Consequences of an auto loan bubble

With more financing options available for purchasing cars, American driving is up:

By increasing access to cars, lax financing standards also appear to be contributing to a national rise in driving, and with it, declining public transit ridership. In the latest edition of its biennial survey of who’s riding buses and trains in U.S. cities, Transit Center, a public transportation research and advocacy group out of New York, notes that the share of households without vehicles fell 30 percent between 2000 and 2015, with foreign-born residents, who are more likely to earn lower incomes and ride transit, posting even sharper declines.

In the survey, respondents who reported decreasing their bus and train use overwhelmingly replaced transit with private cars. And almost half of respondents who said they’d purchased a car over the past two years received a loan to finance it. Of those, 56 percent said that getting a loan “was easier than they had expected.”

Of course, improved car access among lower-income groups might look to be a positive trend on its face, since a personal vehicle can equate opportunity. So strong is the historic link between car ownership and household income that a trio of transportation equity scholars recently called for subsidizing access to wheels for poor Americans. But fewer rides made by public transportation and more by private automobile is a trend with consequences that transcend the U.S. economy: It feeds the planet’s existential problem of rising carbon emissions, especially since SUV and truck sales have become particularly popular during this auto-loan boom. “The rise in auto debt is evidence that we’re dependent on cars in an unsustainable way,” said Cross.

The new high-water line of defaulted auto loans also suggests that personal vehicles aren’t always golden tickets. Instead, for Americans living paycheck to paycheck, they’re a catch-22: If you don’t have the money and can’t buy a car, you’ll struggle to make ends meet. And if you don’t have the money, but still buy a car, you’re liable to fall even further behind. Vehicles may be the table stakes for playing in the U.S. economy, but in so many ways, it’s getting harder to win.

As noted by many, just as homeownership came within the reach of more people in the 2000s due to creative lending options and subprime options, the same is true of the auto industry. Does this mean that a burst bubble in car loans – due to many people being behind on their vehicle payments – would cause Americans to rethink driving and the reliance on personal vehicles?

I would guess no. At this point in American history, the country is too far in on its dependence on driving. It is not just about driving to work; driving offers opportunities to access cheaper housing, independence for drivers compared to utilizing mass transit which works on consistent schedules and requires being around other people, and a host of consumer and recreational opportunities primarily accessible through driving (think big box stores, shopping malls, fast food places, road trips, etc.). This list does not even account for the auto industry and the construction industry which have huge stakes in more driving.

At the same time, while Americans have resisted public housing, would they be more amenable toward government help in obtaining or paying for cars? Few communities or government agencies have provided cars or money towards cars but it may be necessary in a society heavily dependent on getting around via a car.

 

#1 payment priority for Americans: car loan

In a country dependent on and built around driving, perhaps the importance of making car payments is not a surprise:

“Your car loan is your number one priority in terms of payment, “said Michael Taiano, a senior director at Fitch Ratings. “If you don’t have a car, you can’t get back and forth to work in a lot of areas of the country. A car is usually a higher priority payment than a home mortgage or rent.”

People who are three months or more behind on their car payments often lose their vehicle, making it even more difficult to get to work, the doctor or other critical places…

After the financial crisis, there were a lot of restrictions placed on mortgages to make it harder to take out a home loan unless someone could clearly afford to make the monthly payments. But experts warn that there are far fewer restrictions on auto loans, meaning a consumer has to be more savvy about what they are doing when they take out a loan.

This article made me think a little: does this mean that cars come before homes in the United States? This would counter my own claim that suburbs are more about single-family homes then they are about cars – see my rough rankings of Why Americans Love About Suburbs.

Yet, the suburbs existed before cars. By the early 1900s, suburbs existed and utilized transportation technologies like railroads and streetcars. Mass suburbanization certainly occurred on a different scale with the availability of cars in the 1920s and then after World War II. But, the United States would have had some form of suburbs and their emphasis on single-family homes without cars even if that was on a smaller scale.

The whole relationships between cars and homes was cemented in the postwar era when increasing sprawl really did limit other transportation options for many people. And the shift of jobs to the suburbs made this problem even worse. Perhaps we could shift the what-if scenario to the future: could the suburbs go on without cars (hard to imagine) or cars on without suburbs (probably)?

A call for the Green New Deal to address sprawl and where people live

Want to pass a Green New Deal to benefit the United States? One commentator suggests it must reckon with the legacy and persistence of sprawl:

The Green New Deal is ostensibly a jobs program, an environmental program, and a redistributive program. If it’s a jobs program, it must wrangle with spatial mismatch. If it’s an environmental program, it must tackle the fact that an all-electric fleet of cars is functionally, at this time, a pipe dream. And if it’s a redistributive program, it must grapple with how roads paved into suburban and exurban greenfield developments deepen, expand, and exacerbate segregation.

A Green New Deal must insist on a new, and better, land-use regime, countering decades of federal sprawl subsidy. The plan already recognizes the need to retrofit and upgrade buildings. Why not address their locations while we’re at it? Suggestions of specific policies that would enable a Green New Deal to address land use have already emerged: We could, simply, measure greenhouse gases from our transportation system or build more housing closer to jobs centers. Reallocating what we spend on building new roads to paying for public transit instead would go a long way toward limiting sprawl.

Where we live is no coincidence of preference. Federal policy has enforced inequities and disparities for both the environment and vulnerable people at a national scale. It’s never too late to address the most fundamental aspect of our carbon footprint: where we live. And building housing near jobs, transit, and other housing—rather than ultra-LEED-certified parking garages—is merely a political choice. No innovation required.

This makes sense: how much can the United States truly address environmental matters if it does not reckon for the actions of roughly the last century that encouraged decentralization?

Here is what I wonder: would it be harder to address sprawl or environmental issues? On one hand, climate change is contentious and partisan. On the other hand, going after sprawl would require taking on deeply ingrained American values. When Americans value single-family homes, driving, and all that the suburban life offers, shifting priorities and funds to denser housing, mass transit, and cities may prove difficult.

The environmental movement in the United States has roots in suburbia. Rachel Carson was inspired by her suburban settings to write Silent Spring. But, truly reforming land use as opposed to making suburbs greener is a tall task. Of course, important decisions made today could address the issue of subsidized sprawl. American suburbs are neither natural or have to last forever. It would likely take decades to see the consequences on the ground.

The difficulties of promoting mass transit in a decentralized landscape

Mass transit use declined between early 2017 and early 2018; here is one take on what was behind the drop:

Ridership declined in all of the nation’s 38 largest urban areas (and the 39th, Providence, gained only 0.1 percent new riders). Transit systems in Austin, Boston, Charlotte, Cleveland, Miami, Milwaukee, Philadelphia, San Diego, and Tampa-St. Petersburg all suffered double-digit declines, with Austin losing 19.5 percent and Charlotte 15.4 percent despite being two of the fastest growing urban areas in the nation…

Transit apologists offer many excuses for ridership declines, such as low gas prices and crumbling infrastructure. But gas prices were 10 percent higher in March 2018 than March 2017 and ridership is declining even in areas with brand-new transit infrastructure.

The fundamental problem is that big-box transit — moving people in 60-passenger buses, 450-passenger light-rail trains or 1,500-passenger heavy-rail or commuter-rail trains — no longer works in American cities. Such transit made sense a century ago when most jobs were in downtowns surrounded by dense residential areas. But today only New York City comes close to looking like that.

Modern urban areas have far more jobs scattered across the suburbs than concentrated in downtowns. Job location is only one of many factors people consider when deciding where to live. The result is jobs, residences, retail, schools, and other activity centers are widely dispersed.

This discussion encapsulates several important major shifts in the United States in the last seventy years or so: the move of people AND jobs to the suburbs; a whole way of life built around driving; and an increasing emphasis on private life. All of suburbanization presents a particular issue: as noted above, it is not very efficient to use trains or buses to help people move from a variety of residences to a variety of workplaces. Unless there is a certain level of density, suburban mass transit does not appeal to many.

The mass transit available in Wheaton, Illinois is a good example of this. The suburb has two train stations that send riders to Chicago. Few train commuters use this line to go suburb to suburb – though there are some denser concentrations of suburbia along the route – and it would take a long time to go into the city and then ride another train back out to another suburban location. There is also a suburban bus system that tends to run routes between train lines in the suburbs or between concentrations of residents and areas of employment. Ridership is limited and the lines can take a lot of time compared to driving in a car.

Given all of these conditions, mass transit is a tough sell, particularly as the years go by and new mass transit projects have higher price tags.

Defining the suburban aspects of the movie “Eighth Grade”

Defining the suburbs, whether considering geography or social life, can be complex. So when the film Eighth Grade claims to depict “the tidal wave of contemporary suburban adolescence,” how is suburbia depicted? Here are some key traits according to the film:

  1. People live in single-family homes. Kayla is shown going from house to house and acts as if her bedroom is a personal sanctuary from the outside world.
  2. The story revolves around the lives of children, a key emphasis of suburban life. When not in a home, Kayla is at school. Her social life revolves around school. Family life is critical as the primary relationship Kayla has is with her father who tries at various points to encourage her.
  3. A land of plenty. No one in the film lacks for anything and all the teenagers apparently have phones and devices to connect with each other and broadcast their lives. Some people in the film have more than others but consumer goods are not an issue in the suburbs depicted. Everyone is middle class or above even though we see little of what people do for work.
  4. The shopping mall is part of a key scene, one of the iconic places where teenagers can interact and consume.
  5. There is a good amount of driving required to get from home to home or to the shopping mall.
  6. The teenagers and families depicted are mostly white.

On one hand, the movie depicts a fairly typical residential suburban place. Many of the features of the suburbs listed above are on my list of Why Americans Love Suburbs.

On the other hand, the film does a lot with Kayla engrossed with her phone and social media. Could this take place anywhere? Or, is the film suggesting the particular combination of suburbs and social media leads to a negative outcome (too much online immersion) or positive (the values or features of suburbia help give her a broader perspective about live)?

Furthermore, the film primarily works within a well-worn depiction of suburbia: largely white, middle-class and above, revolving around teenagers, school, and families. Thinking like a sociologist in terms of variables, would it have been too much to situate a similar story in a more complex suburbia with more racial/ethnic and class diversity and a different physical landscape?

Ways to develop social norms needed for ride-sharing carpools

Sharing a ride-sharing vehicle with other passengers can lead to problems:

“These days, I’m always worried about if I’m going to get in a car with a passenger who is new to pooling and won’t know how to behave properly,” says Omar Paten, a 36-year-old Brooklyn resident who pines for his carpool of yore in Atlanta, Ga., where he grew up. “It was like there were unwritten rules that everyone knew to follow. No one would eat, no one would smoke, no one would play loud music just out of respect for others.”…

Vanessa Graham didn’t bother to rate one recent ride—she just decided to swear off ride-sharing. The 26-year-old Queens native says her early-morning commute to Manhattan was shattered by a booming beat after two co-passengers joined the ride and plugged an iPhone into the car’s auxiliary cord. Then they started freestyle rapping…

“It was 95 degrees outside! My makeup was literally melting off in the car,” said Ms. Sheppard. Most egregiously he insisted that she was a spoiled American princess who didn’t understand the real struggles of life. “He told me that AC was a luxury not a necessity, and that he never drove with the AC on any of his personal cars. I laughed out loud.”

The article hints that earlier iterations with carpooling worked because knowing your fellow passengers and sharing a vehicle for a long period means that everyone tried to behave. Additionally, the ride-sharing services ask passengers to rate drivers and not other passengers:

One loophole in the app: You can’t rate an obnoxious fellow rider, or even learn who they are, beyond a first name that disappears when the ride is over.

So how do social norms develop in such situations? I could imagine a few paths:

1. The companies provide guidance for passengers on how to act and/or enable drivers or passengers to offer feedback to each other.

2. The press or regulators emphasize stories of bad passengers, either shaming the companies or riders into acting.

3. Passengers observe bad passenger behavior and informally a set of norms arise.

4. Drivers push back consistently against bad passengers.

If I had to guess which one will happen, I would go with #1 as the issue could be one that limits business for particular companies that do not act. How exactly companies would encourage social norms – positive reinforcement? Rating poor behavior? – would be interesting to watch.

What was present and missing from my peak suburbia drive to Costco

A few days ago, I picked up a few family members and we visited the nearest Costco (utilizing one of their memberships). One family member remarked this may have been a peak suburbia experience – and they may be right for several reasons:

  1. We traveled in a minivan. We didn’t necessarily need all of that space but it could have proved useful at some point.
  2. We stopped at McDonald’s along the way. The minivan went through the drive-through, a common American occurrence.
  3. We traveled to a quintessential big box store: Costco. The store was crowded, we browsed for over an hour, and we purchased a good number of items.

At the same time, we missed a few elements of a truly peak suburban experience:

  1. The trip to Costco was not sandwiched between a kid’s activity. Put a pick-up from preschool at the beginning and a travel to a lesson or sports practice at the end.
  2. The crowds and traffic were not too bad because of the time of day we went to Costco. Instead, make this all part of a evening commute between roughly 3:30 PM and 6:30 PM.
  3. While we certainly purchased items that we did not need, I would not say that we mindlessly consumed on bulk items. Most or all of the items had a justifiable reason for their purchase.

The combination of driving in a large vehicle for consumption purposes among a semi-dense landscape…is this what Americans dream of when choosing to live in suburbia?