Sunday, January 9, 2022

The Asset Economy

As they say on the interweb, "I'm old enough to remember" when homelessness became a visible problem in the U.S. in the 1980s. I lived in Washington, D.C., at the time and it seemed to come out of nowhere. Some of that was my naïveté and some of it was because it was truly new.

I've heard various reasons for that sudden change, related to the elimination of single-room-occupancy buildings and the mainstreaming of people from mental institutions without proper support (coinciding with the bootstrap-happy Reagan era), and those obviously were part of the immediate problem.

But as it has worsened over the decades since and affected all sorts of people who don't fit that "profile" of single men with who used to live in SROs, we know there are other reasons. A recent Twitter thread by Ned Resnikoff, the policy manager at UC San Francisco's Benioff Homelessness and Housing Initiative and a former analyst for the California legislature, put together an argument and reasons that I think are pretty coherent.

Here's his full thread, and my brief condensation.

At base, Resnikoff attributes the problem to the rise of the "asset economy" since the late 1970s. To curb inflation, the logic went, rising wages had to be stopped, and so people were encouraged to look to an increase in the value of their homes (their main asset) to compensate.

This is a classic Ponzi scheme, in the sense that the early joiners could do well by it, but the later ones would get screwed. You (as a home-buyer) will need more and more money to buy a house, but incomes have stayed relatively flat. In the meantime, rents are affected as well, since they exist in the same market.

Unfortunately, while this system is unstable and socially destructive in the long run, it is very effective at building a political constituency in the medium term.  

Home-owners in this political constituency are often the people (referred to by their opponents as "NIMBYs") who prevent more housing from being built because it will change the "neighborhood character" or who fight to maintain single-family zoning or half-acre (or larger!) lot-size requirements. Elected reps know that home-owners are a high-turnout constituency and the reps are usually from that constituency themselves, while renters and younger people who want to buy houses are lower turnout voters, as well as being more mobile from district to district.

Resnikoff's Twitter thread was based on a post he wrote for the Benioff Initiative's blog, so if you want to read an expanded version of the thread, check that out (it's good). It's his discussion of a book called The Asset Economy by Australians Lisa Adkins, Melinda Cooper, and Martijn Konings

This quote is from Resnikoff's blog post:

...a supermajority of Americans have a significant financial stake in the asset economy; for many of them, their financial health and the security of their families depends on rapid, perpetual asset appreciation. This means that many of the policy levers we could use to reduce the overall cost of housing (or even slow the growth of housing costs) would run directly counter to the economic interests of the largest and most powerful voting bloc in the asset-based class system. Furthermore, most of the people within that bloc are not part of the “one percent” by any reasonable definition; they are part of the generation that was granted easier access to the asset economy as compensation for stagnating wages.

Young people who want to buy homes in many markets are more and more shut out of buying, unless they have intergenerational wealth to rely on. Add to that, the new competition from corporate buyers of single-family homes, who then rent the houses.

Resnikoff does not suggest solutions in his thread or blog post. His final sentences are this:

The asset economy is based on a fundamental contradiction: Broad-based homeownership combined with rapidly inflating housing costs. These two elements cannot coexist forever. Something is going to break.


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