B4 • Friday, August 11, 2023
thegardenisland.com
THE GARDEN ISLAND
HOMELESSNESS LINKED TO HIGH HOME VALUES population of Wyoming. And while the U.S. is one of the most affluent counThe U.S. has a homeless- tries in the world, some countries with much less ness problem — and it money seem to have done a might be more closely remuch better job at handling lated to affluence than to their unhoused population. poverty. For example, Portugal, That’s one of the surprising conclusions from a new which has a GDP equal to about 1 percent of the U.S. study by real estate company Home Bay that uncov- GDP, has a homeless rate that’s half the U.S. rate. ered a strong correlation One possibility is that between homelessness and countries like Portugal are elevated home values. Experts at Home Bay ana- simply doing a better job at identifying and targeting the lyzed data from Zillow and the Department of Housing root causes of homelessand Urban Development ness. and found that, among the The Home Bay study 50 largest U.S. metro areas, found a few U.S. cities that cities with greater-than-avdefied the pattern of high erage home values also had homelessness and high home values. rates of homelessness 2.5x Boston, for example, has higher than metro areas the sixth-highest average with lower-than-average home values, but the home values. 27th-highest rate of homeThe poster child for this pattern is San Jose, Califor- lessness. There are also outliers in nia, which has both the the opposite direction — highest average home values in the nation ($1.39 mil- cities where home values lion) and the highest rate of are low enough that the American dream of homehomelessness. This link proved durable both stateownership is still very much within reach for the wide and nationwide. average American, but According to the Home which also have surprisBay study, California’s six biggest cities have homeingly high rates of homeless rates that are 2.3 times lessness. higher than the national avOne example is Hartford, erage, and home values that Connecticut, which has the 32nd-highest home values are almost 3 times the nain the U.S. but the 11th-hightional average. est rate of homelessness. A difficult problem However, in the vast maThere were nearly jority of the metro areas 600,000 homeless Ameristudied, home values and the rate of homelessness cans in 2022 — roughly were tightly linked. equivalent to the entire
Frank Schneider WEALTH OF GEEKS
U.S. 30-year mortgage rate climbs to 6.96 percent this week ASSOCIATED PRESS LOS ANGELES — The average long-term U.S. mortgage rate rose this week to just under 7 percent, the latest setback for would-be homebuyers already facing affordability challenges due to a housing market limited by a shortage of homes for sale. Mortgage buyer Freddie Mac said Thursday that the average rate on the benchmark 30-year home loan rose to 6.96 percent from 6.90 percent last week. A year ago, the rate averaged 5.22 percent. It’s the third consecutive weekly increase for the average rate, which now matches its high for the year set on July 13. High rates can add hundreds of dollars a month in costs for borrowers, limiting how much they can afford in a market already unaffordable to many Americans. The average rate on a 30-year mortgage remains more than double what it was two years ago, when it was just 2.87 percent. Those ultra-low rates spurred a wave of home sales and refinancing. The sharply higher rates now are contributing to a dearth of available homes, as homeowners who locked in those lower borrowing costs two years ago are now reluctant to sell and jump into a higher rate on a new property. The lack of housing supply is also a big reason home sales are down 23 percent through the first half of this year. The latest increase in rates follows an uptick in the 10-year Treasury yield, which climbed to 4.19 percent last week, it’s highest level since early November.
WEALTH OF GEEKS
Cities with greater-than-average home values also had higher rates of homelessness, recent data showed. Struggling cities After San Jose, the city with the second-highest average home value is San Francisco, where homes are worth an average of $1.11 million. San Francisco also has the second-highest rate of homelessness in the U.S. Next on the list is Los Angeles, which has the third-highest home values and the third-highest rate of homelessness. Sacramento has the fourth-highest rate of homelessness and the eighth-highest home values, while Seattle ranks fifth in both categories. Rising home values also put pressure on landlords to raise rents in order to meet their mortgage obligations and other escalating expenses. That explains why higher rents, like high home values, are associated with higher-than-average rates of homelessness. Looking at the 12 metros with the highest rates of homelessness, average rents there come in at
$2,274 a month. In cities with lower-than-average rates of homelessness, rents are nearly $700 less, averaging only $1,596. The four cities with the highest average rents are San Jose, San Francisco, New York, and Los Angeles. These cities rank first, second, sixth, and third in rates of homelessness, respectively. Root causes It may seem intuitive — from a strictly economic viewpoint — that the cities with the least affordable housing would have the most people who can’t afford a place to live. But the conventional wisdom is that homelessness is a consequence of poverty, not affluence. If that conventional wisdom is false, it could explain why some U.S. policies aimed at curbing homelessness have failed. “Currently, nearly all our government programs that seek to address homelessness focus on maintaining
shelters and providing a limited number of housing vouchers,” said Dan Kerr, director of the Public History Program at American University. “The shelters seek to keep the public display of homelessness from getting out of hand, while the vouchers are ultimately a form of subsidy for landlords.” In this view, certain government policies aimed at homelessness aren’t so much about solving homelessness as hiding it from the public. Meanwhile, there’s been very little effort put toward the actual cause of homelessness — e.g., high home values and the resulting lack of affordable housing. “The government moved away from public housing in the 1970s,” Kerr said. “And since then has not addressed any real ways to keep market-based housing affordable.” Poverty The complexity of this problem is revealed by an analysis of poverty rates and their relation to homelessness. Although it may seem intuitive that cities with less poverty would also have less homelessness, the opposite is actually true. The Home Bay study found that cities with low poverty rates tend to have higher rates of homelessness than cities with high poverty rates. Specifically, metros in which less than 10 percent
of city residents live in poverty actually have rates of homelessness that are 2x higher than metros where more than 10 percent of residents are in poverty. In other words, the two strongest predictors of homelessness are inflated home values and high average incomes. Clearly, some portion of the population is being left behind when home values and incomes rise. “Since 1979, the bottom 20 percent of income earners have seen an actual decrease in family income,” Kerr said. “Stagnating and decreasing incomes, coupled with greater costs to secure housing, leave more and more people vulnerable to homelessness.” Essentially, when home values and wages have boomed, the benefits have accrued to the top fourfifths of the population, while the bottom fifth has seen their purchasing power dwindle — to the point that more of them become homeless. The real solution to homelessness, then, would be to increase that bottom quintile’s wages. Kerr said that the people facing the issue on a day-to-day basis mostly agree with this diagnosis. “When asked what they think needs to be done, the large majority of people experiencing homelessness argue that we need to address the issue of low wages,” Kerr said.
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