Posts Tagged ‘housing’

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A minimum-wage job should be enough to satisfy workers’ minimum needs, which of course includes putting a roof over their heads.

In reality, it doesn’t. A person working a full-time minimum-wage job will find it virtually impossible to rent an affordable home anywhere in the United States, according to a new study by the National Low Income Housing Coalition.

The report reveals that in fact there is not a single county or metropolitan area in which a minimum-wage worker can afford a two-bedroom home, which the federal government defines as paying less than 30 percent of a household’s income for rent and utilities. And in only 12 counties in the entire country is a one-bedroom rental home affordable.

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On average, a full-time worker in the United States must earn $21.21 per hour to afford a modest two-bedroom apartment and $17.14 to afford a one-bedroom apartment—figures that roughly correspond to the mean and median hourly wages in the country. As for everyone who earns less than that—the millions of low-wage workers, seniors and people with disabilities living on fixed incomes, and other low-income households—housing costs are simply “out of reach.”

Another way of seeing the problem is to calculate how many hours a minimum-wage employee would have to work to afford a one-bedroom rental home. Even Puerto Rico, which would require the fewest number of hours (45), exceeds the normal 40-hour workweek. At the other end, a minimum-wage worker in New Jersey would have toil more than two and a half times the normal week (106 hours) to afford a one-bedroom rental home.

It’s clear that private markets—in labor and housing—have failed American workers. They can provide neither decent-paying jobs nor the affordable housing for millions of members of the U.S. working-class to put a roof over their heads.

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The stock-in-trade of neoclassical economists, like Harvard’s Gregory Mankiw, is that free markets are the most efficient way of allocating scarce resources. Therefore, they spend a great deal of time celebrating free markets, and criticizing any kind of regulation of or intervention into markets.

Rent control is a good example, one that is taught to thousands of undergraduate students every semester. According to Mankiw, when governments establish price ceilings on rental housing, they cause a shortage of rental units. In the short run (as in the chart on the left above), when the supply of rental housing is fixed, the shortage may be relatively small. But in the long run (as in the chart on the right above), when both the supply of and the demand for rental housing are more “elastic” (that is, more sensitive to changes in price), the shortage grows.

When rent control creates shortages and waiting lists, landlords lose their incentive to respond to tenants’ concerns. Why should a landlord spend money to maintain and improve the property when people are waiting to get in as it is? In the end, tenants get lower rents, but they also get lower-quality housing. . .

In a free market, the price of housing adjusts to eliminate the shortages that give rise to undesirable landlord behavior.

That’s the world according to neoclassical economic theory. And in reality?

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Philadelphia, the City of Brotherly Love—aka the nation’s poorest big city, and among the most racially segregated—according to Caitlin McCabe [ht: ja], “is increasingly becoming a renter’s haven.”

But what happens when too many renters, many of them higher-income, flood the market?

In cities such as Philadelphia, lower-income residents feel the squeeze. And it could be getting worse for them

A new study by the Federal Reserve Bank of Philadelphia shows that, as a result of gentrification, Philadelphia lost one-fifth of its low-cost rental-housing stock—more than 23,000 units renting for $750 a month or less—between 2000 and 2014.

Even more, the study found, the affordable housing that remains in the city is in danger, too—

since 20 percent of the city’s federally subsidized rental units will see their affordability restriction periods expire within the next five years. Of these rental units, more than 2,300 are in gentrifying neighborhoods.

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The short-term result of gentrification and the loss of low-cost rental housing is that Philadelphia is now the fifteenth-most-expensive rental city in the nation, with a median rent (for a one-bedroom apartment) of $1,400. In the long run, the shrinking stock of affordable housing leaves lower-income renters saddled with higher rent burdens, greater financial distress, and insecure housing arrangements, which combine to reinforce residential patterns that are already highly segregated by income and socioeconomic status.

As the Philadelphia Fed explains,

The pockets of gentrification in Philadelphia appear to reinforce these patterns in several ways. First, gentrifying neighborhoods become less accessible to lower-income movers, limiting their housing search to more distressed and less central neighborhoods. Vulnerable residents who remain in these upgrading neighborhoods often face higher housing costs and are less likely to see improvements in their financial health. In addition, vulnerable residents in neighborhoods that are in more advanced stages of gentrification may even become more likely to move out of these neighborhoods. Each of these consequences of gentrification reflects the impact of increasingly burdensome housing costs, driven by losses of both low-cost rental units and units with subsidized affordability.

The market for rental housing in Philadelphia is increasingly becoming a neoclassical economist’s dream—but a nightmare for low-income renters in the City of Brotherly Love.

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Back in 2012, I wrote about the residents of Rio de Janeiro’s favelas (shanty towns) who were being evicted by the Brazilian government on behalf of the organizers of the 2014 World Cup and the Olympic Games now taking place there.

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In the place of one such favela, Vila Autodromo, which was once home to more than 500 families, all that remains are “Olympic parking lot tarmac, raw dirt and 20 tiny white utilitarian cottages, built grudgingly by the city as a concession to a core of families who refused to leave even as their homes were demolished.”

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But the former residents haven’t forgotten either their old working-class neighborhood or the force that was used to evict them. So, they and their supporters have erected an open-air museum, the Museu das Remoções (Museum of the Evicted). It consists of seven installations built from materials left behind after the demolitions.

Each installation pays homage to a house or building that was demolished, as well as the struggle faced by the residents of the community.

The plan is for the museum to stay open through to the end of the games.

Meanwhile, the slogan “Nem todos tem um preço” (Not everyone has a price) remains visible on some of the free-standing walls of demolished buildings.

I keep finding myself reminding relatives and friends that, when it comes to the pronouncements of mainstream economists (like Greg Mankiw) and presidential candidates (of which we’re now down to two, at least in terms of major political parties), there’s another America out there, which many of us only dimly view.

But every once in a while, we get a sense of what is going on, often through good reporting (in addition to, as Bill Moyers suggests, short stories, novels, and plays by working-class writers).

One example is the remarkable—and bone-chilling—article by Shane Bauer for Mother Jones. Back in 2014, Bauer went undercover at a private, for-private prison in Louisiana, working as a guard. Conditions at the prison were extraordinarily bad, for inmates and guards alike. Four months later he was found out, when a Mother Jones videographer was arrested while gathering footage nearby. The resulting essay is 35,000-word opus accompanied by a six-part video series (of which the first is at the top of this post). Basically, it’s a story of how the corporate search for profits led to a lack of resources in the cell blocks Bauer patrolled, while low wages created a constant turnover among employees. Inmates lived in overcrowded squalor and were routinely denied health care for serious psychological and physical sickness. And prison officials and guards resorted to the use of arbitrary force in the absence of of proper staffing and facilities.

Here’s a short excerpt (from chapter 3):

The walk is eerily quiet. Crows caw, fog hangs low over the basketball courts. The prison is locked down. Programs have been canceled. With the exception of kitchen workers, none of the inmates can leave their dorms. Usually, lockdowns occur when there are major disturbances, but today, with some officers out for the holidays, guards say there just aren’t enough people to run the prison. (CCA says Winn was never put on lockdown due to staffing shortages.) The unit manager tells me to shadow one of the two floor officers, a burly white Marine veteran. His name is Jefferson, and as we walk the floor an inmate asks him what the lockdown is about. “You know half of the fucking people don’t want to work here,” Jefferson tells him. “We so short-staffed and shit, so most of the gates ain’t got officers.” He sighs dramatically. (CCA claims to have “no knowledge” of gates going unmanned at Winn.)

“It’s messed up,” the prisoner says.

“Man, it’s so fucked up it’s pitiful,” Jefferson replies. “The first thing the warden asked me [was] what would boost morale around here. The first two words out of my mouth: pay raise.” He takes a gulp of coffee from his travel mug.

“They do need to give y’all a pay raise,” the prisoner says.

It’s a story, in other words, of contemporary America—not just of private prisons (although it is an indictment of the growth of for-private incarceration), but also of the frustrations associated with the military-like occupation of U.S. streets (with an understanding of what that means for both the occupiers and the occupied).

The second article appeared in Tuesday’s New York Times, on the uneven recovery in Las Vegas, the epicenter of the housing crisis. The story is very different, about middle-class people who couldn’t be more different from inmates and prison guards, who are suffering from being underwater on their mortgages and struggling to negotiate a sale to avoid foreclosure.

But I was struck by two similarities—of people imprisoned in their homes (because they can’t get out from under their high mortgage payments) and of the violence (real or perceived) of their once-prosperous housing developments. Consider the story of Michael Hutchings who, with his wife and their children, still lives in their 10-year-old dream home.

A Marine veteran, Mr. Hutchings is now a block captain for the neighborhood association near Sunrise Mountain, 10 miles east of the Strip. Like many residents of the scattered American cities where violent crime is rising, he got so concerned that he installed iron gates and 12 security cameras to watch over his 1-year-old son, Maxim, and 3-year-old daughter, Natalia, as they play. When he takes them to the park, he goes armed.

The inmates and guards of the Winn Correctional Center and the Las Vegas homeowners who still have not experienced a recovery from the crash of 2007-08 are, in their different ways, prisoners of the American Dream.