it only to lose your cash. People in Kenya like to save for property and it is sad to see them lose their life’s savings.

America’s Housing Affordability Crisis Spreads to the Heartland

Low mortgage rates and thriving employment should be the recipe for a strong housing market. Instead, they’re deepening America’s affordability crisis.

What began on the coasts, in areas like New York and San Francisco, is now radiating into the nation’s heartland, as well as to cities from Las Vegas to Charleston, South Carolina. Entry-level buyers are scrambling to purchase homes that are in short supply, sending values soaring.

Expectations that the Federal Reserve will reduce interest rates this week will do little to change the sober reality: For many, prices have risen much faster than incomes, pushing homeownership out of reach for a new generation of hopeful buyers. That’s cooling the market, with the 2019 spring season shaping up as the slowest for sales in five years, according to CoreLogic Inc.

“All signs point to a housing market that should be doing really well and it’s not,” said Danielle Hale, chief economist for Realtor.com. “The No. 1 constraint, despite low mortgage rates, is that people can’t find housing that they feel is affordable.”

Many buyers in expensive West Coast cities have already retreated after a surge in prices squeezed them out. But in other areas, demand is still robust, fueled by a strong economy and this year’s rapid decline in borrowing costs. There’s just too little to buy, and too much competition.

Dean Rusch, a 29-year-old chemical-plant worker, has been trying to buy a starter home for less than $200,000 in Louisville, Kentucky, since April. On three occasions, houses he planned to tour were snapped up before he could get there. He was outbid on another. He finally had an above-asking offer accepted Sunday on a house listed for about $199,000, but only after his agent locked the door during a showing, keeping another buyer out. For much of his hunt, it was slim pickings.

“I’ve looked at some crappy ones,” Rusch said. “I used to be in the fire department, and smelled some crazy stuff. But one smelled so horrible that it gave me a headache.”

Recent months have shown a growing divergence between the high and low ends of the U.S. market. Prices in the bottom third jumped about 9% in June from a year earlier, compared with 1.1% growth for the top third, data from Redfin show. Meanwhile, sales for lower-priced homes plunged almost 20% as buyers struggled to find properties in their range, according to Zillow.

Bigger Gains at the Bottom of the Market

“We have a lot more buyers pre-approved for mortgages than people closing on homes,” said Jeff Davis, Rusch’s agent. “What that means is the struggle is not in the financing. The struggle is in the inventory.”

There are some signs of a pickup in the market. Contracts to buy previously owned homes rose 2.8% in June from the previous month, exceeding economists’ forecasts, the National Association of Realtors reported Tuesday.

Still, the outlook is particularly bleak for first-time buyers. The number of new homeowners created in the second quarter was the lowest since 2006, and just a third as many as a year earlier, the Census Bureau reported last week. Black homeownership fell to the lowest level since at least 1970.

Unequal Recovery

The housing recovery that began in 2012 has been unequal from the start. About 6 million Americans lost homes in last decade’s crash and needed time to rebuild their credit. Private equity firms such as Blackstone Group Inc. swept in to buy foreclosed properties at deep discounts and rented them back to many of those displaced former homeowners.

Now those people are back in the market, along with the bulging population of millennials eager for their first crack at homeownership. But many of the properties they want have already been picked over. Builders have focused on wealthier buyers willing to pay bigger price tags, and now some areas have too many expensive homes, and not enough where they’re needed.

Fewer Affordable Options

Affordable homes disappeared first in technology and financial hubs like Silicon Valley and New York, where buyers with big paychecks pushed up prices. Now values are flattening after many would-be homeowners have been forced to the sidelines. In some areas, demand has also been hit by a pullback in foreign buyers and new federal limits on property-tax deductions — as well as fears that a recession may be around the corner.

But even in traditionally affordable parts of the country, renters worry that if they don’t act, their piece of the American Dream will go to the higher bidder.

“People do at this point in the cycle start getting a little panicked that they need to get into the market,” said Jenny Schuetz, a fellow in the Metropolitan Policy Program at the Brookings Institution. And, with lower mortgage rates, “a lot of people who were on the fence between renting and owning, may look at owning.”

In Louisville, fewer than one-fifth of listings were affordable to buyers in the bottom 30% of incomes in April, according to Realtor.com. That’s down from 23% a year earlier and 38% in 2015. The trends are similar in other low-cost cities from Grand Rapids, Michigan, to Charleston, where only 6% of listings meet that affordability threshold.

‘Clogged Up’

Las Vegas, which was hit hard by the last crash and then sharply rebounded, now is seeing a rapid decline in sales because there’s little on the low end worth buying. Many single-family houses were purchased by investors, and now are rentals. The result is there aren’t enough owners of entry-level homes to move up to the next rung of the ladder, said Thomas Blanchard, president elect of the Greater Las Vegas Association of Realtors.

“Our inventory is clogged up, causing a backup of people that want to buy,” Blanchard said. “It’s a self-fulfilling prophecy — nobody is willing to move anywhere because they’re afraid they won’t find a house to buy.”

Vegas was among U.S. cities with the biggest annual price increases in May, with a 6.4% gain, according to an S&P CoreLogic Case-Shiller index released Tuesday.

Mike Manesiotis, a 28-year-old who works in software sales in Charleston, says his friends in Seattle and the Bay Area would say home prices where he lives are a steal. But the salaries are also much lower, he said.

Manesiotis wants to live in or near downtown, within a short walk or Uber ride to bars and restaurants, and pay less than $350,000 — near the median price for a single-family home in the city. But he hasn’t found anything he likes. The return of low mortgage rates hasn’t helped.

“It’s not the interest rate; it’s the sheer cost,” he said. “You’re spending $300,000 on a home that’s 1,000 square feet. You get two bedrooms, one bath and it needs a lot of work.”

Source: bloomberg

Another Bad Sign for the Housing Market: Remodeling Spending is Expected to Slow

After years of feverish remodeling activity, Americans are starting to cool on home improvement projects.

The annual gain in homeowner spending on home improvements and repairs is expected to drop from 6.3% during the current quarter to less than 1% by the second quarter of next year, according to the Leading Indicator for Remodeling Activity from the Joint Center for Housing Studies of Harvard University.

Others, however, argue that the slowdown in remodeling is already upon us. Smaller remodeling companies have been particularly hard hit by this trend, said Robert Dietz, chief economist for the National Association of Home Builders.

“We’ve been noticing in the data this year that the remodeling market has been cooling,” Dietz said. “The market is cooling among some of the smaller remodelers. If you talk to the larger ones, they’re busy.”

The National Association of Home Builders latest quarterly Remodeling Market Index came in at 55, up one point from the previous quarter but down three points year over year. Figures above 50 in this index indicate that more remodelers are reporting market activity as having been higher rather than lower compared with the previous quarter.

Why Americans are cooling on home improvement projects

Chris Herbert, managing director of the Joint Center for Housing Studies, attributed the slowdown to a confluence of factors. “Declining home sales and homebuilding activity coupled with slower gains in permitting for improvement projects will put the brakes on remodeling growth over the coming year,” he said in the report.

Though existing-home sales rebounded in May, sales activity has been much slower so far in 2019 as inventory has remained low. Home remodeling activity is strongly associated with home sales — sellers will seek to renovate ahead of listing their home, while buyers will make changes to a property so it better suits their taste and needs.

Another factor: home price appreciation has slowed and isn’t outpacing income growth like it once did in some markets. When home prices were rising faster than wages, “home owners felt wealthier and were more likely to reinvest in their homes,” Dietz said.

The bottom has not fallen out of the remodeling market, however. The decline in interest rates throughout 2019 thus far could provide an opening for home buyers. If that sparks more demand for homes, then home prices could continue growing at a healthy pace.

Plus, other longer-term trends are beneficial for the remodeling industry. Environmentally-conscious consumers continue to seek out energy efficiency-related improvements, while baby boomers continue to invest in changes to their homes that will enable them to age in place.

“The fundamental drivers of the market are still there,” Dietz said.

Source: marketwatch

More Army, Navy Families Unhappy with Private Housing in Wake of Scandal

Satisfaction with privatized military housing has declined since last year for both the Army and Navy, according to surveys released by the services Thursday.

But while soldiers and families living in base housing can view the survey results and see where their installations fall on the spectrum, the results of the Navy survey don’t contain specifics for each base and provide only a general look at the overall state of Navy housing.

After a scandal earlier this year as reports came to light of vermin, mold and lead contamination in U.S. military housing managed by private companies, the services launched a series of inspections and fixes, including resident surveys, to determine the extent of the issues and how to address them.

According to the Army survey conducted by CEL & Associates, the service saw overall satisfaction decline by nearly six points on a 100-point scale, from 80.5 to 74.6, which translates into a drop in ratings from “very good” to “average.” The score’s components — property satisfaction and satisfaction with service — both declined, with property satisfaction dropping 6.4 points from “good” to “average” and service satisfaction dropping six points from “very good” to “average.”

The Navy saw the average overall satisfaction rates drop by nearly 12 points, with properties ranging from “poor” to “good.” No Navy housing projects earned a score of “very good” or “outstanding.” Property satisfaction and service satisfaction for 10 different projects also dropped by seven to nearly 16 points, and no Navy housing saw any increases in satisfaction rates.

For the Army, installations with the highest marks, receiving scores considered “outstanding,” were Fort Greely, Alaska; Fort Huachuca, Arizona; and Picatinny Arsenal, New Jersey. Housing at those installations is managed by Lendlease, Michaels and Balfour Beatty Communities, respectively.

Fort Bragg was at the bottom of the list with an overall rating of 58.9, or “very poor.” The North Carolina base housing is managed by Corvias. Fort Meade, Maryland, also managed by Corvias, and Fort Carson, Colorado, managed by Balfour Beatty, were the only two installations to receive “poor” ratings.

A spokeswoman for Corvias told Military.com that the survey was taken before the company made improvements to its property management operations. She added, however, that Corvias is “using the survey — as well as direct resident feedback — to continue to make improvements.”

“We want to hear from residents, and we are listening and responding, providing better service and working with our Army partner to meet both the short- and long-term military housing infrastructure needs,” said Kelly Douglas, Corvias media and marketing strategist.

The remainder of the Army’s bases were in between, with ratings from very good to below average.

“Feedback from residents is extremely valuable for measuring and improving the quality of housing on Army installations,” said Alex Beehler, assistant secretary of the Army for Installations, Energy and Environment, in a news release. “The results of this year’s survey will be used to continue identifying the concerns of our residents, and will guide Army staff and the private housing companies on ways we can improve the quality of life for our soldiers and their families.”

But while the Army’s survey results provide a full accounting for base housing on every installation, allowing residents to determine how their homes and management companies measure up, the Navy’s survey results did not contain the names of the installations or contractors.

Navy officials said in a release that the project names were redacted “because the Navy’s business agreements with our public private venture housing partners limit the type of information we can release publicly.”

Thus, Navy residents have no way to determine which companies are performing better or worse than others across the service.

Navy officials said the survey was conducted because, under agreements with the housing companies, those that score less than 75 points in overall satisfaction must submit an action plan to address issues found by the survey.

“We continue to improve our existing processes and make changes that are designed to enhance our residents’ housing experience and quality of life,” said Greg Wright, housing director for Commander, Navy Installations Command, in a statement. “The survey results confirmed that many of our immediate actions were focused on the correct areas, and the results provided a more in-depth look at other areas of concern.”

The surveys were sent to personnel and families living in military housing. Questions were asked on the quality of property and service, such as responsiveness, quality of workmanship and support.

The Army sent surveys to 79,388 homes at 43 installations across 381 neighborhoods and received 23,431 back, a response rate of nearly 30%.

The Navy sent 35,215 surveys to 10 projects across 42 installations. More than 8,400 were returned, for a response rate of 24%.

An analysis of resident comments to the survey found that for Navy families, unresolved issues with their housing were the top complaint, with roughly 30% saying they had ongoing problems.

“Residents should report deficiencies to the property managers immediately,” Wright said in a release. “If the issue is not resolved to their satisfaction, residents should notify their Navy Housing Service Center or chain of command, who will advocate on their behalf.”

Soldiers reported their top concerns as visitor parking, pest control, landscaping and the conditions of their communities.

The Navy report included recommendations for the Navy to improve its results, including resolving all health and safety issues, establishing an action plan and training employees on it, and educating residents on the housing process, from basic allowance for housing and payments to management companies to reporting and resolving issues.

“We need to do a better job to ensure that service members and their families are aware of the resources available to them,” Wright said. “The government employees at the installation Navy Housing Service Centers are a wealth of knowledge and experience and are trained to help residents resolve housing issues as quickly as possible.”

Source: military

Older Americans face a Housing Crisis. Here’s what Congress should do about it.

Retirement savings reform isn’t a hot topic for journalists, but it’s one of the few areas where Democrats and Republicans in Congress and President Trump could pull off some bipartisan reform when legislators reassemble in September.

The list of necessary fixes to current law is long and well known: As people live longer, the rules regarding “required minimum distributions” from savings plans need to have their age triggers increased. Overall maximum contribution levels should rise. Defined-contribution plans ought to be available for groups of employers so the costs of establishing and maintaining the accounts are not so high.

The amount of assets that Americans have stashed away for retirement is significant. The Investment Company Institute reported that the total of such assets stood at $28 trillion at the end of the first quarter, with $7.7 trillion in defined-contribution plans and $9.2 trillion in individual retirement accounts. Many Americans have little or no retirement savings, but a lot of Americans are regular contributors to their long-term fiscal health.

Most attention gets paid, understandably, to those who will depend entirely or nearly entirely on Social Security, with much less focus on those with healthier balances in their retirement savings. When Congress gets to retirement reform in the fall — Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) and ranking Democrat Ron Wyden (D-Ore.) lead the effort — congressmen ought to pause and consider how they can use their reform efforts to also help seniors stay in their homes as incomes decline or stop but mortgage payments stretch out into the future. Older Americans on fixed incomes face a housing crisis, and one part of the solution is retirement reform.

The Joint Center for Housing Studies at Harvard found that nearly three-quarters of senior Americans want to live in their own homes as they age. But because “housing is the single biggest item in most household budgets,” Aging Options reports, “housing-related expenses disproportionately affect a senior’s financial security and their ability to save for the future.” The burden of housing costs got heavier when Congress severely limited the deductibility of home mortgage interest in the Tax Cuts and Jobs Act of 2017.

If retirement reform allows seniors to pay off all or part of their home mortgage debt with money saved in their own retirement accounts without triggering taxes on the money used, then Congress will have taken a big step toward solving one part of this problem. Seniors with mortgages would then have the option of offloading their mortgage debt using money saved for their retirement without first having to pay federal and state income taxes on the money used to pay off the home loan. Millions of seniors would find themselves without a mortgage bill to pay and not facing a staggering tax bill as a consequence.

The Urban Institute concluded that the most valuable nonfinancial asset in the United States is a home, and that 69 percent of all families own one. Housing is the key element of financial security in retirement. Allowing Americans to use the money they have saved to pay off the homes they have purchased is the most obvious “fix” in the world, but congressional staff I have asked about this always reply that it increases the risk of seniors having lower incomes from savings while also reducing future tax receipts. The latter objection makes little sense, as the taxable event of a withdrawal to pay off mortgage debt can simply be postponed from the date of the withdrawal to the date of the sale of the home.

What opponents of allowing Americans to use their money to lower or eliminate housing costs won’t see or refuse to admit is that retirement security begins with a place to live. A senior American doesn’t need as much savings if his or her home loans are paid off. This should be a no-brainer for every legislator, but it’s not part of the draft laws circulating though the House or Senate.

Current data is difficult to find, but a 2012 New York Times story found that 1.5 million homeowners over 55 lost their homes between 2007 and 2011, with the largest group being over 75 years of age. Those years followed the panic, of course, but even if seniors with mortgage debt are not losing their homes, they are enjoying life less if they are making a mortgage payment they could avoid if their own retirement assets were available to pay off the mortgage.

The biggest obstacle to this obvious reform is the same one to most reforms: Permanent D.C. didn’t think it up and hasn’t internalized its logic. Maybe Grassley can change that, and in so doing, improve the quality of retirement for millions of Americans.

Source: washingtonpost

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