March 2, 2024 Breaking News, Latest News, and Videos

S.M.a.r.t Column: The Sunset of Home Ownership

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. 

Send comments to santamonicasmart@gmail.com 

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 

For previous articles, see https://santamonicaarch.wordpress.com/writings/

in Opinion
Related Posts

S.M.a.r.t Column: Gelson’s Looms Large

February 22, 2024

February 22, 2024

Our guest column this week is by SMCLC (the Santa Monica Coalition for a Livable City). SMCLC is a well-established...

S.M.a.r.t Column: Top Toady Town

February 18, 2024

February 18, 2024

Throughout history, from the ancient Romans and Assyrians to Russia’s ongoing invasion of Ukraine, siege warfare has served as an...

SMa.r.t. Column: B(U)Y RIGHT

February 4, 2024

February 4, 2024

“By Right” state housing laws that give developers, in certain projects, the ability to ignore codes ‘by right.’ Well, that...

S.M.a.r.t  Column: Serf City

January 28, 2024

January 28, 2024

Homelessness is a problem in California, and nowhere is this more evident than in our fair city, where the unhoused...

S.M.a.r.t  Column: Bond Fatigue

January 22, 2024

January 22, 2024

Last week’s SMart article,  described two critical problems faced by our Santa Monica Malibu Unified School District (SMMUSD): the declining...

S.M.a.r.t Column: Peace on Earth

December 27, 2023

December 27, 2023

We are all, by now, saturated with jingles, holiday cards, “ho ho ho’s,” countless commercial advertisements, and exhortations to feel...

S.M.a.r.t Column: On the Clock with Mayor Brock

December 17, 2023

December 17, 2023

I became Santa Monica’s Mayor on Tuesday, December 12, 2023, following a simple “switch of the chairs” transition with outgoing...

S.M.a.r.t Column: SANTA MONICA CITY COUNCIL 2024

December 10, 2023

December 10, 2023

Position:Seeking Santa Monica City Council Candidate(s) Introduction:Exciting opportunity for the right candidate(s) to work with like-minded Council members committed to...

S.M.a.r.t Column: ARB (NOT Ready to Build!)

December 3, 2023

December 3, 2023

Santa Monica City’s Architectural Review Board (ARB), established in 1974, acts “…to preserve existing areas of natural beauty, cultural importance...

SMa.r.t. Column: We are thankful for….

November 27, 2023

November 27, 2023

SMa.r.t. would like to wish you all a great Thanksgiving with friends and family and also to thank its readers...

S.M.a.r.t Column: Make the City New Again

November 19, 2023

November 19, 2023

When the COVID crisis struck, it cut the city’s income in half, demolishing many businesses and causing widespread layoffs and...

S.M.a.r.t Column: Four Futures

October 29, 2023

October 29, 2023

As well described by Paul Krugman, all cities have a core competency: things they do well or better regionally or...

SMa.r.t column: Beautiful Quartz Countertops Are Hurting Workers and Should Be Banned

October 9, 2023

October 9, 2023

Quartz countertops are super popular because they’re tough and can handle stains, scratches, and heat. But there’s a big problem:...

S.M.a.r.t Column: Architect’s Son Reflects On Civic Auditorium

October 2, 2023

October 2, 2023

Welton (David) Becket (1902-1969), pictured above, backed by a picture of our Civic Auditorium, was the designer of that famed...

S.M.a.r.t Column: Civic Center Debate

September 24, 2023

September 24, 2023

Civic Center Debate Last year, the City declared the Civic Center Auditorium surplus property after a decade of neglect and...