In the Before Times, some asshole with a blog observed:
One housing crisis, and the one that gets the least attention, exists in those places where housing prices are too low, but I’m not going to discuss that here. The second housing crisis afflicts low income people including the homeless, and that problem is that low-income people don’t have enough money to afford any housing unless it is really low price: as my Uncle Harry used to say, “Rich or poor, it’s always good to have money”, and they just don’t have enough money. The third crisis is that people are paying too much for housing. This isn’t an existential crisis–they can afford to pay for housing, but they are spending money on rent when it could be spent elsewhere more productively (this is rent extraction in the economics sense). It affects people from the low-middle stratum through upper-middle (though not gentry class). Obviously, Uncle Harry’s dictum applies here too–it’s better to be upper-middle than lower-middle, and the boundaries between lower-income and lower-middle are fuzzy, but the key point is that this isn’t an immediate existential crisis, such as choosing between food and rent…
For low-income people, they need some kind of subsidy, whether it be public housing or rent supplements (e.g., Section 8). Building more housing (unless it’s subsidized public housing) won’t solve their problems, especially in a short time frame. Again, they can’t really afford to pay for housing–it’s a cash flow problem, not a supply problem.
Which brings us to the ongoing housing crisis for essential workers in NYC (boldface mine):
Two things have been true since the pandemic flattened New York’s rental market last March: prices have fallen sharply, but not for the people who need relief most.
Now a new report shows how little those price cuts have helped the more than 1 million New Yorkers the city calls essential workers…
From mid-March to the end of 2020, there were 11,690 apartments citywide that were considered affordable to essential workers, a more than 40 percent increase from the same period the year prior, according to the listing website StreetEasy. But even after a year of record rent cuts, that share represented just 4 percent of the total market-rate inventory in the city.
Essential workers — a broad category that includes teachers, bus drivers and grocery clerks, among others — make an average of about $56,000 a year, and can comfortably pay $1,400 a month on rent, or about 30 percent of their gross income, a common calculation to measure affordability.
Record rent cuts have not bridged the gap. In January, the median monthly asking rent in Manhattan was $2,750, a 15.5 percent drop from the year prior and the largest year-over-year drop since 2010, according to StreetEasy. Brooklyn and Queens also had record cuts of 8.6 percent, dropping to $2,395 and $2,000.
This displays the slide of the middle class. These are people who are rapidly moving from ‘paying too much’ to unable to pay at all, yet these are what used to be considered middle class jobs. But in overheated urban areas, these salaries are essentially working-poor salaries.
It also illustrates something else: more market-rate housing typically helps the middle class–or in places like NYC, the upper middle class–but to help those who don’t earn enough, we need subsidized housing, regardless of mechanism. That, or we need to increase incomes, and not just at the bottom either.
After the pandemic, these fundamental problems won’t go away unfortunately.