This post originally appeared in the Detroit News on July 31, 2019.
Sitting in the Fox Theater for the first night of the Democratic debate in Detroit this week, I was dismayed by the nearly total lack of discussion about the plight of millions of qualified first-time homebuyers who can’t find a home they can afford or can’t buy one that they can.
While Beto O’Rourke and Gov. John Hickenlooper briefly raised the issue as an aside, none of the moderators asked about housing affordability and no one debated solutions to this growing crisis that is impacting both urban areas — including Detroit — as well as rural areas throughout the country.
While it is true that in parts of California an income of $300,000 a year isn’t enough to afford a median priced home or a two-bedroom apartment, housing costs in cities like Charlotte, North Carolina, and Nashville, Tennessee, are also out of reach for most working people with good jobs. For minimum wage workers, the problem is much worse, as even modest rental units are often out of reach. But high prices are only part of the problem.
In areas where housing is affordable, mortgages are often unavailable because lenders are concerned that the regulatory risk of any foreclosure can wipe out the profit of 10 other performing mortgages. One Civil War-era law that was expanded in 2009 punishes lenders for making even the smallest errors in underwriting FHA mortgages. As a result, lenders have raised mortgage standards to the highest levels in generations and routinely avoid making loans under $100,000. Two of the largest lenders withdrew from the FHA market altogether.
As a result, families in cities like Detroit and rural areas in northern Michigan find it increasingly difficult to finance affordable homes. In the most desirable neighborhoods, like the University District and Rosedale Park, cash investors are quick to push out first-time home-buyers, turning traditional family-owned homes into rental units.
The situation is even worse for African-Americans — much worse. As Nolan Finley noted in his op-ed the day before the debate, in Detroit, “black home ownership has dropped to 40% from 51% since 2000.” It’s just as bad in the rest of the nation, where black home ownership has dropped faster and deeper than any other group. In fact, the black home ownership rate today is lower than it was in 1968 when segregation was legal.
I recognize that I’m not the only advocate who thinks their issue deserves more attention in the debates, but the demise of black home ownership contributes more than any other issue to the growing wealth gap, as housing is the primary asset of middle-class families. Lower wages are part of the problem, but without more housing, higher wages will only drive up prices on the limited housing supply.
Prison reform is one issue that is getting some attention, but we need additional focus on job training and housing for those being released. Nine million Americans are released from prison each year. Are we going to train them to build homes or otherwise find work that can give them a new lease on life, or will we just add them to the growing homeless population and hope for the best? Hope is important, but it doesn’t build homes.
The bottom line is we need to build more housing — a lot more. When you account for new household formation and obsolescence, we are losing 250,000 units of housing every year, according to a wide range of economists. So, the problem is guaranteed to get worse, and certainly won’t be solved by a $15 minimum wage. The law of supply and demand can’t be repealed. A lack of affordable-home builders, labor shortages and higher prices due to growing protectionist trade policies make a bad situation worse. It’s time candidates, and the journalists who cover them, bring this critical issue to the forefront.
David Dworkin is a native Detroiter and contributor to the Detroit News. He was part of Obama administration’s Detroit Bankruptcy Recovery Team and served in the Treasury Department in the Obama and Trump administrations. He is currently president and CEO of the National Housing Conference in Washington, D.C.