How the Cost of Housing Became So Crushing

from New York Times I'm Michael Boro. this is the. [Music]. daily home prices on a tear again over. the past year take a look at this. starter homes hit the $1 million Mark in. 241 cities across the country. frustration over the cost of housing in. the United States we need to build more. housing in America.

young people will once again be able to. afford a mortgage and a home has become. a centerpiece of the presidential race. the Federal Reserve today delivering a. jolt to the US economy the focus of. government policy would be home buyers. now looking for more cuts from the. central bank to potentially ease the. cost of borrowing even more and an. agonizing Nationwide dilemma from San. Francisco to. Kalamazoo but as my colleague Connor.

explains the true origin of the housing. crisis is what now makes it so hard to. [Music]. [Applause]. solve it's Tuesday September. [Music]. 24th so Conor this Story begins with you.

and me sitting across a table at a bar. which sounds like set up to a punchline. but it's true but that's where the Story. begins yes that is where the Story. begins so I live in Los Angeles and I. was in New York visiting and uh maybe. this is a good argument for working in. an office more. often but I had all these meetings with. you know all our bosses about ways in. which we could cover this really.

kind of grinding and metastasizing. housing crisis we have in America and. then I serendipitously ran into you at a. bar below our office and you said. something to me and I can't pretend to. remember everything word for word. obviously and I too don't remember every. word I had a Martini in me but my. question to you yeah was basically why. is it that we talk about a housing. crisis but we never talk about how we.

got to a housing crisis how can it be. that we're living through something so. big and so. widespread and it's in the presidential. campaign and it's in our lives and it's. affecting our bank accounts but I really. can't tell you how it started yeah so I. really took that to heart I loved that. Framing and so I I actually pretty much. from that moment forward was trying to. think of how I could get all of that. into one story so Conor now that you.

have gone off on this assignment that I. had no authorization to give you tell us. the story of what you found about how. this housing crisis actually started so. the way I like to think about it the. sort of metaphor I use is that the. housing market caught a. disease and the disease we caught is the. 2008 financial crisis H so you think. back to that time it was another nervous.

week for the world's financial markets. and on Wall Street banks are being. bailed out stock market is falling apart. in the last 6 months Americans have seen. their investment shrink their property. values plummet and the country Edge. closer towards a recession we're hearing. you know all these complicated things. about mortgage back Securities and all. these things we don't understand but at. the heart of all that is the housing. market home prices keep falling and. foreclosures keep storing all these.

mortgage back Securities were going to. buy and ultimately build tons of new. homes all across America once beautiful. homes now an ugly reminder of the. economic crisis facing many. homeowners right and the images I. remember from this period are these. photographs of winding Las Vegas. Suburban subdivisions filled with houses. that were sitting empty and it seemed in. the middle of his Cris is like there was.

suddenly a glut of housing in the United. States which is why I've never quite. understood how we wound up with a. shortage of. housing right well we were building a. lot of Housing and probably a little bit. more than necessary but then it just all. stopped so what people don't think about. as. much is what this crisis did to home. builders h a ton of smaller home.

builders just went out of business. completely the larger home builders are. laying people off way ratcheting back. how many homes they build a year a lot. of the land that they've earmarked for. future home building is essentially. worthless now and they're selling it for. pennies so what in the end happens is we. go from building about 2.2 million. housing units a year before the crisis. to 600,000 w.

in the depths of the. crisis and if it gone 2.2 million. 600,000 and then 2.2 million next year. wouldn't have been a problem right. bounce right back right yes but that's. not what happened instead every single. year we are hundreds of thousands in. some cases a million units. under what sort of the normal paces and. these are units we need to build every. single year to keep up with population. growth plus just kind of housing falling.

apart it decaying Etc and so once. Builders are in this hole it's really. hard to dig out of because the whole. industry has been redesigned around this. kind of weakened Market their labor. forces the amount of 2x4s they buy the. amount of land they have on hold we have. this new smaller home building industry. that is just not equipped they're simply. no longer capable of building homes on. the scale we need because they've never.

really recovered and so the disease we. caught the 2008 financial crisis becomes. a preexisting condition and it makes the. housing market sick it has left our. patient weakened and in a very hobbled. State and therefore much less capable of. dealing with anything else that might. come its way so the pre-existing. condition at the heart of our current. housing problem in the US.

is the financial crisis inflicting. tremendous trauma on the homebuilding. industry in such a widespread way that. basically it stops functioning in any. normal sense and we start to get into a. hole that over the past two decades. means we're not just short sum housing. but based on the math I'm putting. together from what you just said perhaps. millions of units of housing that should. have been and would have been built if.

the financial crisis hadn't occurred yes. that's exactly the problem and it is. indeed millions of units the estimates. of this say that we are short at least. two three million units oh so there are. many more people who want housing than. there are housing for them and the. industry is not responding to that is. not building enough and so each new. thing that comes is just going to make. the housing market more and more and. more and more expensive got it so let's. talk about some of those things.

Millennials Millennials are now the. largest generational group starting in. the 2010s they're going to make the. housing market boom we see Millennials. entering the housing market in a big way. Millennials are finally moving out of. Mom and Dad's basement cities are the. cool place to live and Builders have yet. to catch up with demand and apartment. rents are just exploding because there's. this huge demand to live in kind of cool. Urban neighborhoods with bars that sort. of thing vacant apartments are getting. multiple offers these days it's a good.

time to be a landlord so they're bidding. up Apartments it's crowded and it's. getting nasty as they start to move into. home buying they are bidding up. entry-level homes more and more people. are living alone over a longer period we. are studying more particularly women we. are marrying later we are also. unfortunately divorcing more we have. seen growth in smaller households. Atlanta Seattle Denver Minneapolis all. all 40% or more of the households have.

just one person you know these are it's. just like a larger period of people's. lives in which they want to live alone. which like Millennials entering the. market makes it more expensive it. increases the demand for housing bidding. wars are back with a vengeance then we. have the pandemic 2020 is expected to. outpace 2019 when it comes to the number. of homes sold and all these people able. to work remotely everybody used to want. an open floor plan now you need multiple.

Zoom rooms sure they some cases want. bigger homes and some cases want to live. in these smaller more remote areas H. this is what we're like desperate for is. just some outdoor space on top of that. you start to have inflation the era of. cheap money and easy money is over then. you have a rise in interest rates. housing has never been more unaffordable. because of where interest rates are at. because of elevated and we're even. talking about zoning which restricts how.

many units can be built in a certain. parcel or airbnbs that basically turn. homes into hotel rooms so all these. other things are out there but they're. hitting a housing market that has been. under building for almost 20. [Music]. years it sounds like any of these. individual factors that you're ticking. through here would be enough to shake. any normal housing market but what.

you're saying is that because the US. housing market is already so sick from. this original pre-existing condition of. the financial crisis each one of these. new factors hits it harder and harder. and makes it basically impossible to. recover. from yeah when I first started covering. this it was most obvious in places that. were already expensive but then it just. spreads year by year across the country.

it goes to smaller cities even rural. areas are starting to have a huge. housing. shortage each new place starts to. contract the disease to take our. metaphor and so there's this big game of. musical chairs happening where people. are moving all around the country in. search of the next cheap housing market. and eventually it gets to the point. where there's nowhere you can run. anymore. [Music].

we'll be right. [Music]. back so Connor this crisis is spreading. affordable places are now becoming. rare and attractive to those with money.

and in turn they're becoming endangered. that's the state of play that's right. and what we start seeing is cities in. Middle America smaller regular cities. places that aren't Finance hubs places. that aren't Tech hubs places that have. been trying to actually attract more. residents and businesses for a long time. suddenly this precious resource they. have affordable housing is exposed and. vulnerable because everyone's CED it.

mhm this is Kazo. Michigan a diverse city of over 70,000. neighbors and it even comes to cities. like kalamazo Michigan which is a place. no one expected the housing crisis to. strike cazo has a lot of the amenities. of a large town but yet retains the. small town charm we got affordable. housing few traffic headaches and very. friendly people it's sort of between. Detroit and Chicago but it is absolutely.

not either of those. places you know it's Urban but then it's. natural it's a small town with really. big town attractions it's got so much to. offer for a town its size it's a pretty. blue collar town you know if you make. $100,000 or even less you can have a. very comfortable life there and Camu is. getting some great attention it was. ranked the coolest place to live with. the lowest cost of living in the entire. country how about that go cazoo yeah. quite the honor. it's a place where money goes a lot.

further and so it's much more. comfortable to be a middle-income family. there you can have a bigger house you. can do more things people discover our. community and they might think me this. would be a great place to live this. would be a great place to work this. would be a great place to raise a family. a lot of the people there think of that. affordability is almost like a condition. of the place it's it's like winter it's. something that kalamazo has right fact. of life yeah it's a fact of life until. everything we're talking about comes to.

kalamazo and Connor I'm familiar with. what the housing shortage and its impact. look like in coastal cities because I. live in one of them but what is it look. like when all of this arrives at the. doorstep of a place like Kalamazoo well. I mean the most obvious first thing you. see is prices exploding home prices go. up about 40% since the pandemic rents go. up about 50% W so all of a sudden.

anybody looking for housing finds that. it's way more. expensive and of course at first that. affects people with the least money. they've got the least room in their. budget so you start to see homelessness. or people living at a hotels that sort. of thing M but it moves up the income. ladder because the shortage gets worse. and worse and worse and the competition. gets more and more Fierce and people who. were having no problem affording housing. are all of a sudden getting overwhelmed. by this problem H recorder on if that's.

okay sure um I'm Connor what his name. I'm Barb Tech at Denny and I met a woman. going through exactly this her name's. Barbara Tad Denny she goes by Barb and. Barb how old are you I'm I'm 67 okay and. are you retired or what do you do um I. do home health so I take care of. somebody older than. me she works as a home health aid and. her husband works in a factory together. they make about $65,000 a year which in.

kalamazo is solidly middle class and the. reason it's solidly middle class is that. they can find an affordable place so for. 10 years they lived in a duplex um it. was two bedrooms one bathroom living. room dining room the house is about a. hundred years old and their rent was. only $630 a month we used to go out to. eat Barb told me that you know she felt. generally fine they even saved a little.

bit now this was not a fancy place in. the 10 years that we've been there he's. done no major overhauls nothing I ask. him for carpet every year the carpet was. sort of Ratty not very nice it had knob. and tube electrical if I run my. microwave and he happens to plug in. something upstairs it'll blow the fuse. she had to sort of coordinate with the. neighbor over over who was going to use.

the microwave or other appliances when. because the fuses would blow if they. both used them but it was affordable for. them and it made it so that their income. went a long way so economists and. housing wonks refer to this as naturally. occurring affordable housing which is. the euphemism for kind of a crappy place. down on its heels old it's a place. that's affordable for an obvious. reason that is a huge piece of our. affordable housing puzzle in America.

sort of older housing that gives people. a way to make their money go a little. bit further right so they're living. there and everything's pretty good. that's their. situation until their landlord decides. to sell and that's something that. happens in a hot Market the landlord has. had this place where the price of it. hasn't changed much in a long time and. all of a sudden he can get all this. money for the. kind of Ratty duplex right much more.

than he ever thought so they all of a. sudden have to go looking for a new. place and they are just now in this. market that they almost didn't know. existed and lots of other landlords have. sold their ratty duplexes and investors. have moved in and families have moved in. and they're fixing them up and the home. prices are going up the rents are going. up and just everything is becoming more. expensive they eventually land in a. manufactured home but it costs about.

$1600 a month and their whole entire. budget has just been. nuked what has been your lifestyle. adjustment I mean that's ,000 more. dollars a month well we've had to cut. back on everything they were never. wealthy right but money has gone from. something they didn't stress out about. over every single Bill to all we think. about is every. penny it just kind of sucks mhm you know.

as much money as what he makes and as. hard as what we both. work and to. think can we really afford. this you know. it's like why am I working so. hard and if you just zoom out you can. find someone like Barb basically. anywhere in America right now you know. the census just put out a report that. said about half of all renters are cost.

burdened right now which means they. spend more than a third of their income. on rent and a good amount of that group. spends more than half so there are. people all over this country now who. they basically work to survive they work. to pay for rent they work to pay for. housing and I think what people need to. realize is that at a moment when people. are really mad about inflation when the. presidential campaign is all about. how can we reduce prices on middle class.

Americans yeah grocery bills are up and. the cost of milk and cheese and bacon. and all these things are up but really. at the heart of that inflation pain is. the cost of housing. H so given just how widespread this. problem has become how much Financial. pain it's causing to people like Barb. just a sweep of it you know from San. Francisco to kalamazo how does the US. really start to pull itself out of a. situation how does it treat this sick.

patient what feels very clear to me here. is that any kind of a half measure isn't. going to cut it for example lowering the. interest rate as the Federal Reserve did. a few days ago something anxiously. awaited by anyone trying to buy a house. that seems like a nice thing to do but. it's not going to solve our housing. shortage no absolutely it will not and. it could even make things worse because. things like lowering the interest rates. might increase the demand but they don't. really increase the supply right so it. would seem like the answer has to.

require us to go back to that original. problem and basically just go on a. massive building spree and how do you. even start to undertake that yes so you. hit the nail on the head which is I. guess a good building metaphor right so. we need a building boom and some outside. force is going to have to push the. industry to build way more housing than. is currently capable of or even wants to.

right and that outside force is almost. certainly going to be the public sector. State local and ultimately the federal. governments and the reason is is that. the entire model is now so upside down. that it's often more expensive to build. a house it costs too much in land too. much in 2x4s too much in labor that a. builder can't even make money for a. price that a middle class person could. afford to buy it for so what do they do.

they build much higher end homes and. what happens is this kind of idea of the. middle class starter home essentially. starts to go extinct right Builders can. more easily make a profit catering to. the rich and that's what a lot of them. do you just said that it's going to take. the government to push Builders to build. what we actually need them to build. which is a whole lot of affordable and. middle-income housing so what kind of. tools does the government have at its. disposal to accomplish that everywhere.

you go in America you're going to hear a. lot of different programs but they're. really going to only do one of two. things you're either going to make it. way easier to build or you're going to. spend money doing it so the first one is. reducing regulatory barriers like zoning. restrictions to say how many units can. be on an acre or environmental rules. that kind of stretch out the timeline. for how long it takes to get building. there are design rules there's a million. little rules for how you build and you. can either get rid of them or reduce. them and that makes building easier.

faster and less expensive the second. thing you could do is put money into it. the government could build the housing. on its own in some cases or it can just. give subsidies in the form of tax breaks. or even direct subsidies to developers. who typically then are asked to make the. housing more affordable in some. way and I actually saw a really. interesting version of that in Kazo. so one thing the state of Michigan is.

doing is trying to incentivize Builders. to just do more and they've done this by. expanding subsidies to Developers for. pretty much any housing that's built and. they've added additional subsidies for. housing that's really targeted at the. middle class Kalamazoo though went even. further people in the county recently. voted to create a housing fund that. allows them to subsidize all kinds of. different housing projects. everything from basically homeless.

shelters to middle class housing they. even rais the level of what income is. eligible now for subsidized housing in. kalamazo it used to be that you had to. have a household income of under. $80,000 now you can make all the way up. to about $120,000 a year to qualify for. housing aid or subsidized housing and so. what's happening is they're really. changing how they think about housing. aid it's gone from something we think of. as traditionally being aimed at lower.

income families and households to. basically most people can qualify for. housing subsidies now H but what you're. describing so far. feels mostly like useful But ultimately. local and scattershot efforts here and. so some communities are going to get. their act together come up with these. subsidies others perhaps are not is. there any compelling. National program underway to address.

this housing shortage I know that both. KLA Harris and Donald Trump do make. housing a pretty big focus of their. policy proposals so there's no plan I. have heard that sounds like it's really. compelling or some Panacea right but. what I have heard is what you just said. presidential candidates repeatedly. talking about this K La Harris for. instance has a plan that aims to. subsidize Builders who build and level. homes starter homes as they're called.

and also to subsidize the buyers who. would buy homes like that Donald Trump. has talked about reducing regulations on. housing but really if you cut through it. they both sort of describe this as a. crisis of too little and I think that is. a sign of progress I know that their. Solutions such as they are are radically. different but they recognize that there. is some problem of not enough housing. and I think that in a polarized Society.

anytime you see an area of agreement. even if all the agreement is is what the. problem is that is I would say a. positive sign but a positive sign is not. a bricks and mortar plan to build. millions of new housing units so in your. mind how long is it going to take for. the United States to solve this problem. and how optimistic are you that the us. is going to get its act together and act. figure this out tough question you know.

we began this conversation saying took. us almost 20 years to get here right so. it's kind of fool hearty to think you're. going to get out of it right away I. don't know that it'll take us another 20. to get out of it but you need to have. many years probably 10 years of. sustained focused effort but look we've. done this before after the Great. Depression there was a huge housing.

crunch there were ads for people to live. in chicken CPS there was even famously. an ad for someone selling an ice box as. a sort of studio apartment wow but after. World War II ended there was a massive. building boom single family housing. starts in this country went from about. 100,000 in 1944 to about 1.7 million. just 6 years later so this can be done. what's happening in the middle there is. this massive increase increase in. investment from the government things.

like the GI Bill things like lending. programs there is a. fullon national effort to build housing. to create really the modern middle class. and the modern suburbs right I'm not. saying it's going to happen exactly like. that this time it's just worth noting. that when you put your focus on an issue. really really really big things can. happen but then again we are not the. United States of 1950 any anymore there. is no political consensus on almost.

anything and there's always when it. comes to the government intervening and. spending money suspicion and sometimes. anger over why is somebody else getting. something a handout that I'm not getting. and so how do you think about that so I. think that the weakest argument against. the government doing this is that it's. pushing us in a New Direction a newly. subsidized housing market because this. has always been how it has been pretty.

much the entire housing market is. subsidized in some way from the 30-year. fixed mortgage that you think banks give. you out of the goodness of their heart. to huge tax breaks that people get for. their mortgage interests Etc the federal. government has its financial heft and. power into pretty much the entire. housing market and really on a more. abstract level You could argue that. pretty much all of land is to some. extent subsidized I mean think about. homes that are near public transit homes.

that are near schools yes homes that are. near a really great Public School System. some of the most expensive homes in. America so the idea that people you know. work really hard and acquire homes. through their own grd I mean yes people. do work hard and yes you do have to save. up for a down payment but the entire. real estate market is subsidized to some. degree and really the question is who do. we subsidize and to what extent fair. question and to bring us back to where. we started this conversation from what.

you're saying this sick patient of a US. housing market now needs the. government's help and the government has. been subsidizing the housing market when. it wasn't sick in all kinds of ways for. a very long time and so there's a. reasonably compelling case for the. government to intervene now meaningfully. and broadly when the crisis the patient. is in a very acute.

situation yes but it's going to require. the kind of concentration and focus that. governments frankly aren't that used to. putting in but the reason I think that. they can and ultimately will solve this. is that it's not going. away there are certain problems like say. the federal deficit or uh a natural. disaster that that rear their head and. seem really acute but then they kind of.

fade away from memory this is not going. to fade away the housing crisis we have. right now is going to be worse next year. I don't care what happens with interest. rates it's going to be worse next year. it will probably be worse the year after. that and so at some. point the size of the problem and the. fact that it is not going away is going. to create the conditions for that. focused effort. [Music].

well Connor Thank you very much you're. [Music]. welcome we'll be right. back here's what else you need to. another day.

on Monday Israel inched toward allout. war with Hezbollah launching air strikes. on more than 1,300 targets inside. Lebanon that killed nearly 500 people. according to Lebanese Health. officials it was the deadliest day in. Lebanon since 2006 when Israel last. fought a war with Hezbollah the Irani. backed group that the United States has.

classified as a terrorist. [Music]. organization in response Hezbollah. launched its own barrage of about 165. Rockets into Israeli territory according. to Israel Hezbollah has been firing. rockets and drones from Lebanon into. Israel since last October in support of. Hamas prompting Israeli. counterattacks I have a message for for. the people of Lebanon Israel's war is.

not with you it's with healah for too. longal has been using you as human. shields on Monday amid its air strikes. Israel explicitly warned the people of. Lebanon to evacuate areas where. Hezbollah stores its weapons don't. letala endanger your lives and the lives. of your loved ones don't letala endanger. [Music]. Lebanon to today's episode was produced. by Alex Stern Olivia Nat and Claire.

tennis gutter it was edited by Liz o. Balin and Lisa Chow contains original. music by Pat mccusker Marian Lozano. Rowan nisto will Reed Dan Pow and Diane. Wong and was engineered by Chris Wood. our theme music is by Jim brunberg and. ven lansberg of wonderly. [Music].

that's it for the daily I'm Michael. borro see you tomorrow.