What is housing’s No. 1 purpose?
Throughout mankind’s history housing has been about shelter. Housing is about one of Maslow’s basic human needs in his hierarchy of needs.
It comes in all forms from basic start-up housing for our workforce and young families to elaborate expensive suburban and urban housing to homeless shelters, and its purpose is to give us a secure place to build our lives from.
But in these times of amazing new wealth, housing is no longer primarily about shelter. The shelter need is now become the No. 2 purpose of housing. Hence the growth in homelessness and our city’s willingness to exile our workforce to other counties.
Over the past few years, the No. 1 purpose of housing has become making money/being a profitable investment center.
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This recent evolution ties into the massive increase in wealth by those with higher incomes. Simply put, the primary investment vehicle has been the stock market. But behind that it is real estate. Many people have a lot of money and they like the returns on the investment in real estate, so the cost of land and housing has and is increasing quickly. Housing is now primarily viewed as a profitable investment priority over a shelter priority.
This shift was recently explained in a series of articles in ShelterForce, a trade publication for the nonprofit affordable housing industry. The name of this shift is referred to as the “financialization of housing.”
One fallout from this shift to escalating profit over shelter is the rapid increasing rents we are currently seeing. If you buy an apartment complex, you do it with the investor’s return as the primary purpose. Investor returns have always been considered in developing housing, but the returns used to be more modest at 3% or 8% or 10%.
Today, investors expect you to give them a much healthier return. This means you need to increase rents to make the promised returns/profits on their investments. Increasing rents drive out our lower-paid workforce. It also leads to several rent increases in a short time period.
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Also investors know that delayed rents do not maximize profits. Historically, many owners operated out of grace by working with their tenants who were lower income and who hit hard times.
“Hard times” included unexpected medical costs, a car breaking down, a layoff, a job change, etc. They were every-day life events that caused a bump in a tenant’s income, but an event they could recover from in a short time.
Rents were late, which was hard for the owner. Yet many owners worked with late rents as most felt that the primary purpose of housing was shelter.
If we as a city agree to the priorities of profits over people, where will those workers go when they fall behind and are evicted? These working evicted neighbors will be forced to move to another county, or move in with family or friends, or become homeless.
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During the last week of October, The Scene ran an article how one apartment complex that housed our workforce had been recently purchased and the new owners planned to increase their rents by 90%.
Guess what? The family interviewed for the article had to move on.
Channel 2 ran a story that highlighted Nashville for being in No. 17 in highest rent cities in America with rents increasing in most one- and two-bedroom apartments. They also reported that to rent in Nashville one needs and income of $70,000.
The hourly wage for $70,000 is near $35/hour. Recently released data from Metro Social Services shows 44% of all Nashville wage earners earn under $20/hour ($40,000/year).
To be a fully functioning city we need these workers. But if we accept housing’s new purpose is to make money and not shelter all our citizens, how do we strengthen our community? If we continue to do this what are we doing to the soul of our community?
Eddie Latimer is CEO of Affordable Housing Resources in Nashville.
What is housing’s No. 1 purpose?