The High Cost of Expensive Housing
There are economic, societal, and environmental costs when housing becomes too expensive. Housing is too expensive when the costs of housing and transportation combined exceed 50% of a household’s gross income. When housing costs exceed this portion of a household’s income, those households often respond in one of three ways, through belt tightening, by moving to a less expensive city, or by sharing their house with extended family or roommates. Having grown up and lived in Orange County, California, a place so famous for its expensive housing that there have been multiple TV shows and movies premised on the fact, I have seen the negative impacts for the economy, environment, and society caused by each of these household responses to high home costs.
The negative impacts of belt tightening
The first natural reaction to high housing prices is for a household to cut back spending elsewhere. Simply put, expensive housing sucks up a family’s money for discretionary expenses and cuts down on the amount of money spent in the local economy. We even have a term for this belt tightening, being house poor.
There have been several times in my own life when I’ve been house poor, during college and after buying a home. In some ways, being house poor during college is a right of passage. Almost everyone has roommates, and doesn’t have much money after paying rent. Many would also say that being house poor after buying a new house is the proper place to be. The conventional investment wisdom is that a family should buy as expensive of a house as they can afford, accept that they’ll be house poor for the first few years, and work to bring up their income to more comfortably cover the cost of their mortgage. This is the advice that I followed, perhaps unwisely. Being house poor in such a way significantly adds to the background stress of life, and provides for less money available for most other things in life.
This reallocation of expenses to housing, away from everything else, is most impactful on the local economy. Families that are house poor spend less on the type of activities that generate wealth for the local community. When money is tight, families eat out less, spend less on local entertainment, and generally shop less. All of these activities are vital to the consumer economy for most communities. By cutting back in these areas, there is less demand for jobs in the service sector, and reduces the value created by the community.
In addition to the economic costs, there are even greater impacts to society, especially at the household level. High housing costs create a need for multiple income earners for each household. It also can lead to parents working longer hours or multiple jobs in order to provide for their children. This reduces the amount of time families have for bonding, it reduces the amount of time parents have to help their children in their school work, and it reduces leisure time, causing an increase in stress and unhappiness.
The negative impacts of moving away
Once belt tightening isn’t enough, a logical second choice for households dealing with expensive housing is to move where the housing is less expensive. Unfortunately, places where housing is less expensive generally have fewer options for quality work, so people end up commuting further distances than they would if they lived where housing is more expensive.
A friend of mine who grew up in my neighborhood bought a house just on the other side of the County line, about 10 miles away. Unfortunately for him, this 10 mile commute was along a highly congested highway, and would often take more than an hour. His solution was to buy a motorcycle so he could lane split (which is legal in California), and cut his commute time in half. This, of course, had predictable results. One day a car, not seeing him splitting lanes, changed lanes in front of him. He slammed on his brakes, dropped his bike, and in the process broke his leg. Because of this whole episode, he and his wife decided to sell their house and move out of Southern California to Seattle, where housing costs would be less of a burden.
Even though individuals are burdened a longer commute, the environment bears the brunt of the costs when households need to commute further to get to work. Tautologically, longer commutes lead to more vehicle miles traveled, meaning more gas is burned causing more carbon dioxide to be released into the atmosphere. This directly diminishes the remaining carbon budget. In addition, as more people drive further distances, they demand more roadway spending which in turn makes it easier for more people to drive further distances. This is the roadway demand cycle that has driven the expanse of the nation’s automobile transportation network over the past century.
Longer commutes also have an impact on society, as evidenced by my friend’s story. Just as with working longer hours, longer commutes take time away from family and from social interaction. It has been postulated that longer commutes have contributed to the decline in people participating in their community. In addition, and perhaps more importantly, moving breaks existing social networks, and reduces a family’s social safety net when they’re no longer living near family. By moving, parents no longer have grandparents to call on when a child is sick, or as a ready babysitter for date night. Moving away makes dealing with unforeseen circumstances more difficult, which adds to household stress.
The negative impacts of overcrowding
Many lower-skilled workers simply don’t have the ability to move further away from their jobs, because there isn’t enough time in the day to commute while holding down two or three jobs at a time. For the families of these workers, the only solution is to live in larger households with more people working. Whether these larger households are made up of extended family or roommates, it results in overcrowding. Of course, cultural factors also lead to overcrowding, however cultural factors tend not to result in most of the negative impacts that result from economically induced overcrowding.
Once, when I worked for an affordable housing developer, we purchased a group of four-plex apartments in Huntington Beach, CA. Before we purchased these apartments, they were market-rate slums and they were badly overcrowded. Most of these two bedroom apartments had two or three families living in each one. It wasn’t abnormal to see up to seven beds in each bedroom, along with clear evidence of people sleeping in the living rooms of each apartment. With such a crush of humanity, every single unit had air that was thick with humidity and perspiration. The walls were wet to the touch and mold was seen growing in the corners. These apartments were not a healthy place for anyone to call home.
The worst impacts due to economically induced overcrowding are social. Individuals have less space and privacy; homes are noisier, more chaotic, and often less clean; and households are less stable, with people regularly moving in and out. These conditions increase stress for everyone living in the home, and they have especially detrimental effects on children. The often overlapping patterns of activity in the home interrupts children’s sleep, the lack of quiet space makes completing homework difficult, and the many social relationships that parents must maintain within the home pulls them away from spending an appropriate enough time developing relationships with their children.
In addition to the profound negative social impacts, overcrowding also leads to strained municipal budgets. Overcrowded households use more city services than other households. Greater conflict in the home caused by higher stress and a lack of private space leads to more calls for police service. More people living in the home put a greater strain on utilities, using more electricity, water and especially sewer capacity. Overcrowded homes also house more kids than intended for local school and who utilize local parks, often without providing the capital contributions school districts and parks departments rely upon to build new facilities.
High housing costs lead to significant negative impacts to the environment, the local economy, and society through belt tightening, emigration, and overcrowding. Local communities can change their housing policies to reduce the cost of housing and avoid these negative impacts, but first they need to understand the true cost of expensive housing.
[Note: This is one article in a longer series on housing affordability, part of a larger look at how local communities can address global issues related to climate change, housing affordability, the local economy, the fiscal solvency of cities, and public health.]
