Fixer-Upper Chapter 5: Homeownership Should Be Only One Component of Household Wealth

“For most middle-income Americans, the equity accumulated in their homes is the largest single source of wealth. Homeownership has been marketed as a cornerstone of the American lifestyle, as a source of both individual wealth-building and community stability. But there are substantial downsides – for families and for the nation – to relying on homeownership as the primary strategy for accumulating wealth.”

Key takeaways are:

  • A more balanced approach to wealth-building would reconfigure homeownership subsidies to better target first-time homeowners in addition to encouraging other short-term and long-term wealth building strategies.
  • The most common approach to financing homes in the US – a fully amortizing, thirty-year fixed-rate mortgage, is a great forced savings mechanism that is one of the most effective ways to combat short-term spending and build wealth over time.
  • On the other hand homeownership violates a key rule of finance: diversification. Putting all one’s eggs in one basket is risky, especially since housing prices are not guaranteed (witness the aftermath of the Great Recession).
  • Another drawback to homeownership is that it is illiquid, so it is difficult to convert your house into cash if you need to.
  • Homeownership is at the root of the racial wealth gap. Despite the Fair Housing Act (FHA) passing in 1968 and allowing explicit racial discrimination in housing, we are still seeing the inequity that traces its roots back to the redlining and discriminatory lending that preceded it.
  • Homevoters contribute to toxic politics. NIMBY-ism is in part a product of people wanting to protect their most valuable asset, so they turn out in droves to fight anything that might threaten it.

Proposed Solutions:

  • Redesign homeownership subsidies to be more effective and more equitable
    • Page 92-93 of the book offer some background on proposals that would move incentives away from the current Mortgage Interest Deduction (MID) structure to something that would more effectively enable moderate- and middle-income renters to buy their first home.
  • Help all households build short-term liquidity through matched savings accounts. Think 401(k) but for but for building savings; could included matches from employers and could be eligible for preferred tax treatment. Much like MID this would be an incentivized forced-savings product that helps fight the human tendency to spend now.
  • Address the racial wealth gap through individual and child development accounts. Similar to the 401(k) idea, but instead of an employer match these could possibly have the Federal government providing a match through a subsidy, and it would be on a sliding scale so that the lower the income of the family the higher the potential subsidy level.

I definitely recommend buying the book so you can get the full benefit of Schuetz’s full analysis of the challenge and detailed solution proposals. You can buy it here.

Link to Chapter 1 of Fixer-Upper post.

Link to Chapter 2 of Fixer-Upper post.

Link to Chapter 3 of Fixer-Upper post.

Link to Chapter 4 of Fixer-Upper post.

Link to main Fixer-Upper post.

Fixer-Upper Chapter 4: Give Poor People Money

“Housing is the largest single budget item for most low- and moderate-income families. Keeping a roof over one’s head is just as important as being able to buy food and receive health care. Yet, in contrast to food stamps and Medicaid, housing assistance for low-income households is not an entitlement. Rather, Congress allocates a pot of funds (really, several different pots) that can be distributed to households until the money runs out. About one in four eligible low-income households receives federal housing assistance at any given time. Many poor households who qualify for benefits will never receive them because the queue ahead of them is too long.”

Key takeaways are:

  • Poor families face a gap between their incomes and housing costs.
  • Renters spending a large share of their monthly income on housing are at high risk of housing instability and displacement.
  • A common strategy to stretch a tight housing budget is to double-up, or share one house or apartment with multiple families.
  • Another strategy is to live in unregulated informal housing.
  • Many with limited housing budgets live in poor quality housing, sometimes below minimum housing standards.
  • Lack of decent and stable housing doesn’t just harm poor families. Overcrowding can affect public health – perfectly illustrated during the COVID-19 pandemic. It also impedes childhood development.

Proposed Solutions:

  • To address the problem of low incomes, give poor people more money. Questions that need to be answered: Which level of government should provide funding? How much money should each person or family receive? Can the program be designed to minimize unintended consequences, like reducing people’s incentive to work or encouraging landlords to raise rents?
    • Tax policies are one area the federal government already uses to supplement income, like the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC). A significant disadvantage of these is that they are an annual occurrence while rent is due on a monthly basis.
    • Raising the federal minimum wage would likely make it easier for some low-income families to pay for housing, but it would be a less precisely targeted mechanism, even if there were no off-setting job losses.
    • One approach that has been tested in some localities is universal basic income (UBI). There hasn’t been a large-scale UBI tested in the US, and one challenge would be incorporating geographic differences in the program.
  • Better functioning, more flexible housing markets are necessary but not sufficient
    • Three types of regulatory reforms would be particularly helpful to low- and moderate-income households: Relax zoning restrictions on housing density; rethink building codes that require full kitchens and separate bathrooms for every household; remove regulatory barriers to manufactured and modular housing.
    • Fix the HUD’s housing voucher program. Recent research has indicated that a variety of technical fixes could increase landlords’ acceptance.
  • Market-based approaches won’t solve housing problems for everyone.
    • Private LIHTC developments are popular with both Democrats and Republicans, but construction subsidies are more expensive than vouchers (in California developing new LIHTC projects costs $480,000 per unit), and thus the impact is limited.
    • The clearest case to be made for public or nonprofit ownership of subsidized properties is that some people require more than just an apartment and a voucher to remain safely housed. People with chronic mental or physical health problems need supportive services.
    • In addition to supportive housing some local housing markets will probably always require non-privately owned housing because of the deficit of available housing, and the privately-owned housing is prohibitively expensive. These are markets like New York and San Francisco.
  • Vulnerable renters need consistent legal protection.
    • Landlord-tenant laws are adopted at the state level, so there is wide variation in legal protections. Most other developed countries regulate leases at the federal level, which provides greater consistency and transparency.
    • Laws that make it very difficult for landlords to remove problematic tenants have the potential to backfire, encouraging landlords to screen out perceived less desirable renters up front.
    • Overly strong tenant protections can deter property owners from becoming landlords, leading to a smaller rental housing stock.

I definitely recommend buying the book so you can get the full benefit of Schuetz’s full analysis of the challenge and detailed solution proposals. You can buy it here.

Link to Chapter 1 of Fixer-Upper post.

Link to Chapter 2 of Fixer-Upper post.

Link to Chapter 3 of Fixer-Upper post.

Link to Chapter 5 of Fixer-Upper post.

Link to main Fixer-Upper post.

Fixer-Upper Chapter 3: Stop Building Homes in the Wrong Places

“The United States continues to build – and rebuild – too many homes in the wrong places, environmentally speaking. Since the 1950s, most new housing in the United States has been build in low-density suburbs, far from downtown job clusters and public transportation. Single-family homes – the predominant structure type in suburban areas – have a larger carbon footprint than apartment buildings.” This excerpt gives you a good indication of what this chapter focuses on.

Key takeaways are:

  • One “wrong” place to build a home is a long distance from places of work.
  • Large homes in car-dependent suburbs create large environmental footprints.
  • While transportation contributes to each individual’s footprint (Schuetz notes that that the majority of commuters drive, and drive alone), so does the energy they consume in their homes. Larger homes require more energy for heating and cooling, kitchens in a 3,000 SF single family home have more electronic items than an apartment, etc.
  • A second “wrong” place to build housing is anywhere that there are increased risks of recurring damage from the climate, and consequently those places are impacted by climate change. Flood zones, low-lying coastal areas, areas prone to wildfire, areas prone to hurricanes, etc.
  • Burdens of climate change fall heavily on low-income, black and brown communities.

Proposed Solutions:

  • Homes in high-risk locations should be more expensive for buyers, not taxpayers. One idea – Fannie Mae and Freddie Mac could continue securitizing loans in high-risk areas, but incorporate climate risk into prices through higher interest rates, lower loan-to-value ratios, or other fees.
  • Climate insurance and disaster recovery programs should discourage risk and mitigate racial disparities. In addition to assessing the National Flood Insurance Program, the government needs to look at funding levels for the Community Development Block Grant – Disaster Recovery (CDBG-DR) and FEMA’s Hazard Mitigation Grant Program. Those programs provide funds for homeowners to sell flood-damaged or high-risk properties in order to relocate to safer locations, and prohibits future rebuilding on properties acquired through the programs.
  • Tax driving and legalize climate-friendly land use.
  • Climate-friendly suburbs need to integrate housing, land use, and transportation.

I definitely recommend buying the book so you can get the full benefit of Schuetz’s full analysis of the challenge and detailed solution proposals. You can buy it here.

Link to Chapter 1 of Fixer-Upper post.

Link to Chapter 2 of Fixer-Upper post.

Link to Chapter 4 of Fixer-Upper post.

Link to main Fixer-Upper post.

Fixer-Upper Chapter 2: Build More Homes Where People Want to Live

The chapter’s title is entirely descriptive of its contents. Key takeaways are:

  • Land is more expensive in places where people want to live
  • To make housing in desirable locations more affordable, use less land per home. Schuetz uses an example from Wellesley, MA to make the point. A typical residential lot costs $850,000. A single-family home would cost $1.2 million to build, so all-in it would cost $2 million. On the same lot five side-by-side townhouses would be $800,000/unit and a four-story multifamily building with 11 condos would be $500,000.
  • Local governments exercise tight control over how much housing can be built and where. Schuetz makes the very important point that the way that local governments regulate housing supply has social and economic costs, and those costs are borne more heavily by younger, lower-income, and nonwhite households. This is done largely by zoning the majority of housing for single family detached homes, and prohibiting higher-density housing options like townhomes, duplexes, condos, etc.
  • Measuring “excessively strict” zoning is difficult. If state and federal governments want to incentivize less restrictive zoning, it will be essential for them to develop accurate, fair, transparent metrics.
  • Exclusionary zoning exists everywhere, but it creates the most damage in large coastal metros. My note here: as some who works on housing related issues in a non-coastal, smaller metro area in North Carolina, I can tell you that exclusionary zoning practices have had a significant impact here as well. That’s because the area is growing increasingly rapidly in population, but housing production has not kept up. The current regulatory environment is hampering development and the growing supply-demand gap is reflected in skyrocketing housing costs, including rent – not just homeownership.
  • Not building homes in the right places has economic, environmental and human costs.

In this chapter, and subsequent chapters, Schuetz offers solutions. To address the issue of building homes where people want to live she says policy solutions need to address two separate sets of questions: “First, what do better land use policies and better housing incomes look like? Second, what kind of fiscal, legal, or political levers could be used to nudge local governments to adopt better policies?” In this chapter she addresses the first question, and she addresses the second in chapters 6,7, and 8.

To begin she says that “there are two clear principles for better land use policies, but many variations in implementation. First principle that each jurisdiction should allow a diverse range of residential structure types and home sizes. Second, the development process should be simpler, shorter, and more transparent.”

Her other primary point is that “localities should target better housing outcomes, not just better policies on paper.” Here she offers a great thought:

“Defining better outcomes and setting concrete benchmarks would help local governments, housing advocates, and potentially state and federal agencies to measure progress. Mayors and county supervisors often run for office promising vague or unrealistic improvements (“ending homelessness” or “making housing more affordable”), but campaign statements are rarely helpful in measuring day-to-day improvements.”

I definitely recommend buying the book so you can get the full benefit of Schuetz’s full analysis of the challenge and detailed solution proposals. You can buy it here.

Link to Chapter 1 of Fixer-Upper post.

Link to Chapter 3 of Fixer-Upper post.

Link to Chapter 4 of Fixer-Upper post.

Link to Chapter 5 of Fixer-Upper post.

Link to main Fixer-Upper post.

Short, Medium, Long Term

Last week (June 20-24, 2022) was a doozy in the U.S. Any other time the US House of Representatives’ January 6 hearings would have dominated the news cycle, but then you had a couple of Supreme Court rulings that rocked the country, the most “rocking” being the Roe v. Wade rollback that was released on Friday. Predictably, and understandably, that ruling led to protests across the country, and thousands, if not millions (billions?) of posts online.

I’m not a constitutional law expert, nor am I a women’s health expert, so I won’t offer any opinions on the merits of the ruling from a legal or medical standpoint. What I do know something about is working in the non-profit sector, with a particular focus on trade associations. That means I’ve spent a fair amount of time representing industries of one kind or another, and providing services to the member companies and their employees, in an effort to promote the growth of the people as individuals, the companies as businesses, and the industries as a body. That’s why, upon hearing the news from the Supreme Court my thinking went immediately to how I would approach the issue if I thought of those who provide women’s health/abortion services as an association (federation model) and women who could/would be patients as members of that association.
(Update: My daughter, who is much smarter than me, actually did a search and found just such an organization does exist. For those so inclined you can visit https://prochoice.org/ for more information).

First I’d do what every association does when confronted with a world-changing moment. That means we’d do an assessment of the situation and immediately begin defining what we need to do short term — think of these as tactical, “can’t wait” activities — then we figure out our medium- and long-term activities. It’s not that we only do the short-term activities from the start, it’s just that they take top priority at the time. Then we do an assessment of the resources needed to accomplish each activity, figure out which ones we can realistically tackle, focus on those and work our butts off to get the resources needed to accomplish them. Again, I’m no expert on the topic of abortion, but based on what I’ve been reading here’s what I see as some of the challenges and how they could be tackled. It’s not intended to be comprehensive – just a collection of thoughts I’ve had over the last few days.

Short Term (first 3-6 months)

Problem: Probably the most critical challenge is for women currently seeking service in states that have “trigger-laws” that immediately made abortions illegal upon the Supreme Court’s ruling, to get access to legal abortions. Some clinics in those states are already working to open operations in other states where it’s legal, but many women don’t have the resources required to travel to those states.
Solution: The association approach would be to fundraise to pay for travel for the women, and provide expertise and the required technology to affiliated local organizations to coordinate the travel of their “members” to clinics in legal states. This program would continue as long as abortion is illegal in any given state.
Problem: In states with trigger laws there could also be an initial fight in the courts about the legality of organizations aiding women seeking abortions in other states.
Solution: The association approach would be to provide on-demand legal services for local organizations or women who find themselves in a court fight. This could potentially be done in partnership with other organizations like the ACLU and Legal Aid.

Medium Term (next 5 years)

Problem: There are a huge number of passionate, energetic people ready to volunteer to fight for this cause. While there are numerous organizations out there that these folks are active through, there is a risk that they could go in multiple directions and not benefit from leveraging their collective resources.
Solution: Creating a federated organization that can pull these disparate groups together to leverage their resources, and organize them so that their work is optimized for maximum effect. It’s a delicate dance because you have to find a way to balance each organization’s unique identity and offerings, while getting them to line up behind a consistent message, political agenda, shared resources, etc. A good example of what I’m thinking is what Feeding America is to food banks, except that group doesn’t have the political challenge that a pro-choice group would have. You’d think this would be a short-term problem, but there’s no way something this complex gets done in a few months so I’d look at this as a medium-term issue.
Problem: States that ban abortions might also try to prevent women from having access to the “Morning After” pill or other therapeutic measures.
Solution: This is a legal and logistical problem. The legal issue could be addressed by an association’s legal operation; the logistical challenge of getting drugs into the hands of women in need could be addressed by teaming clinicians with Pharmacy Benefit Managers (PBMs) or even Mark Cuban’s new venture Cost Plus Drugs.
Problem: As far as I can tell there is not a strong legal framework that requires men to assume their share of the responsibility, financial and otherwise, for unintended pregnancies.
Solution 1: The association could create, and fundraise for, a cadre of lawyers to represent women in civil court, to require men to pay for pre-natal care, half (at least) of any of the mother’s related health care expenses, child support, etc. Those same lawyers can represent mother’s in any custody hearings. Again, this might be accomplished by partnering with ACLU, Legal Aid, etc.
Solution 1a: Before you beat me up about the atrocious history of men paying child support, another step the association should take is lobbying Congress and/or state legislatures to make sure these payments can be garnished from wages, that mother’s are first in line at any bankruptcy hearing, etc.

Long Term (foreseeable future)

Problem: With the Supreme Court’s ruling a woman’s access to abortions has become contingent on individual states’ laws. That means that women with limited resources living in states that ban abortions will not have equitable access to care that residents of other states, or women of more means in their own states, have.
Solution: This is a purely political challenge. The association will need to form and lead a long-term political operation that brings together stakeholders at all levels, local, state, and federal to effect the necessary changes to give women equal care no matter where they live. I’m not expert enough to say what the legal remedies are, but no matter what they are there will need to be a significant political shift to accomplish them. That will take long-term funding, coordination and will.

Obviously this outline is pretty simplistic, and unlike industry associations that have a relatively easy to define “membership”, the players in the pro-choice world are far more varied. Believe it or not, however, most industry associations have a fairly diverse constituency and often struggle to get members to agree to how to approach issues, what to prioritize with their political operations, where to concentrate their resources, etc. The same challenge will most definitely be faced by any pro-choice “association”, but the benefit that industry associations provide their members – political influence, shared knowledge base, leveraged legal representation, leveraged resources (particularly technology), a bigger messaging megaphone, volunteer recruitment and management – would be realized by women if a pro-choice association approach is taken.

Fixer-Upper Chapter 1: Housing Sits at the Intersection of Several Complex Systems

The first chapter of Fixer-Upper serves as a prelude to set up the rest of the book, but there are a few good takeaways. My favorite is the criteria Jenny Schuetz provides in “What does a well-functioning housing system look like?”:

  • Housing supply should be reasonably responsive to demand.
  • Within a metropolitan area some new housing should be added in the neighborhoods with highest demand, where people most want to live.
  • Markets should provide a diverse set of housing choices that match household budgets and preferences.
  • Regardless of income, all people can afford decent quality, stable housing in healthy communities.

Back to main Fixer Upper post.

Link to Chapter 2 of Fixxer-Upper Post.

Link to Chapter 3 of Fixer-Upper post.

Link to Chapter 4 of Fixer-Upper post.

Link to Chapter 5 of Fixer-Upper post.

Fixer-Upper Notes

In an effort to go beyond my normal “we have a housing crisis, not just an affordable housing crisis” rap, I read Fixer-Upper: How to Repair America’s Broken Housing Systems by Jenny Schuetz. I was interested in it because it looked like it would be prescriptive, not just descriptive in nature and I was not disappointed. The chapter headings pretty much tell the story:

  1. Housing Sits at the Intersection of Several Complex Systems
  2. Build More Homes Where People Want to Live
  3. Stop Building Homes in the Wrong Places
  4. Give Poor People Money
  5. Homeownership Should Be Only One Component of Household Wealth
  6. High-Quality Community Infrastructure is Expensive, but it Benefits Everyone
  7. Overcoming the Limits of Localism
  8. Build Political Coalitions around Better Policies

I’ll be doing a separate post on each chapter and as I do I’ll link to them from the list above. In the meantime you can see a presentation by Schuetz related to this over at Harvard’s Joint Center for Housing Studies’ website.

Unmeme 1

You know those memes you see on Facebook or other social media that asks you to do something and you know for a fact it’s just a way to gather data on you? Well, I decided to copy them on my old blog here and then give my own answer. I’m calling these Unmemes. Here’s the first:

Answer: Put the lid down

Simple, Powerful Messages

Last week I was on a panel with several other people to discuss some of the local housing challenges we’re facing in our part of the world right now. One of the other panelists, I’ll call him Mr. Smith, was someone who I’d worked with on housing related policies for the past 4+ years, and we’ve occasionally ended up on the opposite side of issues. We’ve never been in an argument, either one-on-one or in a group, but we have disagreed with each other on how to approach some issues that the groups we were involved with were addressing. So, while I don’t think Mr. Smith would think of me as his enemy, he probably thinks of me as his nemesis in certain situations.

Towards the end of the panel presentation we were talking about a new government-funded program that is being rolled out in response to the COVID-19 pandemic and that Mr. Smith’s department was responsible for creating and administering in one of our local cities. There are four local government’s that are crafting these types of programs and in my opinion Mr. Smith’s department had done as good a job as any in getting their program off the ground, and they’d done so in a very trying environment. I shared that opinion during the panel discussion, and honestly didn’t think much of it. It was my opinion, which may or may not be worth anything, but I’ve always felt that if someone does good work then you might as well say so.

The panel discussion happened at midday. Around four that afternoon I received an email from Mr. Smith that said, “Jon, Thank you for the kind words about the program. My staff and I really appreciate it. Have a good weekend and stay safe.”

That email made my week and it reminded me of the power of a simple “thank you”. It also reminded me that people¬†always¬†appreciate being appreciated especially when they do the kind of work that is invisible, or when it is visible, it is criticized. With that in mind please take a moment to recognize the folks who have made a positive contribution to our world – not only will it make their day, it will make yours too. And if someone does that for you, just remember to say “Thank you.”

*Quick note: I originally wrote this on my LinkedIn account. My apologies if I’ve bored you twice without notice.