Growing up in school you may have been taught that all humans have certain needs to survive such as air, food, water, shelter, clothes, and love; without one of these key needs being met, it leads to a difficult if not near impossible existence. Currently, the need for shelter is under tremendous trouble. Finding affordable housing is now a growing global problem affecting most of the population. In communities across the United States, there are shortages in low-income housing and there is not a single county in the U.S. that fills 100% of its low-income population’s need for safe, affordable housing.
The situation is not isolated among the low-income earners; now more than 11 million Americans pay more than half their monthly income for rent which is much higher than the recommended 30%.
At first glance the solution may seem easy, why not live somewhere cheaper? The unfortunate reality is there are no cheaper options. For low-income workers who may be earning the U.S. federal minimum wage of $7.25/hour, a renter would need to work 90 hours per week to afford a one-bedroom rental home at the fair market rental rate and 112 hours per week to afford a two-bedroom. Millions of Americans with higher wages are struggling to afford a place to live for example, for a modest two-bedroom apartment in the U.S. renters needs to earn a wage of $20.30 per hour. In six states and the District of Columbia, they need to earn more than $25.00 per hour.
Before the recent economic crash, the housing market was experiencing an unprecedented boom where housing prices kept going up and up until as many remember, it blew-up leaving many broken pieces and people. In the wake of the recovery, the people who lost their homes, switched over to renting as a cheaper and more flexible option, builders quit building homes and the younger generation stayed at home with their parents longer.
Its been 10 years since the great recession of 2008 and as the younger generation is now ready to finally leave home and past wounded homeowners jump back into the housing market, only to find that the landscape has changed.
To better understand the changing housing landscape, I reached out to Dr. Avi Friedman, professor and co-founder of the Affordable Homes Program at the McGill School of Architecture in Montréal, Canada to discuss the future of affordable housing.
To Start off the interview, I asked Dr. Friedman if there was really a housing crisis. Here’s a summary of our discussion.
“It seems to me that the draw and the attractiveness of home ownership did not fade away in the past 50 years, the ability of people to buy a home declined steadily. If you take another product, for example, the car and you check people's income then you can see how the price of the motor vehicle escalated. You see that the cost of the car sort of keeping with the rise of people's income. In housing it’s not that way, the price of the home grew much faster than what people can make. I believe that it happened shortly after the late '60s or '70s. It closed the door on certain groups primarily in recent years whose income stayed fixed or grew little but, the cost of housing increased rapidly. I believe that today, our ability to solve this issue without intervention no longer exist. This is what I believe makes it a crisis in my perception.”
With the average income per household in the U.S. being $56,000 and the average house costing well over $150,000 it may seem that greed on the builders' side and sellers side would be the main driving factor for this crisis but, instead I learned that the issue has both economic and psychological components. Dr. Friedman clarified six of the key factors contributing to the affordable housing crisis.
1. Needing Two Incomes to Afford a Home
“Now if you were to think about home ownership say after World War II, there was a single breadwinner and another person stayed home. People could afford to buy a home with a single salary. Once the price of homes grew steadily, the ability to afford a home on a single salary disappeared. You need two people in the household to earn money to pay the mortgage.”
2. Changes in the Demographic Makeup for Those Who Want to Buy Homes
“We have more single people today, people who may not be willing or interested in getting married. We have more single-parent families, the number of divorce cases, if you are to check statistics, grew again steadily. What is happening today is that there are groups of people who are attempting to buy a home on a single income; which again is impossible given the current cost of housing.”
3. The Appearance of Job Security
“Job security was the foundation of home buying. You would go to the bank, and the banker would ask you what you do. And you would most likely qualify for a mortgage if you were able to demonstrate to the bank that you have a profession that keeps you in good standing. This is not the case anymore. The relationship between an employee and employer completely shifted in the year 2000. When a company loses money or wants to be more profitable, they might fire more people. The fluctuation in employment and the ability to find a steady job is harder.”
4. Consumer Desire for the McMansions
“For years many car manufacturers stopped manufacturing small vehicles. In other words, there will be fewer economy cars in the future because they have found a better way to entice people to pay more and buy SUV’s. As you know, Ford really abandoned most of its small vehicles. It is the same notion, the same philosophy if builders can sell you a big home they will do so.”
5. Zoning
“If you go to suburban communities primarily, you will find that in many places municipality introduced by-laws and zoning that cannot make small homes happen. In other words, you need to have a certain size of lot, coverage of a certain size and so on. There is simply not a possibility to build, to construct a small home in many places this again aggravated the situation.”
6. The Drive for Bigger
“We created a system where municipalities, in order to increase tax revenue, have a common notion that large homes generate more tax revenue. Usually, municipal taxes are levied based on the size of the property. So, what they've done is divide the land into large lots and prohibit in many places the construction of other housing types like townhouses, small units. What we call two-family homes, stack-style houses and so on. When developers come to these places, they find this situation and they like it, they like it because they can build this large home and charge tremendous amounts of money. But to some degree, it seems to me that we have been there and done that. There’s a rule, and the moment that things collapse, the moment that the market unfortunately goes down, goes sour; many people will owe lots of money to the bank. I believe that we are ruining people, many people stretching themselves to the limit.”
Gentrification
My next question to Dr. Friedman focused on what the role gentrification plays in the affordable housing story. Gentrification which is the process of renovating and improving a house or district so that it conforms to more affluent taste has been blamed in the media as one of the main driving factors to the affordable housing crisis. How true is this?
“The issue is primarily for those who are renting. Gentrification, for the most part, benefits homeowners, the value of their property rises but, unfortunately, people who rent are being pushed out from the neighborhood. Properties are being either demolished or being converted into condominiums, into housing.”
Some of the most well-known areas in America experiencing gentrification are Brooklyn, New York; Washington D.C. and Tacoma, Washington. In these areas and neighborhoods, people have been pushing against developers and bringing it to the attention of the local government that the rising costs are unsustainable for most of the people currently living in the neighborhoods.
“There are no true mechanisms that cities successfully use to block gentrification from happening, they may have slowed it. In Montreal, my city, for example, the recent area that used to be low income for renters … during the process of gentrification fancy restaurants and stores were moving to the area, the city government made a rule prohibiting more than one restaurant per block. In other words, they don’t want to slow the process … so the point is that gentrification damages the poor in a big way. It does not damage homeowners because their property values rise, and they can sell their properties to developers for a lot of money and buy a property in another location.”
As gentrification starts to sweep across cities it is the renter who will suffer when they are kicked out and continue to work in the same area. Renters will have to travel long distances to find work and an apartment that they can afford.
“The bottom line is that when I studied gentrification, I did not see very innovative solutions that halted the process completely. In a free market, the city in fact, cannot do it. A solution that does not exist in my city is that the municipal government can give incentive to developers who will build smaller, lower cost housing or they can give developers what they call density bonuses. Let’s say that in an area you are permitted to build only four stories and they say, we will let you build six stores if 25% of the units will be under $100,000.”
In Dr. Friedman's opinion, the only other option for the poor is to move into social housing or government-run projects because without intervention there are currently no other solutions.
The Outlook for Millennials
According to recent data through Futurecast an agency focused on millennial and Gen Z research, millennials make up about 25% of the U.S. population. As the new upcoming homeowner generation, they have a very different outlook about achieving the American the dream. Since most millennials experienced the great recession during their foundational adult years, many are unlikely to reach the level of financial stability their parents did at the ages they are now. Millennials are changing what use to be considered the “status quo” of going to school, getting married, buying a home and having children. Instead, many millennials find themselves in a unique position or even at a crossroads with what used to be expected of them as adults and where they are in life.
“If you take the millennials, for example, I do not envy them. On every front, they did not have and for sure will not have the lifestyle that their parents have. And what we are seeing, I don't believe this is the case in the United States … we are seeing a shift, that in my opinion, may lessen a little bit of the affordable housing crisis. Millennials are having fewer children. In other words, they don't fall into the traditional pattern of the homes they grew up in and for sure not their grandparents.”
By this shift in having fewer children millennials have lessened the pressure and need for themselves to buy a big home. In addition, in American and Canadian cities it is becoming attractive to once again live in the city. Millennials want to live near their places of work, near the centers of entertainment and some want the convenience of being able to walk everywhere without a car.
“They like the urban life, the urban style. They would like to be near their place of work, place of entertainment and it is a phenomenon that is very, very present in many North American cities and I believe one can argue around the world. One can say we are becoming Europe, meaning that is rare for someone in Europe to reside in a single-family home. Most Europeans start their life in an apartment and this shift is what is happening in the past say ten years.”
Where We are Heading
I asked Dr. Friedman about the possibility of the disappearance of the middle-class.
“Yes, I think that it is already here. I believe that we are seeing a great divide in Canada and the United States between what people can afford. People who are house rich, who can afford to buy places and people who are left behind; who’s ability given their income to even dream about owning a home does not exist.”
Friedman believes that the “American Dream” is changing or being redefined.
“There is affordable housing and there is accessible housing. Accessible housing is the ability of one to access homeownership, to begin with. For many people, their income does not make it even accessible to them. It’s not even a question of affordability. We see the number of those rising sharply in many urban centers around the world where people are now living in a time, of a major paradigm shift.
We see a wave of immigration coming. The amount of people migrating from the Middle East and Africa to Europe and North America is enormous, creating an unbelievable affordable housing crisis in many of these places. It is like the waves that followed the Second World War, happening now in front of our eyes.”
Due to the decline of trade workers and the lack of manual labor, the cost to developers to build homes has increased substantially with the average cost of building a house ranging from $147,336 to $436,401 depending on the materials used.
“We are still building dwellings the way we use to back in the '40s and the '50s. … So, we did not improve our methods of delivery, which again makes it even more challenging. We did not come up with ways to lower the cost to the efficiency of production. It's very expensive to put together. It's labor-intensive, people's salaries in the construction industry are rising.”
Solutions
“I don’t see the light at the end of the tunnel. Unfortunately, the components that aggravated the situation in the first place still exist. If I can see some blessing in or potential for solution, it lies in the fact that baby boomers are fading away and there will be a big stock of homes left for other people.”
In addition, Friedman feels one of the blocks to finding a real solution is that the building industry does not have the drive to radicalize and do things differently than it has been done in the past.
“It's not only a crisis of policy but also a crisis of product. There were several attempts throughout the history of housing in North American of attempting to lure to prefabrication but, they all failed. It seems to me that we need to see an attempt to have the governments creating incentives for builders to innovate. To build factories and so on. I heard that in San Francisco for example, the city government said that they will invest their support in an initiative that will sell prefabricated housing around the city because there is a huge deficit of housing. And the homes are very, very expensive in the area. They say that is one of the ways to cope with production.”
Solving the Global Housing Crisis
Looking at the housing crisis from a global level I asked Dr. Friedman about the possibility of the world achieving the goal set by the United Nations of creating sustainable cities and communities by 2030.
“There are some nations where the government gave up on the people. If you go to Brazil and all Latin America. The government sees its responsibility to house, but the amount of inventory is pale in comparison to the amount of housing needed. I worked on Grow Homes in Mexico and I was stunned by the abject poverty in which the people lived; I saw second or third generations who live in squatter settlements, so it is a very serious situation.
I recognize in life or in the world there are two types of projects, two types of challenges or problems. There are structure problems and there are ill structure problems. Structure problems are solvable, if you invest, they are easy to figure out. The ill structure problems are problems in the world that can never be solved. Will we be able to ever make the world a peaceful place … will we be able to solve poverty … will we be able to solve the water issue in some nations? No.
What we can do however is to hope that the problem will shrink a little bit. That we will be able to reduce the severity, the seriousness of the problem. There will always be a housing crisis. What we need to do is to make sure that opportunities do exist to those who have a job, who are in a crisis phase in their life, who fell through the holes in the safety net; that we will be able to pick them up, that they will not fall and crash. This is what we hope.”
About Dr. Avi Friedman
Dr. Friedman is the recipient of the Progressive Architecture Research Award, the J.-Armand-Bombardier Prize for Technological Innovation and the Manning Innovation Award of Distinction. Dr. Friedman has published extensively in both academic and trade publications. He has authored eighteen books for publishers like McGraw-Hill, Wiley, Images, Penguin, and Princeton Architectural Press, which were well-received by reviewers and the public. He also authored journals' articles on construction technology, community planning, and dwellings design. Dr. Friedman is also a practicing architect and the principal of Avi Friedman Consultants, Inc. Over the years, he has led teams that designed projects ranging from custom-design dwellings to entire communities for private sector developers as well as non-profit organizations like Habitat for Humanity. He has designed housing prototypes which were built as full-scale demonstration projects and were then constructed by home builders in the private sector around the world. Dr. Friedman’s work has been cited in many books and has been covered extensively: on TV shows such as Good Morning America, Dream Builders and Stewart Brand’s How Buildings Learn (British Broadcasting Corporation), in magazines such as Popular Science, Architecture and Home, and in newspapers including the New York Times, Los Angeles Times, San Francisco Examiner and the Times of London. In addition, Dr. Friedman has received numerous awards for his design and teaching, including the American Institute of Architects Education Honors, the Association of Collegiate Schools of Architecture Collaborative Practice Award, and the prestigious Creative Achievement Award. In 1999, he received the United Nations World Habitat Award. In the year 2000, the international design magazine Wallpaper included Friedman in its list of the 10 people “most likely to change the way we live”, along with Ingvar Kamprad, founder of IKEA, and Sven Mattison, inventor of the Bluetooth computer chip.
About the Author
Annmarie Hylton-Schaub, Head Marketing Strategist and Content Developer at Project Good Work a boutique marketing group focused on helping individuals who want to launch social impact projects, charities, and change-making initiatives. The marketing group works to develop branding, marketing strategy, and content to connect clients with the people who believe what they believe so that their project and business can thrive.
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