Rents have been outpacing inflation and wage growth for the last few years and isn’t yet showing signs of slowing down. Now that the problem affects working professionals instead of only low-income households it is a matter of national attention.
In 2018, residential rental rates increased an average of 5-10% while wages stayed flat or received the customary 2% cost of living increase. (support) This problem began a few years ago and is only getting worse.
The reality is, that rent growth and housing rates should be linked but they don’t necessarily have to be.
Nevertheless if we could address the housing affordability issue in the United States (not to mention overseas) household wealth formation would be furthered and younger generations like Millennials would be able to more fully participate in the economy. After they pay off their student loans of course.
This problem isn’t just on the east and west coasts where professionals often have shared housing arrangements well past middle age. The Midwest and Great Plains regions are experiencing similar heartburn. But they have the option to address the issue.
You see, the middle of the country was hit hard by the 2008 recession and in the years since recovery, the residential development has focused on expanding the sprawl and creating bedroom communities which often leaves vacant housing in the urban core. These close in neighborhoods pose excellent access to downtown amenities and the housing is often historic with lots of charm. Because they have been ignored for the past decade (and arguably even before then) the property values tend to be undervalued considering their intrinsic benefits. Solutions for expensive coastal cities like New York, Los Angeles and Seattle would look a bit different.
My heart sinks to see city blocks of mostly vacant, boarded up buildings in towns like Dayton, OH.
The homes have hardwood floors, crown molding, deep lots and character that comes at a steep price tag in new developments. Houses in the area can be purchased well below the cost of the materials and typically rent for a
I’m not the first person to notice this anomaly. Renovating existing, vacant homes in Midwest inner city neighborhoods and providing them as rental property is a viable solution to the housing affordability in those areas. The economics support property owners earning a healthy return on their investment. Families and young professionals can live close to downtown without bursting their budgets. Until now, the lack of move-in ready product close to the city has made driving an hour to the suburbs a default choice.
The cost of housing will continue to spiral out of control unless we take concerted action to address it.
Reclaiming vacant houses left over from the 2008 recession could add hundreds of new units to address the lack of supply. Housing Joint Venture pairs would-be investors with pre-vetted real estate investment opportunities that provide consistent returns and bring renewal to blighted communities.