How Affordable Housing Is Crippling Equality And Minority Communities

Homeownership has become a battle-line between wealth and poverty

Thenation.com — Illustration by Curt Merlo.

“A nation will not survive morally or economically when so few have so much and so many have so little.”

— United States Senator, Supporter of Social Welfare,

Bernie Sanders

“Socialism violates at least three of the Ten Commandments: It turns government into God, it legalizes thievery and it elevates covetousness. Discussions of income inequality, after all, aren’t about prosperity but about petty spite. Why should you care how much money I make, so long as you are happy?”

— American Commentator and Media Host, Supporter of Classic Capitalism,

Ben Shapiro

The Inequality Of Housing

For many people, homeownership is a lifelong dream. The fabled fantasy of owning your own roof, your own land, and a family to call your own living within it. Despite how minor it may sound, it’s one of the greatest moments of human existence. The pride of simply owning a home…and the generational wealth that comes with it.

So in the middle of a global pandemic, I tackled house hunting for the first time in my adult life. It was one of the most illuminating, and mind-boggling, learning moments of my millennial life. In doing so, it opened my eyes to just how insane global housing truly is.

As someone that was privileged enough to grow up under the roof of Boomer-generation parents, I was able to enjoy the comforts of having a roof over our head that was in our name. Instead of sharing space with many other folks, I lived the dream of many middle-class of growing up in a family home.

However, by today’s modern standards, it’s becoming a different story. Now more than ever, owning a home is less of a human right and more of a luxury privilege. If you have the money and the capital, real estate is a fantastic avenue to true wealth. Not only can homeownership create new money for you, but it also grows your own personal net worth at the same time. Normally, this would be great, but there is a severe consequence of this idea.

There simply isn’t enough affordable housing in the world.

The coronavirus pandemic has exposed the deep divide between homeowners and those that rent (renters). That your financial standing could literally become a life-saving difference by having proper social distancing and the space needed to recover peacefully. That your wealth and upbringing is an ultimate determinant to whether you may even have the right to even own a home in the first place.

As I have previously mentioned before in my writing, the world economy has been experiencing a K-shaped recovery. Basically, if you created a line chart, it goes something like this:

  • First, the economic markets spiral downwards — represented by a line that simply goes down.
  • Then once the economic recovery begins, that line then splits into two different lines — one line that will trend upwards, and the other that will gradually trend downwards. Thus forming the aforementioned K-shape.
  • The line that goes upwards is represented by those with the wealth and resources to outlast a global pandemic/recession. This means those that have access to cash, money-making assets, jobs that allow WFH (work from home), and other traits that allow the power of wealth building.
  • The line that leads downwards is the vast majority of those without those resources. People that lack wealth, a steady job or employment, WFH access, and a host of other financially constraining factors. Unfortunately, this line encapsulates much of the middle and lower classes.
Photo Via CFM Advocates
Photo Via JP Morgan

Long story short — the rich have become significantly wealthier while average, middle-class workers have become increasingly broke.

However, this form of economic recovery is even more significant with the housing market. While the economy crashed due to the pandemic, housing values have skyrocketed. Owning a home may be the ultimate representation of wealth inequality and it has reached a concerning level during this time.

This is a giant reason why Real Estate is regarded so highly by the richest among us. A constant stream of money that will funnel upwards, no matter the situation. Real Estate is such a safe form of money that even McDonald’s gets rich from it. (I’m serious.)

Landlords Vs. Renters

Homeownership is an insanely expensive undertaking and has created a deep wealth gap for many households. Many people are becoming forever stuck in a cycle of renting. While renting isn’t inherently bad, it’s nowhere near as fruitful when owning your own home. In the short-term, renting isn’t so bad. It gives you somewhere to stay and the flexibility to move around later. However, over the long-term, the costs of renting add up significantly. And consequently, if you fall behind as a renter, it can become disastrous.

Due to financial inflation, where the value of your money goes down over time and the price of assets *cough* homes *cough* goes up, it makes renting extremely costly in the long-term. When you own a home, your mortgage will always stay the same unless you choose to refinance. When you’re renting, the costs continue to go up every year. From higher rents to new fees, it gets expensive to the point of just being hilarious. For example, just ask anyone about the housing markets in California and New York City. Even people with luxury tech careers struggle to keep up with the prices in those areas. It’s insane. It makes saving money brutally difficult even in the best of times and you lost out on the opportunity cost of building your own net worth.

On top of the high costs, the conditions are often abysmal. Depending on your location, the quality of your living will change too. Again, it’s not so bad if you’re single, but when you’re trying to start a family and finding a positive environment, it’s a social nightmare.

And then there are the homeowners — or in this case, landlords.

I’m not talking about someone that owns a house and just renting it for a few bucks. But the type of people that have built their fortunes on buying out multiple properties and charging exorbitant prices — often at the costs of others. Any failure to pay the cost results in eviction. It’s modern capitalism at its ugly finest.

However, the worst part of it all is the parasitic relationship between renters and landlords. Because:

  • If the renters don’t pay rent, landlords could potentially fall behind on the house mortgage or property tax.
  • If the mortgage or property tax isn’t paid, the bank doesn’t get their money and the city will lose out on vital tax money.
  • And if that happens, banks fall behind which then leads to government intervention and get bailed out with new money. While cities will eventually recoup their money, but city workers will potentially lose their jobs until then.

It’s a harsh game where the winners constantly win and the losers…well… keep losing. It’s severely messed up when something as crucial as owning a home has become gate-keeped to this level. Only those at the very top truly win which is the big banks. Meanwhile, everyday people, whether they’re a homeowner maintaining a family, a small-time landlord, or someone just renting and getting by, all get screwed over in some form.

Throw in foreign investors and big companies buying up whatever affordable housing is left, and you have a fucked-up recipe for the lack of affordable housing.

Redlining And The Racial Wealth Gap

So, we can’t mention homeownership without mentioning this. While wealth inequality is bad, it’s so much worse if you’re a minority. Particularly, in America, and still to this day, the effects of this practice continue to haunt the wealth of many people living today.

As listed by Investopedia:

Redlining is a discriminatory practice that puts services (financial and otherwise) out of reach for residents of certain areas based on race or ethnicity. It can be seen in the systematic denial of mortgages, insurance, loans, and other financial services based on location (and that area’s default history) rather than on an individual’s qualifications and creditworthiness. Notably, the policy of redlining is felt the most by residents of minority neighborhoods.

The term “redlining” was coined by sociologist John McKnight in the 1960s and derives from how the federal government and lenders would literally draw a red line on a map around the neighborhoods they would not invest in based on demographics alone. Black inner-city neighborhoods were most likely to be redlined. Investigations found that lenders would make loans to lower-income Whites but not to middle- or upper-income African Americans.

Indeed, in the 1930s the federal government began redlining real estate, marking “risky” neighborhoods for federal mortgage loans on the basis of race.3 The result of this redlining in real estate could still be felt decades later. In 1996 homes in redlined neighborhoods were worth less than half that of the homes in what the government had deemed as “best” for mortgage lending, and that disparity has only grown greater in the last two decades.

Even during the pandemic, the practice of Redlining made everything worse for minority communities. A popular report by financial site, MoneyWatch, expressed that those same communities are more vulnerable to COVID-19 due to the discriminatory practices that led to unhealthier communities.

(And please don’t say people in those areas should just *stay healthier*. That’s pretty hard to do when healthy food options are more expensive. Plus, they’re intentionally located away from minority communities to the nicer (not minorities or black) neighborhoods while cheap, and extremely unhealthy, food options were built to exploit the people living there.)

How Do You Fix A Wealth Gap This Big?

So for all of the complaining and explaining thus far, what are our solutions to such a massive problem? Unfortunately, I’m not sure.

A popular response to this issue is the concept of Universal Basic Income (UBI). It’s literally what it sounds like — everyone gets paid a minimum wage. Personally, I’m all up for helping those in need, but it does come with a simple problem: if you’re making enough to be comfortable, why work at all? It would definitely become harder for a business to operate if people have less reason to do so.

But UBI is a flawed idea, not least because it would be prohibitively expensive unless accompanied by deep cuts to the rest of the safety net. In the U.S. (population: 327 million), a UBI of just $1,000 per month would cost around $4 trillion per year, which is close to the entire federal budget in 2018. A proposed response by the Democrats is to tax the wealthiest among us at higher rates to compensate. But it’s hard to do due to strong Republican opposition and the wealthy elite having considerable influence on politics.

There is also a practical idea of just building more affordable housing. If the lack of housing supply and high demand is driving up prices, just build more homes right? Well, the problem is:

A. Those homes are generally built for the wealthy because home builders are focused on profits first and people second.

B. Even if those homes were affordable, they would just get brought out by everyone with the most money to do so. And we would end up back where we started.

And even if we got another housing market crash, due to the absurd difficulty of just buying a home, most people wouldn’t benefit from it anyway.

The global housing system isn’t just unequal — it’s absolutely broken. A system that is, by design, built on the backs of those that work the hardest to keep the world alive.

The Pandemic Made Housing Inequality Even Worse

Unfortunately, even when this pandemic is over, the affordable housing issue is only going to get worse.

While housing values are going to keep going up, a lot of people will have bigger problems on their hands. Mainly, catching up on any debt incurred during this time and getting bills paid.

Meanwhile, politicians have yet to approve a stimulus plan that could help those in need. Instead of supporting their fellow citizens, they’re too busy playing politics while families around the country continue to fall behind. The housing wealth gap. Whether you’re in danger of losing your home or being evicted from an apartment, this is a dangerous time to fall behind as we have yet to receive any vaccines for the virus.

The Greatest Wealth Transfer In History?

There is also the classic idea of just inheriting our parent’s property. And even that is a hit or miss idea, as many households are struggling to pay the mortgage and keep up with various financial responsibilities. On top of that, for a lot of minority families, it’s not even possible if their parents don’t own property, to begin with. Thus, wealth inequality will become so much worse by the time this mess over. The gap will just increase over the next decade if massive action isn’t taken.

Due to the many pandemic-related factors, there are many people claiming we’re in the middle of the greatest wealth transfer yet as the older, Boomer population is passing down their wealth to the younger generations.

Escape From California…Or Inflation?

However, probably more than anything else, there is the outright danger of inflation that threatens to destroy the affordable housing market.

By now, you have no doubt heard about the exodus of high-paid career workers leaving California for cheaper areas. With the rise of Work From Home culture, people have realized it’s cheaper to just move somewhere else while maintaining the same high-paying lifestyle.

Inflation is the rate at which the value of a currency is falling and consequently, the general level of prices for goods and services is rising. California, in particular, has earned an infamous reputation for an out-of-control inflated economy. With so many high net-worth individuals and companies gathered in one spot, it allowed the price of everything else to spike out of control.

California’s tech industry is a boon to those that can secure a job within it but has become an inflationary nightmare for those that live there.

With so much concentrated wealth in one area, it’s driven up the price of everything else in that area — including the housing. It’s unusual to hear about rents going as high as 3,000$ and that’s considered normal. And while the pandemic has dented that price, the truth is that runaway price inflation has made housing there severely uneven.

California is just one example of inflation hurting us all. However, inflation is more insidious than that. What happened if that same price increase was extended to the rest of the country? Well, that’s the issue we have affordable housing. In the past decades, the prices have all inflated so much that housing has no longer become as affordable as it used to be. And not just the housing, but the building materials used to build those houses. With everything becoming more expensive, it’s harder than ever to justify fair housing.

Lastly, and this one is a hot take, but inflation is considered the primary reason why UBI would fail. If the economy is aware that people are making more money, why not adjust prices to match the new money coming in? While the relationship between stimulus (the aforementioned new money) and inflation is debatable, there is no doubt that human greed will find a way to prevail.

Conclusion

The wealth gap caused by homeownership is immense and it’s very concerning for the next generation. Home prices are going to keep rising and right now, most people won’t be able to own one unless drastic action is taking place.

Due to discriminatory practice and just outright greed, owning a home has become a battle line between the “haves” and the “have-nots”. Redlining, predatory landlords, and various factors in play will keep any potential solution from achieving full impact.

It’s a messed-up situation.

Housing should be a basic human right to all. Instead, it has become a real-world Game Of Thrones with the wealthiest sitting at the throne.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.

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Dayon Cotton is Active Duty US Navy and Freelance Writer. I write dope articles about social issues, life lessons, and advice on how to live a better life. Stay safe out there!

I write dope articles about social issues, life lessons, and living a better life, dayon1020@gmail.com, Follow My Twitter! @dayoncotton00, Active Duty US Navy

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