The affordability crisis
By 
I’ve been meaning to write about this interesting essay by Michael Green, about how the poverty line could be pegged at $140,000 per year, if we’re talking about what he calls “the cost of participation” in contemporary American life.
Some of the claims in the essay are hyperbolic, and it was largely derided by the green eyeshade battalions of the dismal science, but it nevertheless struck a nerve for good reasons. For example:
Critics will immediately argue that I’m cherry-picking expensive cities. They will say $136,500 is a number for San Francisco or Manhattan, not “Real America.”
So let’s look at “Real America.”
The model above allocates $23,267 per year for housing. That breaks down to $1,938 per month. This is the number that serious economists use to tell you that you’re doing fine.
In my last piece, Are You An American?, I analyzed a modest “starter home” which turned out to be in Caldwell, New Jersey—the kind of place a Teamster could afford in 1955. I went to Zillow to see what it costs to live in that same town if you don’t have a down payment and are forced to rent.
There are exactly seven 2-bedroom+ units available in the entire town. The cheapest one rents for $2,715 per month.
That’s a $777 monthly gap between the model and reality. That’s $9,300 a year in post-tax money. To cover that gap, you need to earn an additional $12,000 to $13,000 in gross salary.
So when I say the real poverty line is $140,000, I’m being conservative. I’m using optimistic, national-average housing assumptions. If we plug in the actual cost of living in the zip codes where the jobs are—where rent is $2,700, not $1,900—the threshold pushes past $160,000.
The market isn’t just expensive; it’s broken. Seven units available in a town of thousands? That isn’t a market. That’s a shortage masquerading as an auction.
And that $2,715 rent check buys you zero equity. In the 1950s, the monthly housing cost was a forced savings account that built generational wealth. Today, it’s a subscription fee for a roof. You are paying a premium to stand still.
Green emphasizes that for couples with young children, childcare costs are a devastating addition to household budget. For many people in their 20s and 30s, this means “choosing” to be childless, because it feels fundamentally unaffordable. This of course helps explain why the birth rate has been cratering for decades — it’s now quite literally half of what it was when I was born at the peak of the baby boom. And the birth rate in the US is still a lot higher than in much of the developed world, The worst situation, not surprisingly, is in countries that still have strongly patriarchal traditional cultures, i.e., women are expected to do all childcare and other domestic labor, but where women also now have a certain degree of economic and social freedom. In places like South Korea, the consequence of that combination is a total fertility rate of less than one — a completely unprecedented situation in all of recorded history, and no doubt in the entire history of the species, or otherwise we wouldn’t be here to blog about it.
The Times had a piece today (gift link) that used Green’s essay as a jumping off point. The basic economic problems here are well known: the cost of housing, of childcare, of health care, and of higher education. These things are all central to any concept of a middle class lifestyle. Of course another big factor in all this are changing standards of what’s considered an acceptable version of such a lifestyle:
Mr. Thurston, from Philadelphia, said he wanted children. But right now, he and his partner must climb three floors to their rental apartment. Their car is a two-door “death trap.”
His salary, about $90,000, would need to cover student loans and child care. He also wants to live in a good school district and pay for extras, like music lessons and sports leagues.
“I know you don’t need those things,” he said, “but as a parent, my job is to set my child up for success.”
Even for those who own a home, the thought of children can be daunting. Stephen Vincent, 30, and his partner, Brittany Robenault, a lab technician, first went to community college to save money. Then, he said, they “ate beans and rice” for several years to save for a down payment.
Now an analyst for a chemical company with a household income of about $150,000, he likes his lifestyle in Hamburg, Pa., and wants to keep it.
“We live in the richest country in the history of human civilization, so why can’t I eat out twice a week and have kids?” he said.
To the skeptics who say these trade-offs are simply lifestyle choices, there was a rejoinder: Hey, you try it.
“It’s very easy from a place of wealth and privilege to say, ‘You should be happy with something more modest,’” Mr. Thurston said.
But, he said, “it would kind of suck to live that way.”
Alicia Wrigley is grappling with the trade-offs. Ms. Wrigley and her husband, Richard Gailey, both musicians and teachers, own a two-bedroom bungalow in Salt Lake City and feel lucky to have it — they say they could not afford it now. But juggling in-home music lessons with their 2-year-old’s needs can feel like a squeeze. They want another child, but wonder how it would all work.
“I know it’s possible,” she said, looking through the window at her next-door neighbor’s house, which is exactly the same size.
That neighbor raised six children there in the 1970s. One way mothers then would cope, Ms. Wrigley said, was to “turn their kids out all day, and they’d just run around the neighborhood.”
She said she would not do that today, not least because someone might report her.
“The world,” she said, “is fundamentally different now.”
This is reminds me obliquely of a passage in The Road to Wigan Pier, Orwell’s study of life in a mining town in northern England in the mid-1930s. Orwell is interviewing a family of eight living in a four-room house (I would guess this would probably be in the neighborhood of 800 square feet or so), and he asks them when they became aware of the housing crisis. “When we were told of it,” is the reply.
. . . commenter Felix D’s question about this passage led me to look it up, and it’s somewhat different than I recalled, but the gist is the same:
Talking once with a miner I asked him when the housing shortage first became acute in his district; he answered, 'When we were told about it', meaning that till recently people's standards were so low that they took almost any degree of overcrowding for granted. He added that when he was a child his family had slept eleven in a room and thought nothing of it, and that later, when he was grown-up, he and his wife had lived in one of the old-style back to back houses in which you not only had to walk a couple of hundred yards to the lavatory but often had to wait in a queue when you got there, the lavatory being shared by thirty-six people. And when his wife was sick with the illness that killed her, she still had to make that two hundred yards' journey to the lavatory. This, he said, was the kind of thing people would put up with 'till they were told about it'.