Supporting homeownership alone might not solve our housing problem
It’s a mistake to believe that everything we enjoy and, at times, absolutely need comes from transactions in a marketplace. We must distinguish between wants and needs. When wants are backed by the ability to purchase, they form demand. Markets set aside all those who want but are unable to afford. There is no market for the necessities of life in which needs are apparent but cannot be backed by the ability to purchase.
The housing market is an excellent example of this. The falsity is that everyone needing housing can enter the market without any support. Millions of families in California cannot enter the housing market to buy or rent.
According to a recent California Budget and Policy Center report, eight in 10 households with low incomes (those with incomes of less than 200% of the federal poverty line) were housing-cost burdened, and more than half of these households spent more than half their income on housing. The LAist report in 2022 shows that from 2010 to 2019, Los Angeles lost about 111,000 homes considered affordable for low-income households. Over the same period, about 13,000 new homes affordable to such households were built, leaving a loss of 98,000 homes affordable to low-income families.
According to the 2020 U.S. census, some 45.5% of California’s housing units were occupied by renters. At the same time, several reports indicate a severe reduction of unsubsidized apartments still affordable to low-income renters in California, often referred to as “naturally occurring affordable housing” or NOAHs. California Housing Partnership 2022 report shows that in California between 1997 and 2021, 20,792 subsidized affordable rental homes have been lost through conversion to market rate units, and 7,053 more are at risk of conversion to market rate in the following year. An August 2023 report by the Urban Institute reveals more than a million more affordable housing units are needed in California, and more than 300,000 NOAH units and 30,000 subsidized units are at risk of being lost.
Owning a home is vital to building a foundation for better and more secure financial conditions for every American family. Data indicates that a much higher proportion of assets owned by lower-income and people of color comes from homeownership. We need to promote homeownership but bring a much greater focus on making rental properties affordable. The most crucial step is to free a significant proportion of rental properties from ever being supplied to the market for higher profit. This is the reason for the reduction of NOAH and its dire future prediction. Existing information indicates that over 97% of California cities haven’t produced enough affordable housing.
Social housing provides housing for people unlikely to afford private rental market rates with homes in which they can live with dignity and comfort — an added benefit for the wider society. Social housing should not be mistaken for public housing. Social housing can be built and maintained without government control and uniform regulations. Government investment and use of public land should be utilized, but government control should be reduced to the lowest level possible. This rental housing model has brought great success in many European countries, and there is no good reason for denying many families in need in every part of California.
The correct way of promoting social housing in every California neighborhood is to build it in desirable areas and ensure they meet architectural and livability standards that make it appealing to people across the income spectrum. Charge rents based on income. Those higher-income tenants pay market rents, subsidizing the cheaper rents reserved for low-income occupants. Social housing is protected from being sold to a private for-profit entity for the duration of its life, and residents are granted the same protections as tenants in private properties, including cause eviction protections. The only way to reduce the impact of rising rent is to build and promote social housing over time.
Let us remember that social housing is based on the principle of decommodification of housing, social equity and resident control. This can happen only when houses built are shielded from speculative housing markets. This policy reduces the opportunities for exploitation, negligence, and risky behavior by landlords.
Jamshid Damooei, Ph.D., is the executive director of the Center for Economics of Social Issues and director of the undergraduate economics program at California Lutheran University.
This article originally appeared on Ventura County Star: Supporting homeownership alone might not solve our housing problem
