Land ownership has shaped civilizations from their beginnings, with a constant interplay between great powers—the aristocracy, the state, the Church, the emperor—and those below them. History has oscillated between periods of greater dispersion of ownership, and those that favored greater concentration.
Today, we live in an era of ever-greater consolidation, not from knights in armor, or Communist cadres, but from the forces of big capital and an ever-more intrusive regulatory state. The result has been record-high housing prices, well above the increase in incomes resulting in a systematic decline in the ability of people, particularly the young, to buy their own house as prices rise even in less expensive areas. Supply also faces great constraints, due in part to labor and supply-chain woes and the demand shock of the pandemic and remote work.
Unless reversed, young people will be forced into a lifetime of rental serfdom. The assets that drove middle-class stability, wider social benefit, and subsidized comfortable retirements, will likely not be available to them. Property remains key to financial security: Homeowners have a median net worth more than 40 times that of renters, according to the Census Bureau. Shoving prospective homeowners into the rental market not only depresses their ambitions, but it also forces up rents, which hurts poorer households and even solid minority neighborhoods.
But this impacts far more than just finances. Low affordability and high rents tend to depress the fertility rate, contributing to what is rapidly becoming a demographic implosion in many countries. More important still, dispersed property ownership has long been intimately tied to democracy while concentration tends to characterize autocracies, whether of the state-dominated variety or that of big capital.
How we reverted to a feudalistic state is a complex and infuriating story. Critical to this change has been a planning theology that holds density itself as intrinsically good and that purposely seeks to block housing on the periphery for societal, and environmental reasons. Where implemented, this approach has driven up prices, as evident in places like Sydney, Vancouver, San Francisco, London, and Paris. This has been a boon to speculators and well-heeled developers, but makes middle-class housing unaffordable to the middle class and intensifies the poverty of poorer residents.
This, as many Sydney-siders will tell you, is not exactly what happened. Instead of flocking to the city, research by the Massachusetts Institute of Technology/Queens University (Canada) estimates that nearly 80 percent of Australia’s metropolitan population lives in automobile-oriented suburbs or exurbs. Further, more than 75 percent of employment growth in Sydney and Melbourne occurred outside the central business districts between the 2011 and 2016 censuses. But due to planning restrictions, taxes, and fees, in the decades since these regulations have been imposed, Sydney has become one of the Anglosphere’s most expensive cities, with prices that have placed most prospective homeowners on the sides. Indeed, under these regulations, house prices have tripled relative to incomes creating conditions where two-thirds of Australians now believe that the next generation will never be able to afford a home.
These trends are distressingly common across the higher income countries. The Organization for Economic Cooperation and Development (OECD) reported in Under Pressure: The Squeezed Middle-Class that the future of the middle-class is threatened by house prices that have been growing “three times faster than household median income over the last two decades.”
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Joel Kotkin is the author of The Coming of Neo-Feudalism: A Warning to the Global Middle Class. He is the Roger Hobbs Presidential Fellow in Urban Futures at Chapman University and Executive Director for Urban Reform Institute. Learn more at joelkotkin.com and follow him on Twitter @joelkotkin.
Wendell Cox is principal of Demographia, an international public policy firm located in the St. Louis metropolitan area. He is a founding senior fellow at the Urban Reform Institute, Houston, a Senior Fellow with the Frontier Centre for Public Policy in Winnipeg and a member of the Advisory Board of the Center for Demographics and Policy at Chapman University in Orange, California. He is co-author of the annual Demographia International Housing Affordability Survey and author of Demographia World Urban Areas.
Homepage photo: Sydney, Australia by Jeremy Bezanger, CC 0 License