A Brookings Institution scholar examines the upper-middle class and how their choices separate themselves from the middle class:
The anxiety of being upper middle class: never quite wealthy enough to have all the goods and experiences of the highest group and always striving to stay above the normal/middle people.
A great, short book by Richard V. Reeves of the Brookings Institution helps to flesh out why these stories provoke such rage. In Dream Hoarders, released this week, Reeves agrees that the 20 percent are not the one percent: The higher you go up the income or wealth distribution, the bigger the gains made in the past three or four decades. Still, the top quintile of earners—those making more than roughly $112,000 a year—have been big beneficiaries of the country’s growth. To make matters worse, this group of Americans engages in a variety of practices that don’t just help their families, but harm the other 80 percent of Americans…
The book traces the way that the upper-middle class has pulled away from the middle class and the poor on five dimensions: income and wealth, educational attainment, family structure, geography, and health and longevity. The top 20 percent of earners might not have seen the kinds of income gains made by the top one percent and America’s billionaires. Still, their wage and investment increases have proven sizable. They dominate the country’s top colleges, sequester themselves in wealthy neighborhoods with excellent public schools and public services, and enjoy healthy bodies and long lives. “It would be an exaggeration to say that the upper-middle class is full of gluten-avoiding, normal-BMI joggers who are only marginally more likely to smoke a cigarette than to hit their children,” Reeves writes. “But it would be just that—an exaggeration, not a fiction.”
They then pass those advantages onto their children, with parents placing a “glass floor” under their kids. They ensure they grow up in nice zip codes, provide social connections that make a difference when entering the labor force, help with internships, aid with tuition and home-buying, and schmooze with college admissions officers. All the while, they support policies and practices that protect their economic position and prevent poorer kids from climbing the income ladder: legacy admissions, the preferential tax treatment of investment income, 529 college savings plans, exclusionary zoning, occupational licensing, and restrictions on the immigration of white-collar professionals.
As a result, America is becoming a class-based society, more like fin-de-siècle England than most would care to admit, Reeves argues. Higher income kids stay up at the sticky top of the income distribution. Lower income kids stay down at the bottom. The one percent have well and truly trounced the 99 percent, but the 20 percent have done their part to immiserate the 80 percent, as well—an arguably more relevant but less recognized class distinction.
Four quick thoughts:
- There is a certain lifestyle to be had here. See, my post a few days ago about a healthy lifestyle may have had some merit…
- As described here, many of the efforts appear aimed at avoiding downward mobility. In other words, there is some point in income, education, and lifestyle that cannot be crossed going the wrong way. But, there must be people who have this happen through events like losing a job or a major illness. What happens to them? For the “average” upper middle class person, what really are the odds that they would fall down a rung?
- There is a suggestion from the author that Americans shouldn’t and/or can’t just ask the 1% to sacrifice; the top 20% need to sacrifice as well. To put it mildly, this would not go over well. Given their anxieties as well as their tendencies to pull up the bridge after crossing the moat, efforts like affordable housing or school integration or significant increases in taxes will be met with opposition. They would use the rhetoric of the middle class – “we worked hard to get here – anyone could do it” – while pushing hard to protect their own status.
- Is the ultimate goal of this group to become truly wealthy? Most of them won’t have that opportunity and must know it. Or, is the goal is to simply not be middle class and have some more advantages than most people? Perhaps it really is about the children: is this the group that more than any other tries to give their kids every advantage as a supposed act of sacrifice?
A number of legislative options are on the table in California to encourage the construction of more housing and counter the actions of nearby residents:
Dozens of the solutions floating in the state Legislature aim to address that supply problem, including several that would streamline the process by which housing projects get approved (one, for example, would limit the circumstances in which a special permit could be required to build a granny flat). Others would not-so-subtly make it much harder for local residents and government agencies to block new projects, like by requiring a two-thirds vote for any local ordinance “that would curb, delay, or deter growth or development within a city.”
That latter bill epitomizes the frustration many young working people and families have as they try to attain what was once a milestone of adulthood—homeownership—that is now out of reach for even those making decent money. Some of those folks are YIMBYs, or supporters of a “Yes in My Backyard” agenda. “We know that our housing struggles are not the result of impersonal economic forces or lack of individual effort, but derive from bad policy and bad laws that have restricted housing growth for decades,” said YIMBY leader Brian Hanlon, co-founder of the California Renters Legal Advocacy and Education Fund, at an April Assembly committee hearing….
It’s unclear what the chances for each bill are. Though legislators seem eager to spur more housing construction quickly, some of their allies might not be. Many environmentalists, for example, want new projects to comply with CEQA, the state’s landmark environmental law that requires developers to study and possibly mitigate the environmental impact of whatever they build. And developers are never quick to embrace mandates that they include affordable units in their projects.
If the bills do pass, will any of them actually make a dent in what’s become a crippling problem all across the state? The Sacramento Bee’s Dan Walters recently wrote off the current proposals in the Legislature as “tepid, marginal approaches that would do little to close the gap.” Cuff admits many critics dismiss individual bills as a drop in the bucket. “But on the other hand, let’s put a drop in the bucket,” she says. “A drop is better than a drought.”
This is a long-term issue that may take decades to work out. The issue is complicated as it involves social class, race and ethnicity, understandings of local control, and property values.The article notes that some claim the legislative suggestions thus far are too small and I suspect a number of the bills would lead to lawsuits from communities and residents.
If I had to make a prediction (a near impossible task) based on what has happened in many suburbs throughout the United States, I would guess that the wealthier communities will find ways around these legislative actions. This could happen through the courts as they can better afford the time and money or there could be loopholes in the bills. Either way, the burden of the affordable or cheaper housing will likely fall on communities that are lower income and non-white.
Connect health and real estate in nice locations and you have a joint product to sell:
Chopra has been selling our body antidotes to life for two decades, and he has taken on most ingestible platforms. Now he is striking out into the booming domain of “wellness real estate”—building living spaces ostensibly designed to optimize bodily functioning. In collaboration with the design firm Delos and real-estate firm Property Markets Group (PMG), he is finishing construction of a 68-unit luxury tower in Sunny Isles Beach, on the barrier island abutting North Miami Beach. Two angular penthouse units resembling white glass-marble sky mausoleums are listed for $18.5 and $19.5 million…
The trend in Florida real estate, Maloney continued, is pairing with lifestyle brands. “We couldn’t figure out what we were going to do with our new project. When someone brought up Chopra, my ears perked up,” he said. “We’re not going with a car company or a clothing designer. When this concept came up, we thought, ‘wow, wellness.’”…
The Delos press release for these new “exclusive wellness residences” explains that they “will focus on three core wellness principles: air, water, light and sleep.” My guess there is light and sleep are meant to count as one. The Delos building in Manhattan where Chopra lives also features a “posture-supportive flooring system” and a surface coating “which destroys bacteria,” but I don’t know if these are wellness principles.
It then takes the author a while to figure out exactly what Chopra and his company will be doing to promote wellness. Additionally, an academic expert in this field offers a different approach:
The key to these technologies is that unlike the multimillion-dollar properties of Delos, Colistra and his colleagues are primarily concerned with scale—how to deploy mass-produced housing units that are equipped without creating huge disparities in who has access. “This is probably the antithesis of what they’re doing,” he said of Chopra and company. “What we’re looking at are population-health strategies in which health and wellness is accessible to everyone. When you’re talking about $15 million condos, it very quickly devolves into social inequities. Health is divided between the haves and have-nots.”
And that same expert suggests the answer is not really technology but social connectivity. So how about selling small town northern Minnesota as the ultimate wellness property?
If only wellness were not just a tagline that could sell more products…
Several new reports suggest the luxury housing market is not doing so well:
Sales in the Hamptons, Aspen and Los Angeles fell by double-digit percentages in the fourth quarter, as the supply of unsold homes grew and prices came under pressure, according to market reports Douglas Elliman and Miller Samuel Real Estate Appraisers & Consultants.
Separate research from Redfin found that luxury properties nationwide under-performed the broader housing market for the eighth consecutive quarter. The supply of homes priced at $1 million or more rose 1 percent in the fourth quarter, while the number of $5 million-plus homes was up 15 percent.
The article starts with the suggestion that the election limited sales. But, that doesn’t do much to explain the issues over eight quarters. Perhaps there is a bit of a luxury home bubble? I mean, how many multi-million dollar properties can be bought and sold? I also feel like I have seen numerous news stories in recent years about the latest home that is breaking the record for asking price. But, such homes are only within reach of the wealthiest people.
It would be interesting to hear what experts think this slump means. Builders shifting away from super expensive homes to cheaper homes? The wealthy looking to invest in other kinds of real estate? Any problems with vacant properties in these communities?
With recently released data, the Census Bureau describes the patterns in the wealthiest counties in the United States:
A Census Bureau report on the “highlights” of the data released yesterday noted that the nation’s wealthiest counties are disproportionately in the corridor of territory that runs from Virginia and Maryland and then north along the East Coast.
“Seventy-seven counties had a median household income within the highest range ($81,129 to $125,900),” said the “highlights” report. “Forty-two of these high-income counties were located in the Northeast region, Maryland and Virginia.”…
Nationwide, the median household income in 2015 was $55,755, according to the Census Bureau. That means the local median household income in each of the nation’s three richest counties—all of which are Washington suburbs in Northern Virginia—are more than twice the national median household income.
Of the Top 20 richest counties in the nation, nine are suburbs of the city that serves as the seat of a federal government
It then wouldn’t be too hard to look for patterns in other demographic data across these wealthier counties. One marker – noted in this article – is that many of these wealthier counties are suburban. But, I’m guessing these counties are also well educated and largely white.
It would also be interesting to see how those concerned with inequality would deal with county level data. Many American counties don’t have a lot of control compared to municipalities or states. There can be a lot of variation within counties, both really wealthy and really poor pockets. Usually, recommendations about poverty or affordable housing are made at a municipal or regional level. Is there a way to leverage counties to address particular issues?
Local note: it appears that three Chicago area counties – Lake, DuPage, and Kendall – fit into the highest range in the data. See page 3 of the Census highlights.
For many, the city of Chicago looked good yesterday: the weather was beautiful for November 4th, the buildings gleamed, the lake was beautiful from the air, everything looked pretty clean, and joyful millions descended on the city (I’m skeptical of the 5 million figure but that may be a subject for another post) to celebrate a win for the whole city.
Yet, I want to continue some thoughts from last week: a championship, even one as unusual as that of the Cubs, does not lead to a transformed city. On the television coverage, they talked of the day’s events bringing the city together, how the team embodied different aspects of the city, and how so many hearts had been lifted. Will the poverty rate decrease? Will the uptick in shootings and murders subside? Will economic opportunities start arriving in poorer neighborhoods? Will the public schools start providing a good education for all students? Will residential segregation lessen? Will the wealthy share more with those with less?
If anything, this win will provide more money for those who already have a lot. The Cubs were already quite profitable before the win and the championship supposedly adds $300 million to a multi-billion dollar commodity. The team’s development work around the ballpark is supposed to help the neighborhood but it also follows the pattern of other teams who are using their sports franchises to make more money in local real estate and development. I know the team gives to charities – pretty much all major businesses do – but does the wealth help others?
And does a win provide Cubs fan Rahm Emanuel – alongside other city leaders who were to receive tickets to World Series games until the public got wind of it – a reprieve from tough questions?
And which Chicago is the real Chicago: the skyline, Loop, and North Side or the other areas of the city?
And how about the pretty white fan base (at least it appeared this way by who was attending the World Series games at Wrigley and those who attended the parade and rally)? How many of those who poured into the city to celebrate are from the suburbs and from outside the region?
It could still be a very good day for Chicago if that same passion and energy displayed in celebrating the winning of a game – men playing with bats, balls, bases, and gloves – could be regularly channeled into improving communities.
The housing issues of the Bay Area and other major cities has led to a new YIMBY movement:
The stubbornness of the NIMBYs has sparked a counter-YIMBY movement (“yes in my backyard”) among activists who believe the way out of the housing crisis is to build.
Trauss, the founder of the San Francisco Bay Area Renters’ Federation (SF BARF), is one of the more visible members of the growing YIMBY movement in the city. She began her activism shortly after moving to the city from Philadelphia…
The severity of the housing crisis is swinging public policy in favor of the YIMBYs. In May, Trauss and housing activists from around the state went to Sacramento to walk the halls and meet with legislators in the capitol to lobby support of Governor Jerry Brown’s latest “as of right” proposal that would streamline the permitting process for new development that meets affordable housing requirements to prevent NIMBYs from stalling proposed residential projects…
The growing organization of the YIMBYs was evidenced at their first national conference in Boulder, Colorado last weekend. The gathering included representatives from Austin, Boston, Chicago, Denver, Los Angeles, Minneapolis, New York, Oakland, San Francisco, Seattle, and several other cities, according to The Atlantic CityLab. An international conference is planned for August in Helsinki, Finland.
It will be fascinating to see if this group gets anywhere. How do you convince wealthier residents to voluntarily give up their locational privileges? It will take a lot of sustained political pressure to go against people who have resources and close connections to local officials and people involved in real estate.
If I had to guess, I would think the YIMBY groups are led by middle class people who say that cities should be affordable to college graduates and young families who are trying to start in life. It is a different conversation to push for truly affordable housing; when the average rent in San Francisco for a 1 bedroom is over $3,000, where is there actually room for lower income residents (let alone middle class residents)?