Housing, Poverty and Economic Policy

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August 4, 2017 (San Diego) Over the last few decades we have seen the stagnation of wages. This stagnation means that people have the same cash they had to cover all their needs as they did decades ago. This is especially the case at the lowest rungs of the economy. However, inflation has eaten away at those meager resources. So have housing costs. property values are  likely on a bubble, but the reality is that cities have shied away from affordable housing. This is in many cases code for housing the poor.

So we have a situation where this city, San Diego, is reaching crisis levels regarding affordable housing. Why? We have lost stock, and whatever remains continues to go up in price, while wages are stagnant. This is the heart of the crisis. It is no longer supply and demand. There is poor supply, but very high demand, for a product that is becoming unattainable for many Americans.

This has led to deep housing insecurity for many San Diegans, and Americans in general. This has also led to people who need to choose between electrical services, medicines and paying rent. This has led to 1 in 5 renting families nationwide missing payments, according to Mathew Desmond in Evicted.

This also has led to deep food insecurity as well. With families not having enough resources to put food on the table for the whole month. This creates complicated situations for families and the children of those families. It also is concentrated in certain areas of the urban environment, where those schools perform poorly, and become a predictor of college attendance and success. Children who grow in poverty, and attend schools with 50 percent or more children taking a school lunch are less likely to attend college or technical school, This is creating an underclass.

Moreover, the payoff for poor students who do go to college is less than those from middle-class families.

College graduates from poor families were found to earn 91 percent more over their careers than high school graduates from the same income group. But college graduates from upper-middle-class families earned 162 percent more over their careers than those with just a high school diploma.

This matters, since college, is painted as the only way to leave poverty. However, the reward is less and those degrees are less valuable. This does trickle down to the inner core as well. This matters when we see comparisons between inflation rates and wage growth rates. We will start with the Bureau of Labor Statistics.

We also know that the trends continue regarding inflation,. The Consumer Price Index for the first half of 2017 went up by 1.7 percent. According to the Bureau also reported that “the six-month increase was influenced by higher prices for shelter.” There were also increases in energy and other goods. However, it is of note that the total rise in inflation over 12 months was 3.3 percent.

The Bureau of Labor Statistics also released on July 28 the numbers for compensation. These are the numbers they reported:

Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending in June 2017, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.5 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.6 percent.

It is in those numbers that wage stagnation and higher inflation that wage growth are clear. This is the heart of the shelter crisis in San Diego, and other areas of the countries. It is also the heart of the growth of income inequality.

While we talk of the rise of homelessness, and poverty, both are clear symptoms of a crisis that has been growing over the past decades. This crisis in wages started in 1972 when we saw a decoupling of productivity when compared to wages. Why blaming one party is silly. However, the policies are ones that place a heavy emphasis on deregulation and market forces. This is at the heart of the neoliberal and conservative politics of the 1990s for example, such as welfare reform, that hurt the lower strata of society the most.

Then we have a picture emerging where investors see profit in housing stock near the end of their 55-year mandatory low-income designation. According to KPBS:

Anne Wilson is senior vice president of Community Housing Works, a nonprofit developer. She said affordable housing complexes are highly desirable investments for for-profit developers, if they are near the end of their allotted deed restriction.

“For the last five years, private equity, big money from Wall Street, has been very interested in buying all apartments, all rental housing,” she said. “Interest rates are really low, you don’t get any return from the bank. It’s one of the safe investments, and with rents rising, they see profits there.”

What we are seeing is a perfect storm. A working underclass that cannot keep their head above water. Minimum wage policies that never adjust for inflationary rates. An increasing cost to shelter, which leads to people facing eviction.

These are systemic problems with a long pedigree, The first step in solving them is to admit we have them. Until we do as a society, we will be stuck in a never ending cycle.

 

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