Housing costs further widen income inequality
6th May 2019 · 0 Comments
By Ryan Whirty
Contributing Writer
The growing income inequality in the United States over the last 40 years has been extensively covered in the media, but many skeptics and advocates for the current American economic system have either been unconvinced or dismissive of such critical assessments of the widening chasm between the rich and the poor.
But with cold, hard numbers and comprehensive studies, it can be measurably shown that not only are the poor getting poorer and the rich getting richer, but also that the poverty-stricken are paying more for their housing costs than the wealthy.
Such factors further exacerbate wealth disparities, says Igor Popov, the chief economist at Apartment List, a Web site that helps renters find affordable housing and examines research and data in the field of housing economics.
“Income inequality has been rising steadily since the early 1980s, and we found that housing costs have really risen quickly for those at the lower-end of the income distribution over the past 10 years,” Popov told The Louisiana Weekly. “Rents have been rising while mortgage rates have been falling. As a result, homeowners have gotten a break over the past few years, while most renters pay more than they used to.”
In a recent online analysis that compared income distribution to housing costs in America’s largest cities, Popov found, essentially, that as incomes have diverged, the poor are paying a much larger percentage of their incomes than the rich.
“Those in the top half of the income distribution in 2017 spend significantly less of their income on housing than the top half did in 1980,” Popov wrote. “Those at the very top of the income distribution have enjoyed a significant break on their housing costs. Income inequality in the U.S. has grown, but the disparities are even greater after rent and mortgage payments are paid.”
The gap is also reflected when comparing housing costs for homeowners against those for renters. Those who own their own homes have benefitted from lower mortgage rates and the ability to refinance, while the influx of high-income renters into the rental market has effectively made rent more expensive for those with lower incomes.
“The net effect is that the median homeowner is paying less out of pocket each month,” writes Popov, who earned a doctorate in economics at Stanford University and currently teaches an undergraduate seminar titled “Housing, Neighborhoods, and Homelessness” at the university.
He continues by noting that income inequality is being shown not only on the national level, but within individual metro areas as well.
“Regional disparities exist, and they do appear to be widening,” Popov writes. “Incomes of richer metros are growing faster than the incomes of poorer metros.”
He adds, “The rich are pulling away from the poor within most American cities.”
That sting is especially acute here in New Orleans, too. The Crescent City has experienced the largest increase in the gap between the rich and poor, Popov found – over the last decade, quantifiable income inequality has spiked by a whopping 44 percent.
“We found that income inequality grew faster in New Orleans than in any other large metro over the past decade,” Popov told The Louisiana Weekly.
“Moreover, low-earners in New Orleans struggle with affordability in particular,” he added in an email interview. “For those in the bottom quarter of the income distribution living in New Orleans, their incomes are 75 percent lower than the median but their housing costs are only 25 percent lower. More housing, both subsidized and market rate, would certainly help because housing options for low-income residents is in very short supply.”
Such stark figures certainly are not news to experts and activists in New Orleans.
“We know New Orleans is ground zero for income inequality and rising housing costs,” said Cashauna Hill, executive director of the Greater New Orleans Fair Housing Action Center. “We are second worst in the nation in the share of renters who pay more than 30 percent of their income towards rent and utilities.
“That’s why we need all the tools available – like inclusionary zoning, stronger short-term rental regulations, tax abatements for lower-income homeowners in gentrifying neighborhoods, and better eviction protections – to ensure our people aren’t pushed out of the city,” Hill added.
To that point, Popov says that although these trends, both regionally and nationally, are bleak, there are ways to attack the income and housing disparities and to close the gap between rich and poor.
First, he said, is parsing the numbers and coming up with statistical analyses that paint the picture more clearly.
“We have really solid data on poverty and housing costs, and the data have been telling a consistent story for a while,” he said. “Housing costs are a clear burden for many Americans. The better we understand, however, not just the basic statistics but the full implication of housing policy, the more likely we’ll all be to implement positive change.”
Armed with such substantive, quantifiable support, Popov told The Louisiana Weekly, activists and community organizations must get those with influence and power to start talking. Because it can be shown that the costs of housing can be directly tied to income inequality, we have a place to begin.
“Starting the right conversation is the first step,” he told The Louisiana Weekly. “We hear debates around housing affordability, and we hear debates around how to tackle rising inequality. The key takeaway for us from this research was that these conversations are closely linked. To keep economic mobility and opportunity alive, we need to talk about how housing interacts with inequality.”
With more progressives entering and succeeding in politics, and with presidential candidates able and willing to address these issues head on, he said, there finally could be solutions on the horizon.
California Sen. and presidential candidate Kamala Harris, who spoke in New Orleans recently, has introduced rent relief legislation in the U.S. Senate and said “housing should be a fundamental right, a human right, a civil right.” Sen. Cory Booker of New Jersey, another presidential candidate, has proposed similar affordable housing legislation.
“There’s definitely hope, because we’re seeing these debates bubble up to the national level,” Popov said. “In the run-up to the 2020 election, presidential hopefuls are starting to propose housing plans that explicitly tackle issues of opportunity and affordability. Regardless of the current proposals that are out there, the dialogue is starting, and we’re hopeful that it will lead to productive policy and experimentation.”
This article originally published in the May 6, 2019 print edition of The Louisiana Weekly newspaper.
