The billions owed in back rent in the United States because of COVID-19

Estimates for how much Americans owe in rent because of COVID-19 are in the tens of billions:

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Estimates for the nation’s total rent shortfall on Jan. 1 range in the tens of billions of dollars, potentially exceeding the amount of emergency rental assistance that Congress may or may not deliver over the next few weeks. If lawmakers fail to act, the New Year could trigger a long-feared disaster — an avalanche of evictions during the dead of winter, as the pandemic rages.

Back rent owed by struggling U.S. households — about 11.4 million renters in all — averages about $6,000 per household, or around three-and-a-half months’ rent, according to Mark Zandi, chief economist for Moody’s Analytics. Most of it has accrued since the expanded unemployment benefits under the CARES Act expired over the summer.

“These are low-income households,” he says. “They’ve probably already borrowed as much as they can from family or friends. They have no resources left.”…

The National Council of State Housing Agencies commissioned its own report on the nation’s overdue rent, arriving at a figure of $34 billion back in September. Stout, the global advisory firm that produced the report, has since issued a biweekly report on households facing eviction, drawing on data from the Census Bureau’s American Community Survey and its weekly Household Pulse Survey. Stout’s tracker currently estimates that 7–14 million households will face eviction for nonpayment in January, with rental arrears totaling between $13–24 billion.

Even if COVID-19 ended tomorrow or the vaccine is quickly distributed, administered, and effective, this is a lingering effect that will take a long time to work through. It will affect renters, landlords, other actors in the real estate market (including lenders and investors) as well as communities if there are unpaid bills and/or people left without housing.

Even as the media coverage of this issue might focus on certain housing markets, the effects could stretch across many markets. Imagine the priciest markets: with high rents to start, how can people make up the money if they do not have jobs or the same income or how could they easily find housing? But, the cheaper markets may run into similar problems: if you cannot afford to pay back rent, how many cheaper housing options or replacement housing options could people find? Given the possibility of regional differences, this might mean more local units of government – states, municipalities – could provide different options that better address local circumstances.

More broadly, this hints at ongoing housing issues that seem to get little attention. Housing is a foundational, daily issue for many and COVID-19 just exacerbates existing issues. Relief money from the federal government may provide temporary help but housing costs and quality need attention in many places.

Do not forget the thousands of public housing units lost

With comments from a variety of experts addressing housing issues connected to COVID-19 and other social factors, I noticed the last expert cited provided a reminder about lost public housing units:

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“There’s a lot of talk about a universal voucher program in housing and entitlements, which would be a game changer for family homelessness, but you still have the problem of there not being enough places for people to rent,” Popkin said. “So we need to push both on the supply side and on the increased assistance side.

”Funding could go toward replacing tens of thousands of public housing residences lost between the ’80s and now, whether it be with new construction or renovating older buildings, she said.

“I’d like to see them built in a thoughtful way that doesn’t repeat the mistakes of the past,” she said.

The demolition of public housing high-rises in Chicago and numerous other big American cities had multiple effects. One of the stated goals was to help deconcentrate poverty. By moving public housing residents into other neighborhoods, it was hoped this would help their life chances.

But, this has not worked as well as might have been hoped. If the goal was simply to remove an eyesore in the city and push problems with housing and poverty out of the public eye, mission accomplished. The stigma of such projects disappeared with their demolition. Some of the land, when it was in desirable locations, was redeveloped. If the goal was to help people find good housing and attain more opportunities, this would involve a more robust approach to building and making available good housing. In Chicago, there were promises to provide for better lives and build more units…and it did not happen.

Just because the public housing high-rises are not visible in many locations does mean there is not need for cheaper yet quality housing. Americans do not have much stomach for public housing but the need is there to be addressed.

Proposing the rowhouse as the solution to an over-priced housing, McMansion world

If you do not like McMansions, perhaps the rowhouse is a preferable alternative:

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The great thing about rowhouses — that is, narrow, long, tall houses built connected to one another, sometimes called townhomes — is that they have most of the stuff Americans say they want in a home in a dense, efficient format. Typically they are single-family homes between two and four stories (though they can be built or split into apartments easily enough), with a front and back yard. The yards are small, but big enough for most purposes — you don’t need a McMansion-style soccer field to have some friends over for drinks and burgers, or let the dog run around, or simply get some fresh air and sunshine.

Then because the houses are connected to each other and on tiny lots, they are vastly more efficient. Instead of construction crews working on separate detached projects one after the other, they can build an entire block all at once. Shared walls means smaller bills for heating and cooling. Perhaps most importantly, the high density they enable allows for walkable neighborhoods with lots of shops and workable public transit. South Philly, which is almost entirely rowhouses, has about 24,000 people per square mile — which is not as dense as Brooklyn, but more than five times as dense as Phoenix and easily enough to support a subway line.

Rowhouses do have somewhat less privacy, of course. (I occasionally hear my neighbors even through the foot-thick brick walls, and I’m sure they hear me on occasion.) But even this has its upside — most obviously in a more vibrant neighborhood culture. When the sun is shining the folks on my block like to sit on the porch, chat with each other, smoke some meat, keep an eye on the neighborhood kids playing on the sidewalk, and so on. It feels like a friendly, alive place much more than the silent suburban cul-de-sacs I have visited in my life. And besides, who really wants to mow a three-acre yard all summer? Occasional weeding is more than enough work for me…

But rowhouses make a perfect middling addition to the American urban housing toolkit. Wherever a location is near to an urban center but not quite suitable for high-rises, slapping down a quick set of rowhouses ought to be the default option whenever land is freed up. By the same token, many American cities are also desperately short of moderately large apartment buildings, in the 3-8 story range, at somewhat more valuable locations like directly adjacent to transit stops.

The advantages and disadvantages to single-family homes amid American sprawl are clearly laid out here. The advantages include a lower price, efficiency in construction and heating and cooling, a smaller yard to maintain, and a lively, denser street. The disadvantages mirror these advantages: less space, less privacy. At the least, rowhouses in cities and denser suburbs provides opportunities for homeowners.

I have three further questions about rowhouses. First, what about rowhouses constructed for wealthier homeowners? In this piece, part of the appeal of rowhouses is a cheaper price point. Yet, rowhouses can be constructed with plenty of space and a lot of features for wealthier buyers. These homes might even give the appearance of being denser but are then trapped in small spots in cities or in suburban subdivisions far from anything walkable. Zoning is indeed an issue in certain places but I am guessing that is matters less in wealthier neighborhoods or communities or rowhouses are not viewed as a threat but rather as an intriguing change of pace.

Second, the importance of privacy may be understated. Americans like suburban single-family homes in part because they want to be separate from others (for privacy, because of race and class, to have their own property). Some homeowners want density and vibrant neighborhood life; others do not. If given the choice between a single-family home, a rowhouse, a condo, a townhouse, and an apartment (and controlling for particular neighborhood characteristics), what would most Americans choose?

Third, how much of these chooses about development depend on regional approaches to housing? As noted in the story, rowhouses are common in some places like Brooklyn and Philadelphia. They are not common in many other places. Having lived in one such development in the suburbs of the Midwest, it was an unusual choice among the typical options. And when that community and other nearby ones have been given choices about what to build since, they have largely eschewed rowhouses (except for more expensive ones). Getting communities to change up these options, particularly if there are worries about property values, is not an easy task.

An ADU as an investment opportunity on HGTV’s Flip or Flop

Last night’s new episode of Flip or Flop, Season 9 Episode 7, featured a home with an ADU (accessory dwelling unit). And this unique feature of the home offers a chance to make more money:

After Tarek and Christina realize the garage in the backyard is now a living space, Tarek lays out the argument: this is not just a studio space or a he/she-shed. It is possibly a rentable unit. This may make this property even more enticing.

This got me thinking. ADUs are supposed to help provide more housing units in more expensive markets like Portland and Los Angeles. Instead of building denser, taller housing in single-family home neighborhoods, ADUs take advantage of existing yard space, garages, or other buildings on residential properties.

But, while the ADUs might provide more housing, they may not necessarily provide housing that is that much cheaper. Take the example from Flip or Flop: with a home valued at over $1 million in North Hollywood, they estimated they could rent the studio ADU with a full bathroom and kitchen for $2,000 a month. How many people could afford this?

Further, such units could become a tool for residents and developers to generate more revenue. In such competitive markets, adding any kind of residential unit presents an opportunity. The ADU could enable a homeowner to generate money from their property. An investor interested in a single home or one with multiple homes could generate even more money with ADUs.

To truly provide housing that is more plentiful and at a reasonable price, it seems like a lot of ADUs are needed. They cannot provide as many units as large multifamily developments might. Yes, they do not disturb the existing character of a neighborhood much. But, if the ultimate goal is to broadly expand housing options, the occasional ADU in an expensive area might not be enough.

How are suburban apartments designed with COVID-19 in mind different?

A proposed apartment building in downtown Glen Ellyn, Illinois includes several features in response to COVID-19:

The latest iteration creates dedicated, work-from-home spaces inside apartments. South Bend, Indiana-based Holladay Properties is looking at installing voice-activated elevators to limit touch points. The project also would incorporate small conference rooms and phone booths where residents could take a call or prepare for a presentation.

“It’s hard to ignore the global pandemic,” Holladay Vice President T. Drew Mitchell said. “It’s in front of us everywhere, so some of the things that we’re doing inside of the units is sort of a reaction to that.”…

“What we’ve encountered in our product in suburban Chicago is overwhelming demand,” said Mitchell, who’s based in the firm’s LaGrange office. “We have a waitlist right now at Burlington Station in downtown Downers Grove, and what we’re seeing unfortunately for Chicago is people are returning to the suburbs.”

In Glen Ellyn, rents would range from about $1,400 to nearly $3,000. Glenwood Station amenities would target young professionals working in the city, empty nesters seeking a lower-maintenance lifestyle and other demographic groups.

From the picture provided, this looks like a fairly typical apartment building for a wealthy suburban downtown. The building is not too tall; height is a problem in many suburbs as residents do not want structures to dwarf other buildings, particularly houses). There is room on the sidewalk for pedestrians with streetlights and plantings. While there is some variation to the exterior, the design is not too crazy for a bedroom suburb. The building is not too large; there are just 86 units. There are American flags flying at the street corner.

The changes, according to the article, seem to focus on interior spaces. If you live in an apartment, how do you find space to separate home and work? This may be easier in large homes. What additional spaces could an apartment building or complex contain that gives residents some variety without having to leave? The suggestion above is to provide private spaces elsewhere in the building. It will be interesting to see how apartment developers and owners will in the future modify public spaces – gyms, pools, gardens, dog areas, party rooms, etc. – when restrictions may not allow apartment dwellers to use them in the same way.

What is missing from the COVID-19 apartment approach? Given the economic insecurity and the housing pressures many feel, will apartments be cheaper? These are not cheap apartments according to the story. Will this bring different kinds of people to Glen Ellyn than who might have typically moved there? The amenities are said to be geared toward the types of people suburbs often want to attract as opposed to affordable housing that would better serve those who truly need decent housing.

In other words, suburban development continues in fairly normal ways: the developer gets TIF financing, the city gets a building that fits its character and aesthetic, and suburban downtowns become a little denser.

How far might rent drop in Manhattan and other cities and who will benefit?

As some people reconsider living in Manhattan and other cities with high housing costs amid COVID-19, how far might rents drop?

According to StreetEasy, the median rent has fallen below $3,000. That is the lowest price since 2011.

The third quarter of 2020 also marked the first time since 2010 that Manhattan, Brooklyn and Queens all recorded year-over-year rent declines.

StreetEasy says renters are no longer willing to pay the so-called “commute premium” of living in Manhattan, because so many people are working from home.

Any rent drop in Manhattan or in New York could provide opportunities for people who even just a short time ago had little chance to live there.

At the same time, dropping below $3,000 for the median suggests that rent is still pretty high. Who can take advantage of this drop? Those with resources to do so, not necessarily people who need affordable or cheap housing. Indeed, if these lower rents quickly induce a number of people to take advantage, then rents could stabilize and head back up.

Perhaps there is little that could actually move rents and housing prices in certain housing markets to a point where many more residents could take advantage. A pandemic is unlikely to lead to the production of more housing and struggles with employment, among other factors, will limit who would move to big cities with temporarily lower prices. At the same time, COVID-19 could help nudge conversations about housing in a productive direction.

Former Lt. Governor of Illinois now devoted to fighting for fair housing in Chicago suburbs

As Evelyn Sanguinetti transitions to addressing fair housing after previously serving for four years as lieutenant governor of Illinois, she describes the kinds of housing discrimination that occur:

brick building facade on cold clear day

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Discrimination takes so many different forms. It’s not as apparent as it once was decades ago. The wrongdoers have become better at this sort of illegal activity. You will see it taking the form of lying about the availability of housing or home loans or home insurance, or applying a no-pets policy on service animals. You will see discrimination in the way of illegal steering. So when a prospective tenant wants to look at one apartment, the company showing the apartments says, “No, no, you really want to look a few blocks over; that’s where you really want to go.” A lot of people do not know their rights and they do not realize that this is what’s occurring. Another form it takes is offering different terms or conditions to members of a protected class, such as requiring sex in exchange for rent.

You see discrimination in the form of constructing inaccessible buildings — that’s a big one, too. A lot of the cases that we have pending and a lot of the work we do from a previous settlement, is we make improvements to make housing accessible to people with disabilities.

Another form of discrimination is saying, “No children allowed,”bwhich to me is like a stake straight at my heart. I grew up with my abuelita, my great-grandparents. I mean, there were a lot of us in one household and a lot of children. But the wrongdoers also find a way of making sure children are not allowed. Well, children need to live somewhere.

This sort of discrimination is often quietly done and scattered across locations. It rarely comes up in the news. It may be hard for people to guess how often it happens. The people affected by it may not know how to fight back or bring the issue to light.

Some of the issue might be defining fair housing. Sanguinetti explains the concept:

There’s always this conclusion that goes on with a lot of people like, “Fair housing? Free housing! That’s cool.” And I’m thinking, “No, no.” The Fair Housing Act provides that if you have the resources to live where you want, but you’re being prevented from doing so because you’re a member of a protected class, that’s illegal.

I imagine some might confuse fair housing with affordable housing which is often about providing housing for those who do not have the resources to live in a place. If we do not have a foundation of fair housing, it would be even harder to make the case for affordable housing – which is hard enough in many suburbs.

At the same time, efforts which help ensure fair housing do not necessarily help with getting residents resources (jobs, income, wealth, connections, etc.) that would help them access housing). Fair housing addresses the housing side once people try to acquire housing. Work is also needed on the other end in helping people get to a point where they can have housing choices that help them meet their goals.

Naperville considering affordable housing – but primarily for current residents?

Naperville will soon discuss recommendations from a consultant regarding affordable housing. Several of the suggestions point to at least some of the affordable housing serving current residents:

low angle photo of balconies

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Commissioners say the ideas are designed to help the city meet a state mandate on affordable housing and provide more places where seniors, young professionals and others who can’t afford many of the houses in Naperville can live…

Establish a rehabilitation loan fund to help low-income senior homeowners make repairs so they can age in place.

Establish a housing trust fund to help veterans, seniors, populations with special housing needs and first responders (including nurses, police officers and firefighters) purchase a home…

These ideas and others are listed in the report from SB Friedman, which found that roughly 22% of homeowners and 44% of renters in Naperville are spending more than 30% of their income on housing, making them “cost-burdened.” Many of these households are low-income, the report found, saying “there appears to be a considerable need for both owner- and renter-occupied affordable housing and income-restricted housing throughout the city to meet current residents’ needs.”

One way for wealthier suburbs to address affordable housing is to look for solutions for some of the populations mentioned above: seniors who are retired and are downsizing or having a hard time affording local housing on a restricted income; young professionals who are just out of school and looking to establish their career; and local workers who are seen as essential to the community such as teachers, fire fighters, and police officers. These are all groups that a wealthier suburb would want to keep as older residents should be able to age in place, attracting young professionals is important for keeping a strong tax base and having more young families in the community, and having certain occupations near their jobs and involved in the community is viewed as a plus.

At the same time, it is not clear that this gets at the full range of housing needs in the Naperville area, Chicago region, or the United States. There are lots of people who would benefit from cheaper housing costs yet the issue of affordable housing in many places is also connected to race and class. As noted in this article, housing is a social justice issue. Is Naperville addressing social justice issues if it is providing housing for the populations discussed above? Or, would providing housing for those with lower-wage jobs make more sense? Or, could cheaper housing provide opportunities for some future residents to experience upward economic mobility in a community with a lot to offer?

There is still much that could happen in these discussions. Naperville has a lot to offer to residents and it is a well-off and high-status community. What comes out of these conversations could help determine what the population of Naperville looks like in the coming years.

 

Trying to figure out whether tiny houses are actually affordable

I ran across a story of a self-sustaining time home made in Australia and retailing for roughly $61,000:

In total, this Urban Tiny home on wheels is 8.2 feet wide, 14.1 feet tall, and 24.3 feet long, including its drawbar. The drawbar, which is 4.6 feet long, allows the 7,363-pound tiny home to be towed by several vehicle types, including pickup trucks and SUVs…

The home’s self sufficiency title comes from its power systems, which includes solar panels, a battery system, and a 240-volt inverter…

The inside of the home looks no different than a typical loft apartment…

The bathroom and kitchen source its water from the drinking and grey water tanks. But for those who want a more consistent stream of water and power, there are water and generator power connection points in the tiny home.

The home looks appealing and the built-in electricity and water units provide more flexibility and sustainability. But, here is why I wonder if such houses could truly be affordable housing:

1. The price on one unit is cheaper than most single-family homes in the United States. This does not necessarily mean it is affordable. It is almost double the cost of the average new car in the United States. Would lenders be willing to extend longer mortgages for these small housing units?

2. The owner of the tiny house still needs land. This would require buying a lot, renting a lot, or finding a free lot. The first two options could add significant costs while the third requires a personal connection.

3. It is unclear what the operating costs are for tiny houses: what does maintenance cost? How much are utilities? How long do these units last? What is their resale value after five or ten years?

4. Moving the unit is an attractive option (particularly given #2). But, this requires renting or owning a large enough vehicle to tow the unit.

5. This is not a large unit at roughly 200-250 square feet (including the loft space). In terms of price per square foot, this is not necessarily cheap (particularly if the costs for #2 are added in). If people have a lot of stuff, would they need to rent a storage unit or have a storage building/garage on their property? There is not a lot of private space in these units; would this require living near a community that provides pleasant public and private spaces (think coffeeshops, libraries, parks, etc.) and would this drive up the price of parking the unit?

Putting this all together, I’m not sure this is within the reach of many people (perhaps it is more in the ballpark for a retreat or second home for people with more resources).

Addressing race without addressing residential segregation?

Residential segregation is a long-standing problem in American society. Through legal and illegal means, formal and informal practices, whites often sought and still seek to keep others, particularly blacks, out of their communities and neighborhoods. While residential segregation has lessened in recent years, it is still persistent and numerous communities disadvantaged decades ago are still struggling because of this.

The ability of people of different races and ethnicities to live near each other is not just about proximity to work and access to jobs (though this is helpful too); there are numerous consequences.

-local schools

-access to local governments, and social services

-interaction with neighbors and people in the community

-political representation at higher levels such as state officials or Congress

-nearby cultural opportunities

-health as well as recreational opportunities

-could provide more options for housing and building wealth

-the chance to address local or community problems together

And the list could go on.

As one example, more minorities living in the American suburbs does not necessarily a guarantee them a better life. When many suburbs were built on and operate on the logic of exclusion, suburban residential segregation subverts the idea of the suburban single-family home representing the American Dream.

Tackling residential segregation is a difficult task. Whiter, wealthier communities are not likely to be on board (see how this plays out with affordable housing conversations). Addressing housing at a national level is hard. But, that does not mean it is not worth addressing.