Los Angeles is moving ahead with a new law that homelessness advocates say could displace some unhoused people in the city.
The rule that took effect September 3 restricts “sitting, lying, sleeping” or setting up camp in the “public right-of-way.” Mayor Eric Garcetti signed the ordinance in July, Insider previously reported.
The Centers for Disease Control and Prevention addressed the issue of managing groups of unhoused people in cities weeks before Garcetti signed the ordinance in Los Angeles, saying on July 8 that “clearing encampments can cause people to disperse throughout the community and break connections with service providers. This increases the potential for infectious disease spread.”
The CDC did not immediately respond to Insider’s request for further comment.
LA city councilman Mike Bonin, one of two councilors who voted against the ordinance, said he was “angry and frustrated,” and said the city is responding to homelessness “the wrong way, with failed policies.”
It may be too soon to tell whether sweeps have led to an outbreak of COVID-19, but Pastor Troy Vaughn, CEO of the Los Angeles Mission homeless shelter said, “I think it’s a real concern to not have a controlled process in place to address the pandemic of homelessness in the middle of a public health pandemic.”
Rev. Andy Bales, president and CEO of the Union Rescue Mission homeless shelter, told Insider “most of Skid Row is excluded from the ordinance” effectively preserving “the decades-long policy of corralling and containment of people on Skid Row.”
In a January 13, 2021 opinion submitted by the US 9th Circuit Court of Appeals, a panel of judges argued the city of Los Angeles’ rule prohibiting bulky items in public spaces could be deemed a violation of the Fourth Amendment, which protects individuals from “unreasonable government seizures of their property, even when that property is stored in public areas.”
In a joint statement published on September 3, Mayor Garcetti, the Los Angeles Police Department, and LA City Council President Nury Martinez suggested that, despite the city ordinance having taken effect, it doesn’t need to be the last word on the matter of accommodating LA’s unhoused population. “We don’t need to choose between keeping our public spaces safe and clean, and connecting Angelenos experiencing homelessness with the services and housing they need,” the statement read.
California is the epicenter of America’s housing crisis.
For years, the Golden State just hasn’t provided enough affordable homes, for the simple reason that it’s just not dense enough. It’s largely illegal to build anything that’s not a single-family home in the state.
That just might be changing.
On Thursday, state lawmakers voted to advance Senate Bill 9, which would permit the construction of two-unit buildings on lots that have long been zoned for single-family homes. The legislation will now make its way back to the California Senate for a concurrence vote before it reaches Gov. Gavin Newsom’s desk.
At the root of the affordability problem is a lack of new housing, with construction not keeping up with population or jobs growth.
When you factor in the explosive job growth over the decade – a 22% increase in the number of nonfarm payroll jobs between 2010 and 2019, fueled by the ongoing concentration of the tech industry in places like Silicon Valley – the lack of new construction is even more apparent:
While Newsom hasn’t indicated whether or not he’ll sign the bill into law, its passage would represent a colossal shift in attitudes toward housing and a potential breakthrough in the generational warfare over housing pitting the NIMBYs, or “not in my backyard” boomers against the YIMBY, or “yes in my backyard” millennials.
Before SB9, the millennial YIMBys have taken L after L, as NIMBYs have protected their property values at the expense of nearly anyone trying to find an affordable home. Maybe the next generation of American housing could look very different.
It began in Berkeley
The YIMBYs’ first key victory was in Berkeley, the heartland of NIMBYism, earlier this year. Over 100 years ago, in 1916, the Bay Area city was the first in the US to enact a single-family zoning law. It did so on explicitly racist grounds, as whiter families could more easily afford single-family homes.
Yet after decades of inaction, the Berkeley City Council voted unanimously last February to end single-family zoning. (Oregon is so far the only state to ban single-family zoning.)
Berkeley’s mayor, Jesse Arreguin, is himself a NIMBY-turned-YIMBY. As recently as 2018, he called an upzoning bill “a declaration of war against our neighborhoods,” but a year later he told East Bay Express that his “thinking around the housing crisis has definitely changed.”
This June, Arreguin told NBC that Berkeley’s history of zoning was “rooted in racism” and the city’s lack of affordable housing was an “emergency.” But Berkeley was just a warmup.
An analysis of SB9 by the Terner Center estimated it would lead to just 700,000 more units in the state, a sharp contrast with just around 100,000 new housing units each year, The New York Times reports.
Ali Wolf, chief economist at housing analytics firm Zonda, told Insider that California will probably remain undersupplied for another decade, “so there will be people who will be very excited about the zoning changes. I, for one, am in support of it.”
Homeowners and local officials have long cheered zoning as a way to protect property values and ensure neighborhoods don’t become too densely populated, but YIMBYs argue that limiting home supply leads to a surge in prices and several related issues, such as supercommuting and mass migrations to smaller cities. During the pandemic, the Bay Area’s housing crisis saw tech workers flood into cities such as Austin and Denver, driving prices up there.
The YIMBY movement allows millennials and Gen Zers to tackle several economic problems at once, because improving home affordability can have knock-on effects throughout the US economy. Greater residential density would be more energy-efficient, thus helping curb climate change. It would improve congestion by funneling more travel to public transit and begin to address gentrification by keeping prices at sustainable levels.
Zoning, then, sits at the center of some of millennials’ biggest economic concerns, and SB9 is a major development in the long-running NIMBY wars.
It’s impossible to discuss the size and scope of income inequality in America without including housing in the conversation. In the same way that corporate profiteers line their pockets while their workers fall below the poverty line, wealthy homeowners have rigged the system so their properties surge in wealth at the expense of millions of renters who have been frozen out of the system. In January 2021, CNN’s Anna Bahney noted that while American home prices soared by almost 15% in 2020, that wealth is not distributed equally by income.
“People who already owned high-end property before the pandemic are seeing their wealth grow as the luxury end of the market booms,” Bahney wrote. “Meanwhile, being able to afford a new home is getting further out of reach for those looking to buy in the low- and middle-tiers of the market.”
Housing has almost become a luxury
As property values climb, so do rents. And as housing behaves more and more like a luxury good in America, it is becoming increasingly difficult for working people to obtain housing.
The solution to this problem seems pretty clear: Build enough housing so that anyone can afford to rent, or even buy, a home of their own. But despite the obvious solution, America’s fight for housing equality doesn’t follow the same contours as your typical income inequality debate.
In the latest episode of “Pitchfork Economics,” Glenn Kelman, the CEO of Seattle-based online real estate brokerage firm Redfin, lays out the battle lines. On one side, he said, “there are people who obviously advocate for affordable housing, but there are other people who worry about their property values.”
The civic discourse surrounding housing is an asymmetrical war. Kelman pointed out that homeowners are “very good at organizing into neighborhood associations and limiting construction and preventing the government from really acting in the way that it needs to, to solve this crisis.”
So when affordable housing advocates fight for denser neighborhoods and more construction, they are struggling against a well-oiled machine. In these fights, Kelman said, “the winners are the people who already own homes, who have control of most political processes. They’ve essentially formed a cartel to keep housing prices high.”
Middle and lower-income homeownership is stifled
By transforming their housing into an increasingly valuable rarity, homeowners are basically choking the entry-point to the market. And as prices increase, it’s becoming harder and harder for prospective homebuyers in the middle and bottom of the income scale to get approved for mortgages.
When the housing market functioned as it should, every time a landlord raised the rent, tenants would weigh their higher rent against the price of a mortgage. “But right now, when the rent goes up, those renters can’t qualify for a mortgage. And the landlord knows it,” Kelman said.
The higher bar for entry creates even more inequalities
“If you are one of the people who can qualify for a mortgage and own a home,” Kelman said, “you can rent it out to someone who can’t qualify for a mortgage.” The renters then pay off the landlord’s mortgage, adding even more to their wealth and allowing them the opportunity to buy even more property.
As our housing crisis has grown and as more Americans are losing their homes, we’ve started to see more and more corporations step in to finance affordable housing in cities around the country. Kelman says it’s a nice gesture, but it doesn’t solve the greater housing problem.
“I’m skeptical about corporate philanthropy,” Kelman said. “When you look at the amount of money that we need to deploy toward housing, there’s only one entity that’s capable of that, and that is the government. So the number one thing that businesses can do (to support affordable housing) is support higher taxes.”
One of the first things we have to do to combat housing inequality is to address the systemic advantages that homeowners have in the zoning and approval process. Until everyone has a voice, homeowners will continue to stack the deck in their own favor and housing will continue to fall out of reach for many Americans.
As Kelman put it, “I should not have a disproportionate say about housing in Seattle.” It’s an uncharacteristically blunt statement for a CEO to make – and it’s 100% correct.
In an August 2 interview with the Sacramento Bee, Republican candidate for California governor Larry Elder said that, if elected, he would implement a plan to house homeless Californians created by former Department of Housing and Urban Development Secretary Ben Carson and Los Angeles Mayor Eric Garcetti.
Elder said he would declare a “homeless emergency” in which he would suspend the California Environmental Quality Act (CEQA) so that he can “unleash” developers and contractors who would be able to build low-cost housing and apartments on government land.
“I’ve talked to a lot of developers, and a lot of them are completely demoralized, disillusioned, and many of them are building outside of California precisely because of [CEQA].”
Elder said that the government also needs to deal with the underlying reasons that cause homelessness in addition to building cost-effective housing.
“We have a certain percentage of people who are on the streets who are simply schizophrenic. By that, I mean a danger to themselves or others,” Elder said. “Some percentage – I’m not sure how many – literally have to be removed from the street and put in a mental institution for their own safety and for the safety of the rest of the homeless population.”
Additionally, Elder said the rest of the homeless population is “probably alcoholics, mentally ill, or have substance abuse problems,” and needs treatment.
Asked by Sacramento Bee columnist Marcos Breton about the timeline it would take to implement the plan, Elder said he thinks it would only take a matter of months to build cost-effective housing if burdensome rules and regulations were removed.
Although Carson said Garcetti had signed off on the plan, it did not go forward because Donald Trump did not win a second term.
“If I am elected governor, if I’m lucky enough to be put in that position, and I fail to solve the homeless problem, then I will have been a failure. I’m going to make it one of my top priorities,” Elder said.
Garbatella is a working class neighborhood in the outskirts of Rome. It’s known for a century-old housing project that serves as a reminder of how good urban design can make for happy urban spaces. It’s also home to some of the most interesting street art in the Italian capital.
Built in 1920 to house workers from nearby factories, Garbatella was itself a revolutionary idea: A garden-city with public low-cost housing and space to relax and commune with neighbors.
Today, Garbatella remains a wonderful example of the Barochetto Romano. While high-rise buildings would become the dominant form of public housing in the later years of the mid-20th Century, Garbatella, with its winding streets and lush courtyards, is a place where greenery and urbanization coexist.
The neighborhood is rich in social and culture initiatives and its walls and building facades tell a story of rebellion and the struggle for a better future. Walking through Garbatella, you’ll see art that takes on the destruction of the environment, racism and the criminalization of the migration, the dystopic model of the city, and the cause of Free Palestine.
A common site along one street is Mrs Gisella, who at 81 likes to stay at her windows to greet neighbors and people-watch. She says that Garbatella it is a quiet and pleasant place to live.
Murals also celebrate the neighborhood’s past, like the lady “Garbatella” who is thought to have given the neightborhood its name, and the Roman singer, Alvaro Amici, who grew up in Garbatella.
One mural pays tribute to Enrico Mancini, an Italian anti-fascist partisan who was captured and tortured by the Nazis. He was among the 335 civilians and political prisoners killed by Nazis in Rome on March 24, 1944, at the Fosse Ardeatine massacre in Rome.
The Case Rosse Social Center is a local bar and cafe, but it’s also much more than that. The group offers free classes to migrants, organizes cultural and social activities, and runs a food bank.
The 2020 census data released Thursday showed a more diverse, less-rural America. But the fastest growing metro area broke from that trend.
The US census reflected how America has changed in the past ten years. America’s white population dropped 8.6%, rural populations declined, and the multiracial population increased significantly by 276%. But even as America’s diversity has increased, a Republican, largely-white retirement community proved to be the fastest-growing metro area: The Villages, Florida.
According to the census data, the population of The Villages – which requires at least one member of the household to be 55 or older – grew 39%, from 93,000 in 2010 to 130,000 in 2020. And in just one year, from 2019 to 2020, 5,000 new residents joined the retirement community.
The massive growth of the retirement community illustrates a broader trend of many Americans leaving the biggest cities.
Insider’s Ben Winck previously reported on why so many people are moving to “exurbs,” or districts outside of a city. Exurbs offer cheaper housing than urban areas and suburbs, for one, and are much less dense than cities while still being close enough to cities for commutes.
While The Villages is a metro area, smaller cities like it could see even more growth in coming years.
The surge to The Villages, though, has pushed median home prices there up 18.8% year over year in July, according to Redfin.
The Villages has also played an important role in the nation’s politics. As CNN reported, it has become a battleground area in recent elections, favoring President Donald Trump over President Joe Biden by 33,420 votes, with Biden only receiving 36.7% of the residents’ votes.
But The Village’s role in politics isn’t its only distinguishing factor. Insider’s Taylor Borden reported on the unique makeup of the fastest growing metro area in June, describing it as a place where residents get around by golf cart, party in piazzas, and tan by the poolside.
“This is nirvana,” one resident said in a 2021 documentary about the community.
The golf carts have also made headlines for less-positive reasons. In 2020, a Trump-supporting resident shouted “white power” while driving his golf cart during a rally to support Trump, after which the former president called the participants of the rally “great people.”
With the rate The Villages grew in the past decade, retirement to exurbs and smaller metros could be a growing trend in years to come.
The US housing market doesn’t seem to be in a bubble – yet.
Over the last several months, the housing market resembled its late-2000s boom in more ways than one. Homes are selling in a matter of days, not weeks. Bidding wars are pushing many prices well above their listing levels. And rent prices have begun surging as prospective buyers exit the red-hot market.
Yet experts have largely agreed that the pandemic-era market was crucially different. The late-2000s frenzy was powered by dubious lending practices and rampant speculation, factors that exacerbated the crash in 2008.
In contrast, the current price surge is “rooted in economics,” Frank Nothaft, chief economist at CoreLogic, told Insider in April, citing the eternal economic law of supply and demand. The sudden shift to remote work powered historic demand for homes and supply was limited due to decades of underbuilding. Those two dynamics sparked the buying spree seen throughout the back half of 2020 and early 2021, Nothaft said.
The market is also plagued by a classic case of FOMO, or “fear of missing out.” The Federal Reserve’s emergency rate cuts and purchases of mortgage-backed securities threw fuel on the housing market’s nascent flames. And as prices began to climb, more buyers emerged, looking to take advantage of record-low mortgage rates while they lasted. A handful of Fed officials have since considered pulling back from the policy support, with one even saying he didn’t want to “get back into the housing bubble game.”
The drivers, then, are different. But when you look at the data, it’s ominously similar to 2006. The market might not be in a bubble for the reasons that 2006 through 2008 was, but a handful of measures suggest it’s coming close for different reasons entirely.
Here are three signs that the housing market is creeping toward a 2008-like bubble.
1. Prices are above bubble levels
The Case-Shiller National Home Price Index is among the most popular measures of nationwide price growth, and it’s exceeding the heights of the late-2000s boom.
Prices set several record highs through 2021 as extraordinary demand slammed into inadequate supply. Accounting for inflation tells a similar story. The inflation-adjusted index surpassed its 2006 peak during the pandemic and continued to climb through May.
Whether the increases are driven by speculation or simple economics, prices are squarely above their housing-bubble highs.
2. Homes are selling with bubble-like intensity
It’s not just price growth that echoes the last housing boom. The ferocity with which homes are selling is unlike any seen since 2008, and possibly the wildest on record.
To start, homes are spending mere weeks on the market when they used to spend months. Median days on the market totaled just 16 through the four weeks that ended August 1, according to real estate website Redfin. That compares to nearly 36 days at the same time in 2020 and about 38 days in the same period of 2019.
And when homes do sell, they’re typically going for more than their listing price. The average sale-to-list ratio in metropolitan areas has been above 1 since late February and currently sits at roughly 1.02, according to Redfin.
Behind both data points are the frenzied bidding wars that have become the new normal. Rapid-fire battles between interested parties have sidelined buyers who don’t have the time or money to compete. That winner-take-all environment only exacerbated the months-long housing crisis, Logan Mohtashami, lead analyst at Housing Wire, told Insider in July.
“Buyers talk about how they can’t win the bid. They make good money, it’s not like they’re struggling. They just don’t make enough money compared to other Americans,” he said. “That’s the frustrating thing. These people just want to buy a home to live in and they can’t win a bid. Housing shouldn’t be like that.”
3. Rents are also spiking higher
Home prices aren’t the only ones surging. Rents have similarly skyrocketed, and the relationship between selling and rent prices is approaching bubble levels.
The nationwide price-to-rent ratio rose just above 1.5 at the peak of the market boom in 2006. That same gauge touched 1.45 in May, and has been on the rise since early 2020.
To be sure, the measure is less concerning when only looking at the top 20 largest markets in the US. The narrower ratio hit 1.7 during its bubble peak, and sat at 1.5 at the end of May.
“We’re getting close to the 2006 peak, but we’re not there yet,” economics blogger Kevin Drum said. “In any case, a price-to-rent ratio this high sure seems kind of bubbly to me, and I wouldn’t be surprised if the big spike starting in 2020 is COVID related, not fundamentals related.”
Some 36 million Americans traded homes in 2020, according to one Zillow estimate. Unmoored by remote work and driven by the desire to be near family or enjoy a lower cost of living, buyers have been snapping up primary residences and second homes, fleeing the coastal cities and flooding states such as Texas and Florida, as well as smaller cities, spacious suburbs, and vacation-home spots.
The mass relocations and purchases – coupled with the reluctance of existing homeowners to find a new place to live during a pandemic – have driven the number of homes for sale down to record lows, which in turn has propelled home prices to new highs. Intense bidding have been commonplace. Institutional investors have even been getting in on the action.
The first signs of a cooling pandemic housing market are arriving: Redfin just found that home sale prices dipped in July – the first time they didn’t set a new record in five months. Even still, prices have much to tumble much further to reach last year’s levels: The four-week average for sale prices in July was 18% higher year-over-year.
We’re still in a housing affordability crisis. It’s difficult to break into the real-estate market. Here are six things to understand in order to decide whether you’re ready to take the plunge into homeownership.
1. There’s a striking imbalance of supply and demand
Competition to buy a home is fierce.
There are more people who want to purchase properties than there are homes on the market. (There are even more real-estate agents in the US than there are homes for sale.)
The tightening housing market is goading prospective buyers into expensive homes that don’t ultimately fit their wants or needs. But for those with cash to spare who are prepared to compromise, now could be a decent time to scoop up a property, especially as prices ease up a touch.
2. Investor activity overcrowds the market, further shrinking inventory
Low mortgage rates and the desire for comfortable work-from-home digs have fueled the home-buying frenzy depleting inventory. The few houses available are selling quickly – and the buyers aren’t always hopeful first-time house hunters. Sometimes it’s a $50 billion private-equity firm.
Large-scale investors, such as Blackstone and Invitation Homes, have been snapping up homes across the country to rent out for a profit, beating out everyday Americans in bidding wars by offering cash and skipping due diligence. In other instances, it’s a company nabbing homes at below-market prices for cash, only to turn around and sell them for tens of thousands more weeks later.
4. Building a new home may not be much of an alternative
While existing listings dwindle – in part because homeowners are reluctant to resell their homes out of fear that they may not be able to afford their next one – a possible solution is to buy land and build a new house.
But the raw materials necessary to construct a new property have gotten exorbitantly expensive amid the pandemic. Logistics and shipping issues have resulted in long waits for certain supplies.
The price of lumber has already bottomed, according to Mace McCain, chief investment officer at Frost Investment Advisors. But he’s not expecting a runaway rebound either.
Instead, McCain sees lumber trading rangebound in the $500 to $600 per thousand board feet range for the next two years, reflecting just 15% upside from current levels over the period.
The relatively sideways trading will be a result of two conflicting forces, according to McCain. First is the ongoing housing shortage in the US, a positive driver for lumber prices that should keep them well above pre-virus levels, no lower than $500.
But McCain also notes that surging home prices are also dissuading buyers and sapping demand, hence the $600 cap on how high lumber can go over the next 24 months. It’s a middle ground he refers to as “equilibrium.”
“We’re out of the panic buying. We’re out of the massive industry shortages. We’re out of the extremes,” he told Insider in an interview. “[Lumber] is reaching a state of equilibrium because housing is reaching a state of equilibrium. We’re going to see a stabilization.”
One outlier scenario McCain sees dragging lumber prices below his stated range would be the Federal Reserve starting to aggressively hike interest rates. But it’s not his base case.
“The main thing that usually will soften a real estate market is when the Fed decides to tighten and interest rates go up,” he told Insider. “I don’t think the Fed is going to be aggressive. I don’t think the Fed is going to do anything to destroy the mortgage market.”
Lumber futures slipped as much as 5% on Wednesday, to $502.30 per thousand board feet. They’re currently 70% below their record high of $1,711 reached in May.
Prior to that record, lumber prices had skyrocketed more than 500% in the 15 months after the COVID-19 outbreak as supply-chain disruptions collided with a renewed acceleration in homebuilder growth.
With the emergence of a more contagious Delta variant, McCain remains optimistic the industry will not see a repeat of what happened in 2020 when most sawmills halted operations amid a pandemic lockdown.
“I don’t think the lumber industry is necessarily going to be shut down,” he said. “I think they’ve learned to cope with it. We’re not going to see barriers to supply.”
US mobility has been down since the Great Recession, according to a recent study by the University of Southern California that looked at local-level mobility in US metro areas from 2010 to 2019. The study analyzed data from the American Community Survey, new housing construction records, and employment growth.
It found that mobility rates were down by one-quarter from the 2000s. Metro areas with higher concentrations of adults in their late 20s and 30s saw less moves, which the study attributed to more competition over fewer homes.
The study looked at mobility data from before the historic housing boom – and resulting affordability crisis – of 2020 and 2021, when widespread remote working unleashed a huge wave of migration. However, the unaffordable conditions facing all these pandemic migrants were a direct result of the mobility-related gridlock from the study.
“Millennials have been moving much less than earlier generations and are said to account for a substantial portion of the overall decline in moving,” the study reads. A lack of regular movement among renters can lead to a housing market gridlock by intensifying competition among potential homebuyers.
This downturn in local mobility and the increasing number of young renters competing for houses amid a shrinking housing inventory, coupled with slow construction, fewer home purchases, and high housing prices, are all fueling today’s housing crisis.
“The failure of home buying due to lack of existing housing stock and soaring prices is diminishing opportunities for renters,” study co-author JungHo Park said in a press release. “The net effect is that would-be buyers who can’t buy are clogging up the rental market, leaving fewer openings where people can move, which is adding to the housing market gridlock.”
Millennials haven’t had the opportunity to move
While millennials are inadvertently playing a role in housing gridlock, it’s largely because of the economic situation they inherited.
Housing was largely an out-of-reach dream for millennials for years. Even before the pandemic, they were struggling to save for a down payment as they grappled with the fallout of the financial crisis and the burden of student debt. This kept them stuck in the renting game, lowering mobility rates in the process
But the generation became more financially stable with age, and millennials reached the peak age for first-time homeownership in 2020. Now, there are more millennials trying to become homeowners than there are houses available. They’re competing over an real estate market already dwindling in supply thanks to a lumber scarcity, the pandemic itself, and an underbuilding of houses since the financial crisis.
There have been 20 times fewer homes built in the past decade than in any decade as far back as the 1960s, Daryl Fairweather, the chief economist at Redfin, previously told Insider. She added that was not enough homes for millennials, who are the biggest generation, to buy.
As she put it, “They’re already boxed out of the housing market.”