Affordable vs. Attainable Housing

San Francisco Condo for 600kWhen you think affordable housing, you think $600,000 for a condo, right? With a $12,000 down payment, that would be $3,557 per month for 30 years.

Maybe that’s why a new term has arisen in the real estate market, attainable housing. Under the new rules, old safety precautions are ignored. Once, homebuyers were advised to spend no more than 25% of their income on housing – a joke in many areas today. So now, some FHA loans let people pay 41% of their income for housing. And if they lose their jobs and their home, their biggest asset, the only thing they have to pass on to their children is tough luck.

Wealth Transfer from the Poor to the Rich

One of the biggest areas in which money has gone from the poor to the rich is housing. Though, in a few cases, poor people have hung onto a house long enough to see a large gain, fewer and fewer houses from the days of opportunity still exist.

Now, a house, like an education, has become a costly and risky bet for poor and even middle-class people. It shimmers on the horizon, offering security and value, yet bristling with dangers, dangers that wealthier people don’t face. Those with large assets were able to buy foreclosed homes during the downturn, hang onto them until the market rose, and resell or rent them at a hefty profit.

The cruel irony is that poor people pay more than rich people for the same thing.”

Former home-owners? They may be renting the same kind of house they once tried to buy and are paying as much or more. This means they will never save enough to try buying a house again. Their housing money will always go to someone else, and when they die, they’ll have little to leave their children.

Once again, we run into the cruel irony that poor people pay more than rich people for the same thing. English comedian, television host and political commentator John Oliver recently exposed the horror of used car loans, how they are designed to exploit the way subprime credit cards were designed to lure in people known to be bad risks. But because interest rates are so shockingly high, those cards and used car loans are still profitable. As one business article put it, “financially strapped consumers – or at least those who had trouble paying their bills in the past – are generating more money for banks, per $1 of card balances, than consumers who are flush.”

Where Are the Controls?

And because capital and investment are now so globalized, less-wealthy Americans hoping to purchase a home have to compete not only with ultra-wealthy U.S. investors, but with the ultra-rich of other countries too, especially China. Every realtor in Northern California knows about the Chinese market. “… Chinese buyers accounted for 27.5% of the $104 billion that foreign buyers spent on U.S. homes.” Furthermore, in China, as here, there are rules for the rich and rules for the less rich. “China has capital controls in place to prevent this sort of thing [sneaking huge sums out of the country, sometimes to evade taxes] for the average guy. But … there are ways for well-connected Chinese to transfer money to the U.S., particularly those with business relationships in Hong Kong or Taiwan.”

So how can non-rich people escape the market-devised traps of lending without government intervention? I see no way.

2 Responses

  1. Sheila Spear

    “When you think affordable housing, you think $600,000 for a condo, right? With a $12,000 down payment, that would be $3,557 per month for 30 years.” REALLY??? No that’s NOT what I think of. But then I don’t live in California. I have a 3-bedroom house about to go on the market for $450,000 in a rural area not far from Madison WI. And I know that people looking for ‘affordable’ housing cannot look at this kind of price, let alone the number you suggested! Please!

  2. Chad

    SS’s post v the article: Above dynamic may show even more disparity in certain geographic areas (the doz cities on the coasts, Chitown’n 3 in TX).
    Thanks for the class/race connection in your article around ‘housing wealth’. Wished you’d detailed it our alill with the historical reality’s addition to what the disenfranchised live today (GI Bill/Red Lining). Keep up the good work, I’ll B lookin 4 the novel!
    – -Chad

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