[rad-green] The Great Affordability Crisis Breaking America -- The Atlantic

*Not just in
"America."https://www.theatlantic.com/ideas/archive/2020/02/great-affordability-crisis-breaking-america/606046/
<https://www.theatlantic.com/ideas/archive/2020/02/great-affordability-crisis-breaking-america/606046/>*

*THE ATLANTIC          FEBRUARY 7, 2020*






*The Great Affordability Crisis Breaking AmericaIn one of the best decades
the American economy has ever recorded, families were bled dry.By Annie
LowreyStaff writer at The Atlantic*

[image: image.png]
*ARSH RAZIUDDIN / THE ATLANTIC*

In the 2010s, the national unemployment rate dropped from a high of 9.9
percent <https://fred.stlouisfed.org/series/UNRATE> to its current rate of
just 3.5 percent. The economy expanded each and every year. Wages picked up
for high-income workers as soon as the Great Recession ended
<https://www.epi.org/publication/ib347-earnings-top-one-percent-rebound-strongly/>,
and picked up for lower-income workers in the second half
<https://www.theatlantic.com/business/archive/2017/03/wages-rising/519114/> of
the decade. Americans’ confidence in the economy
<https://news.gallup.com/poll/283940/economic-confidence-highest-point-2000.aspx>
hit
its highest point since 2000, right before the dot-com bubble burst. The
headline economic numbers looked good, if not great.

But beyond the headline economic numbers, a multifarious and strangely
invisible economic crisis metastasized: Let’s call it the Great
Affordability Crisis. This crisis involved not just what families earned
but the other half of the ledger, too—how they spent their earnings. In one
of the best decades the American economy has ever recorded, families were
bled dry by landlords, hospital administrators, university bursars, and
child-care centers. For millions, a roaring economy felt precarious or
downright terrible.

Viewing the economy through a cost-of-living paradigm helps explain why
roughly
<https://www.federalreserve.gov/publications/files/2018-report-economic-well-being-us-households-201905.pdf>
two
in five American adults would struggle to come up with $400 in an emergency
so many years after the Great Recession ended. It helps explain why
<https://www.federalreserve.gov/publications/files/2018-report-economic-well-being-us-households-201905.pdf>
one
in five adults is unable to pay the current month’s bills in full. It
demonstrates why a surprise furnace-repair bill, parking ticket, court fee,
or medical expense remains ruinous for so many American families, despite
all the wealth this country has generated. Fully one in three households is
classified as “financially fragile
<https://www.nefe.org/research/research-projects/completed-research/2018/financial-fragility-in-the-us-evidence-and-implications.aspx>
.”

Along with the rise of inequality, the slowdown in productivity growth, and
the shrinking of the middle class, the spiraling cost of living has become
a central facet of American economic life. It is a crisis amenable to
policy solutions at the state, local, and federal levels—with all of the
2020 candidates, President Donald Trump included, teasing or pushing
sweeping solutions for the problem. But absent those solutions, it looks
certain to get worse for the foreseeable future—leaving households fragile,
exacerbating the country’s inequality, slowing down growth, smothering
productivity, and putting families’ dreams of security out of reach.

The price of housing represents the most acute part of this crisis. In
metro areas such as the Bay Area, Seattle, and Boston, severe supply
shortages have led to soaring prices—millions of low- and middle-income
families are no longer able to purchase centrally located homes. The median
asking price for a single-family home in San Francisco has reached
<https://www.bayareamarketreports.com/trend/san-francisco-home-prices-market-trends-news>
$1.6
million; even with today’s low interest rates, that would require a monthly
mortgage payment of roughly $6,000, assuming that a family puts down the
standard 20 percent. In Manhattan, listings for sale
<http://www.neighborhoodx.com/landlording_data?value=median&amp;city=Comparing%20city%20price%20ranges_consolidated_August2018>
now
ask an average of nearly $1,800 per square foot.

The housing cost crises in the Bay Area and New York might be the country’s
most obscene. But the problem is national, driven by a combination of
stagnant wages, restrictive building codes, and underinvestment in
construction, among other trends. Home prices are rising faster than wages
<https://www.housingwire.com/articles/47878-home-prices-are-rising-faster-than-wages-in-80-of-us-markets/>
in
roughly 80 percent of American metro regions. In 2018, housing
affordability declined in every one of the 160-some urban areas analyzed by
<https://www.nar.realtor/sites/default/files/documents/metro-affordability-2018-existing-single-family-2019-06-11.pdf>
the
National Association of Realtors, save for Decatur, Illinois. Rising prices
and housing shortages are squeezing families in Reno
<https://www.rgj.com/restricted/?return=https%3A%2F%2Fwww.rgj.com%2Fstory%2Fnews%2Fmoney%2Fbusiness%2F2020%2F01%2F23%2Fedawn-reno-nevada-housing-crisis-homeless-working-shelter%2F4549007002%2F>
, Minneapolis
<https://www.axios.com/minneapolis-grapples-with-affordable-housing-shortage-5ecd0c03-06d1-4f87-80e0-9a6ab3a34f15.html>,
and Phoenix
<https://www.azcentral.com/story/news/local/arizona/2019/03/15/arizona-third-worst-nation-affordable-housing/3175202002/>
.

The problem now even extends to *rural *areas, where income growth has
lagged
<https://www.census.gov/library/stories/2018/12/differences-in-income-growth-across-united-states-counties.html>
in
the post-recession period. A recent report by the Pew Charitable Trusts
found
<https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2019/03/25/rural-america-faces-a-housing-cost-crunch>
“sizable”
increases in the number of households spending half or more of their income
on housing in rural counties across the country. The housing crisis is
hitting Bertie County, North Carolina, and Irion County, Texas, too.

One central effect of the housing-cost crisis has been to turn the United
States into a country of renters. The homeownership rate has fallen from a
peak of nearly 70 percent in the mid-aughts to under 65 percent today
<https://fred.stlouisfed.org/series/RSAHORUSQ156S>; the numbers are more
acute for Millennials, whose homeownership rate is 8 percentage points
lower than that of their parents at the same age
<https://www.urban.org/urban-wire/state-millennial-homeownership>. Unable
to buy, roughly 3.5 million younger families have kept renting
<https://www.urban.org/urban-wire/state-millennial-homeownership>—delaying
the Millennial and Gen X cohorts’ wealth accumulation, thus consigning them
to worse net-worth trajectories for the rest of their lives. And renting,
for many families, is not affordable, either: Nearly half of renters are
facing uncomfortable monthly bills
<https://www.jchs.harvard.edu/sites/default/files/Harvard_JCHS_State_of_the_Nations_Housing_2019.pdf>,
and the cost of renting has risen faster than renters’ incomes for a
full 20 years
now <https://www.cbpp.org/blog/census-income-rent-gap-grew-in-2018>.

The cost-of-living crisis extends beyond housing. Health-care costs are
exorbitant, too: Americans pay roughly twice as much
<https://www.oecd.org/els/health-systems/health-data.htm> for insurance and
medical services as do citizens of other wealthy countries, but they don’t
have better outcomes. In the post-recession period, premiums, deductibles,
and out-of-pocket costs in general just kept rising
<https://www.healthaffairs.org/do/10.1377/hblog20190327.999531/full/>,
eating away at families’ budgets, casting millions into debt, and
consigning millions more to bankruptcy.

The “cost burden
<https://www.healthaffairs.org/do/10.1377/hblog20190327.999531/full/>” of
health coverage climbed through the 2010s; just from 2010 to 2016, family
private-insurance premiums jumped 28 percent to $17,710, while median
household incomes rose less than 20 percent. That meant less take-home pay
for workers. Deductibles—what a family has to fork over before insurance
kicks in—also soared. From 2010 to 2016, the share of employees in health
plans with a deductible jumped from 78 percent to 85 percent. And the
average annual deductible went from less than $2,000 to more than $3,000.

The country’s insurance premiums and out-of-pocket health-cost burdens are
just very, very high—including for people with publicly subsidized or
public coverage. The average person on Medicare spends $5,460 on health
care beyond what they pay for insurance
<https://www.kff.org/medicare/issue-brief/how-much-do-medicare-beneficiaries-spend-out-of-pocket-on-health-care/>every
year. The average person with Medicaid
<https://www.kff.org/medicare/issue-brief/how-much-do-medicare-beneficiaries-spend-out-of-pocket-on-health-care/>
forks
over nearly half that. No wonder two in three bankruptcies are related to
medical issues, and nearly 140 million American adults report “medical
financial hardship” each and every year
<https://link.springer.com/article/10.1007/s11606-019-05002-w>.

Next up is student-loan debt, a trillion-dollar stone placed on young
adults’ backs. Or, to be more accurate, the $1.4 trillion stone, up 6
percent
<https://www.experian.com/blogs/ask-experian/state-of-student-loan-debt/#s1>
year
over year and 116 percent in a decade; student-loan debt is now a bigger
burden for households than car loans or credit-card debt. Half of students
now take on loans of one kind or another to try for a higher-ed degree, and
outstanding debts typically total $20,000 to $25,000, requiring monthly
payments
<https://www.federalreserve.gov/publications/2019-economic-well-being-of-us-households-in-2018-student-loans-and-other-education-debt.htm>
of
$200 to $300—though of course many students owe much more. Now nearly 50
million adults are stuck working off their educational debt loads
<https://www.nbcnews.com/news/us-news/student-loan-statistics-2019-n997836>,
including one in three
<https://www.pewresearch.org/fact-tank/2019/08/13/facts-about-student-loans/>
adults
in their 20s, erasing the college wealth premium for younger Americans and
eroding the college earnings premium.

Finally, child care. Spending on daycare, nannies, and other direct-care
services for kids has increased by 2,000 percent in the past four decades
<https://www.theatlantic.com/ideas/archive/2019/11/why-child-care-so-expensive/602599/>,
and families now commonly spend $15,000 to $26,000 a year
<https://cdn2.hubspot.net/hubfs/3957809/2019%20Price%20of%20Care%20State%20Sheets/Final-TheUSandtheHighPriceofChildCare-AnExaminationofaBrokenSystem.pdf?utm_referrer=https%3A%2F%2Fwww.childcareaware.org%2Four-issues%2Fresearch%2Fthe-us-and-the-high-price-of-child-care-2019%2F>
to
have someone watch their kid. Such care is grossly unaffordable for
low-income parents in metro areas across the country, causing many people
to drop out of the labor force. But one in four American mothers returns to
work within two weeks
<https://www.theguardian.com/us-news/2020/jan/27/maternity-paid-leave-women-work-childbirth-us?CMP=fb_gu&utm_medium=Social&utm_source=Facebook&fbclid=IwAR0e2G0o4c1_ltSH_PyI3RO8Z9P7i_VOMIolsEt7ilZnR1ZHKQ9EvEcFXrI#Echobox=1580146241>
of
giving birth, so heavy are the *other* cost burdens of living in this
country. The whole system is broken
<https://cdn2.hubspot.net/hubfs/3957809/2019%20Price%20of%20Care%20State%20Sheets/Final-TheUSandtheHighPriceofChildCare-AnExaminationofaBrokenSystem.pdf?utm_referrer=https%3A%2F%2Fwww.childcareaware.org%2Four-issues%2Fresearch%2Fthe-us-and-the-high-price-of-child-care-2019%2F>
.

The federal government has set as a benchmark that low-income families
should not spend more than 7 percent of their income on child care. But
child care is generally the single biggest line item on young families’
budgets, bigger even than rent or mortgage payments: Putting a kid in
daycare costs 18 percent of annual income in California; home-based options
equal 14 percent of family income in Nebraska; having an infant in
professional care in the District of Columbia costs more
<https://cdn2.hubspot.net/hubfs/3957809/2019%20Price%20of%20Care%20State%20Sheets/Final-TheUSandtheHighPriceofChildCare-AnExaminationofaBrokenSystem.pdf?utm_referrer=https%3A%2F%2Fwww.childcareaware.org%2Four-issues%2Fresearch%2Fthe-us-and-the-high-price-of-child-care-2019%2F>
than
most poor families earn.

It all adds up, and it all subtracts from families’ well-being. The price
tags for tuition and fees at colleges and universities have risen twice as
fast as wages, if not more, in recent years
<https://research.collegeboard.org/pdf/trends-college-pricing-2019-full-report.pdf>.
Rental costs are outpacing wage gains by a percentage point or more a year
<https://www.marketwatch.com/story/rents-are-still-growing-much-faster-than-wages-even-as-growth-cools-slightly-2018-06-12>.
Health-care costs have grown twice as fast as workers’ wages
<https://www.ajmc.com/newsroom/healthcare-costs-increased-twice-as-fast--over-last-decade>.
And child-care costs have exploded
<https://www.ajmc.com/newsroom/healthcare-costs-increased-twice-as-fast--over-last-decade>.
These cost pressures are particularly acute on young Americans who have
seen worse employment prospects and smaller raises than their older
counterparts.

The effects are wide-ranging. High costs are preventing workers from moving
to high-productivity cities, thus smothering the country’s economic
vibrancy and putting a drag on its GDP; economists have estimated
<https://www.citylab.com/equity/2015/05/the-urban-housing-crunch-costs-the-us-economy-about-16-trillion-a-year/393515/>
that
GDP would be as much as 10 percent bigger if more workers could afford to
live in places like San Jose and Boston. High costs are forcing families to
delay getting married and to have fewer children, and putting the dream of
owning a home out of reach.

What is perhaps most frustrating is that the Great Affordability Crisis is
amenable to policy solutions—ones most other rich countries adopted decades
ago. In other developed economies, child care, early education, and higher
education are public goods, and do not require high-interest-rate debts or
endless scrambling by exhausted young parents to procure. Other wealthy
countries have public-health systems that cover everybody at far lower
cost, whether through socialized or private models. And numerous proposals
would transform residential construction in this country, including one
<https://www.theatlantic.com/ideas/archive/2020/01/sb50-california/604786/>
that
just failed in California’s legislature.

But the Great Affordability Crisis hides in plain sight, obvious to
households but unmentioned in the country’s headline economic numbers. It
persists even as President Donald Trump rightly praises the country’s
growth, low unemployment rate, and rising household incomes. And though
there are many nationwide policies that could end the crisis, they all seem
unlikely to pass through the country’s broken Congress; the brightest
glimmer of hope lies in housing and health-care policy by individual
states. But it is still a dim glimmer. This crisis looks sure to stay with
us for the coming decade, whatever recessions or expansions it may hold.

*ANNIE LOWREY <https://www.theatlantic.com/author/annie-lowrey/> is a staff
writer at The Atlantic, where she covers economic policy.*

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