We are watching the sunset of our historical and cultural American dream of home ownership as we now are crossing over what was a welcome mat of opportunity to a lifetime of indentured tenancy for many citizens. Pride in homeownership and economic independence have always been deeply ingrained in the American culture, symbolizing financial stability, security, and a sense of belonging. However, many modern socioeconomic factors have made homeownership more fleeting, distant, and, for many, more impossible than ever.
1. Economic Hurdles: The soaring cost of real estate and inflationary factors. Rapidly escalating property values and low wage growth have created a vast and insurmountable affordability gap. The rising cost of living, student loan debt burdens, and increasing income inequality compound the economic challenges, leaving many aspiring homeowners needing more ability to accumulate the necessary funds for a down payment.
2. Mortgage Market Complexities: The intricacies of the mortgage market present another formidable barrier to homeownership. Stringent lending criteria and rising credit score requirements, amongst other factors, exclude a considerable portion of the population from securing a mortgage. Variable interest rates in the changing market are difficult to predict and add a layer of uncertainty, making it challenging for potential buyers to plan and budget effectively.
3. Urbanization and Housing Supply: The trend toward urbanization has increased housing demand in metropolitan areas. The current housing supply has triggered a surge in property prices. This imbalance between supply and demand has disproportionately impacted first-time homebuyers, pushing them further away from achieving homeownership and forcing some to relocate out of state.
4. Wall Street and Investment corporations: Corporate investment funds have capitalized on this shift by turning residential properties into lucrative commodities. Large-scale investors swoop in, buying vast quantities of homes and converting them into rental properties. This concentration of ownership leads to an enlarging of a rental market where individuals have limited competitive purchase or bargaining power and, as a result, find themselves subject to the whims of distant landlords more concerned with profit margins than the well-being of their tenants.
This trend draws disturbing parallels to a new indentured servitude controlled and manipulated by Wall Street and investment corporations. In the past, indentured servitude involved individuals bound to a specific employer under contractual obligations for a set period. In the modern context, the metaphorical shackles are financial, with Americans being tethered to landlords and large corporations. The opportunities of homeownership have, in a growing number of cases, transformed into converted ownership of shares and investment pools. This distorts and manipulates the original core of American values and capitalism, leaving the ordinary working man and middle class with few options for achieving housing ownership and independence.
Economists have named this trend “neo-feudalism.” A core characteristic is that the masses no longer “own” assets (real property and other assets) but rather “rent” them. This is apparent when neo-feudal sovereigns are those who, while not kings or emperors, still hold an equivalent power in a modern sense (large Corporations and Ultra-Wealthy Individuals) and largely monopolize the marketplace.
This disturbing trend of monopolizing and controlling investment in the housing market must be taxed and regulated reasonably to help provide equal opportunities for aspiring homeowners. But this is just a part of the big picture.
5. Socioeconomic Disparities: Historically, socioeconomic disparities have played a pivotal role in shaping the landscape of homeownership. Historical injustices, such as redlining and discriminatory lending practices, have perpetuated disparities in wealth and homeownership rates among different racial and ethnic groups. Wage growth is not even remotely near home pricing growth, so the widening gap in living wages exacerbates the issue.
6. Purchasing Ability: It is not only the housing supply that affects pricing but, in many cases, is connected with individual purchasing ability. For example, large lender-required down payments are being supplied by either family members who have accumulated savings or have refinanced the equity in their homes, making it possible for a particular segment of the populace to “afford” housing despite the pricing. This is another factor that supports an increase in home prices, which also reflects a movement towards gentrification by new, wealthier residents.
Focusing on housing affordability, pricing, and availability alone will not solve income inequality. While affordable housing initiatives sound good on the surface and can help, our society, to function in socioeconomic balance, needs to address the root causes of income inequality and the cost of living, such as corporate and Wall Street greed focused on profitability above all else as their inalienable right; also the impacts of increasing costs and burdens for smaller family-run businesses that are unable to compete effectively, thereby reducing local family spendable income.
7. Policy Implications: Government policies profoundly impact the housing market. Reforms in zoning regulations, tax incentives (or disincentives, as the case may be), and affordable housing initiatives are necessary to create an environment that fosters homeownership for a broader spectrum of the population. Local, State, and Federal governments must work together to create a fair and balanced home act, providing affordable rental housing and options for homeownership opportunities. This also requires a locally coordinated, multi-faceted approach that promotes equitable access to a wider variety of housing opportunities for those who own a home in their community.
In a recent analysis by the National Association of Realtors, the median age of American homebuyers has reached a new high of 49 years, marking a significant shift from 1981 when the average age of a homebuyer was just 29 years old. This upward trend reflects the mounting challenges younger generations face, including escalating college expenses, increased cost of living, and unstable job markets.
Particularly striking is the shift in the age of first-time buyers, now averaging 35 years, an increase from 31 years in 2013 and 29 in 1981. The National Association of Realtors attributes this change to stricter credit conditions and a limited housing inventory, which has, in turn, been a contributing factor driving up the prices of homes.
Here is a dismal factoid of how Santa Monica stacks up in the US: The current US homeownership rate is 66%, and California has the second lowest ownership rate, 55.3% (only NY is lower than us at 53.9%). Homeownership in Santa Monica, meanwhile, is a pitiful 28.9%, or less than half the national average.
In conclusion, once attainable for a broad cross-section of society, the American Dream of homeownership has become an elusive goal for many. Economic challenges, complexities in the mortgage market, urbanization pressures, socioeconomic disparities, and policy shortcomings collectively contribute to the formidable obstacles that individuals face in realizing this dream. Addressing these challenges requires a comprehensive and collaborative effort from policymakers, industry stakeholders, and the broader community to create a more inclusive and accessible path to homeownership in the 21st century.
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By Michael Jolly
S.M.a.r.t Santa Monica Architects for a Responsible Tomorrow
Thane Roberts, Architect; Mario Fonda-Bonardi AIA; Robert H. Taylor AIA, Architect; Dan Jansenson, Architect & Building and Fire-Life Safety Commission; Samuel Tolkin Architect & Planning Commissioner; Michael Jolly AIR-CRE, Marie Standing; Jack Hillbrand AIA
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