tag:theconversation.com,2011:/columns/mechele-dickerson-152545Debt: the Good, the Bad and the Ugly – The Conversation2015-07-24T17:34:25Ztag:theconversation.com,2011:article/438992015-07-24T17:34:25Z2015-07-24T17:34:25ZCandidates are ignoring race’s crucial role in determining who thrives, struggles<p>Last Saturday, presidential hopefuls Bernie Sanders and Martin O’Malley were booed and heckled by <a href="http://www.nytimes.com/2015/07/19/us/protesters-confront-candidates-on-race-at-netroots-nation-conference.html?emc=edit_th_20150719&nl=todaysheadlines&nlid=28708558">liberal</a> activists at a town hall discussion at the Netroots Nation annual conference. </p>
<p>Why would attendees at a gathering of left-leaning progressives commandeer the microphone on stage and shout down Democratic White House contenders? Because Sanders and O’Malley, like the rest of the candidates, have built political platforms that largely ignore race.</p>
<p>The activists at the Netroots meeting were angry because Sanders and O’Malley have failed to respond to racial criminal justice issues, largely ignoring recent high-profile cases – such as the death in police custody of <a href="http://www.nbcnews.com/news/us-news/sandra-bland-said-she-was-depressed-attempted-suicide-jail-records-n396886">Sandra Bland</a> – and police misconduct involving blacks. Instead, the candidates have focused on economic reforms. But those platforms ignore race too.</p>
<p>Sanders eventually <a href="http://www.salon.com/2015/07/22/bernie_sanders_becomes_the_first_candidate_to_speak_out_on_sandra_bland_we_need_real_police_reform/">denounced</a> the circumstances surrounding the Sandra Bland arrest and has called for police reforms, and Hillary Clinton now <a href="http://www.msnbc.com/msnbc/hillary-clinton-yes-black-lives-matter">appears</a> to have embraced the Black Lives Matter movement. </p>
<p>Still, none of the White House hopefuls has publicly discussed the role that demographics – particularly race – play in determining who will thrive, and who will struggle, in today’s economy.</p>
<h2>Cookie-cutter platforms</h2>
<p>Sanders, who is a socialist and the most progressive candidate in the presidential race, has <a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/16/bernie-sanders-on-americas-grotesquely-unfair-society/">characterized</a> the well-documented wealth and income gaps as “grotesquely” unfair. His proposed solutions, though, are generic and race-neutral ones, like raising the minimum wage or creating jobs in low-income neighborhoods. </p>
<p>Likewise, Hillary Clinton’s recently announced economic policy <a href="http://www.cnn.com/2015/07/12/politics/hillary-clinton-economic-policy-speech/">platform</a> largely steers clear of race and instead focuses on stagnating middle-class wages.</p>
<p>Few Republicans have discussed racial justice issues either, and Jeb Bush has now <a href="http://www.msnbc.com/msnbc/jeb-bush-calls-black-lives-matter-slogan">dismissed</a> the <a href="http://blacklivesmatter.com">Black Lives Matter movement</a> as merely a “slogan.” </p>
<p>But, about eight months before he <a href="http://time.com/3773964/rand-paul-presidential-campaign-launch-speech-transcript/">launched</a> his presidential campaign, Senator Rand Paul, a libertarian-leaning Republican, wrote an <a href="http://time.com/3111474/rand-paul-ferguson-police/">op-ed</a> that discusses the racial disparities in the criminal justice system. The opinion, written in response to the violence in Ferguson, Missouri, after the police shooting death of Michael Brown, argues that “[a]nyone who thinks race does not skew the application of criminal justice in this country is just not paying close enough attention.” </p>
<p>Since announcing his candidacy for president, though, Rand has largely avoided discussing racial criminal justice issues. While his official <a href="https://randpaul.com/issue/criminal-justice-reforms">web page</a> refers to an “unjust criminal justice system,” his campaign has not focused on how the criminal justice system disproportionately harms black Americans. </p>
<p>Likewise, rather than focusing on police misconduct as a cause for the recent riots in Baltimore, he instead <a href="http://www.washingtonpost.com/blogs/post-politics/wp/2015/04/29/what-rand-paul-used-to-say-about-criminal-justice-just-a-few-months-ago-and-what-he-says-today-they-dont-sound-quite-the-same/">suggested</a> that they resulted from a breakdown in family structure, a lack of fathers and the lack of a moral code in society.</p>
<p>While Republican candidate Rick Perry <a href="http://www.reuters.com/article/2015/07/02/us-usa-election-perry-idUSKCN0PC2OU20150702">mentioned</a> black poverty in a recent speech, his <a href="http://www.washingtonexaminer.com/rick-perry-lays-out-his-economic-plan/video/bc-4334883923001">response</a> was also a race-neutral one that focused on giving people at the bottom of the economic ladder a chance to climb.</p>
<p>For the most part, the candidates’ proposals to address income and wage inequality are generic and nonracial: raise the minimum wage, <a href="http://www.nytimes.com/2015/07/14/us/politics/hillary-clinton-offers-her-vision-of-a-fairness-economy-to-close-the-income-gap.html?emc=edit_th_20150714&nl=todaysheadlines&nlid=28708558">expand</a> social security, <a href="http://time.com/3955359/hillary-clinton-economy-2016-presidential-election/">tax</a> the ultra-rich or <a href="http://www.reuters.com/article/2015/07/02/us-usa-election-perry-idUSKCN0PC2OU20150702">increase</a> the earned income tax credit. None of the proposals acknowledges that, because of the widening wealth gap, race and ethnicity have now become almost decisive factors in determining whether a family will thrive or struggle financially.</p>
<h2>Who thrives and who struggles</h2>
<p>The authors of a series of <a href="https://www.stlouisfed.org/household-financial-stability/the-demographics-of-wealth">essays</a> recently issued by the Federal Reserve Bank of St Louis show that race remains a powerful, if not conclusive, predictor of whether you will be a financial “thriver” or “struggler.” </p>
<p>After analyzing data collected in the Fed’s Survey of Consumer Finances from 1989 to 2013, the authors found that about a quarter of American families are financially thriving, while the other 75% are struggling.</p>
<p><a href="https://www.stlouisfed.org/%7E/media/Files/PDFs/HFS/essays/HFS-Essay-1-2015-Race-Ethnicity-and-Wealth.pdf">Thriving</a> families are middle-aged, white or Asian college graduates who have above-average incomes and have amassed enormous amounts of wealth. In contrast, strugglers are young, black or Hispanic, are less educated, have little or no wealth and work in low-wage jobs. The essays reveal that income – and particularly wealth – gaps among whites, blacks and Hispanics are staggering.</p>
<p>Average income for blacks and Hispanics is 40% lower than for whites. Even worse, average wealth held by Hispanic and black families is 90% lower. While the presidential candidates’ proposals to increase the minimum wage might help close the income gap, a little more take-home pay would do little to close the staggering wealth gap.</p>
<p>The essays also reveal that wealth patterns for racial groups have changed little over the last 25 years and, except for Asian families, may now be permanent. For example, from 1989 to 2013, white families have consistently held the greatest amount of wealth, followed by Asian, then Hispanic, and finally black families. Although Asian family wealth has steadily increased over the 25-year period because of higher college completion rates for young Asians, financial patterns have remained virtually unchanged for whites, Hispanics and blacks.</p>
<h2>Race-neutral solutions won’t address the roots</h2>
<p>Increasing college graduate rates for blacks and Latinos or making colleges free (as Sanders has <a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2015/07/16/bernie-sanders-on-americas-grotesquely-unfair-society/">proposed</a>) are race-neutral solutions that could ostensibly close the wealth gap. But, even if more young blacks and Latinos receive college degrees, the wealth gaps won’t go away.</p>
<p>The Fed researchers considered whether education, rather than race, was the main cause for the wealth gap. They <a href="https://www.stlouisfed.org/%7E/media/Files/PDFs/HFS/essays/HFS-Essay-1-2015-Race-Ethnicity-and-Wealth.pdf">found</a> that age and education play only small roles in explaining the gaps. Racial and ethnic differences in financial well-being remain even after accounting for the age and educational attainment of the head of the family.</p>
<p>In the last decade, the US population became more racially and ethnically <a href="https://www.census.gov/newsroom/press-releases/2015/cb15-113.html">diverse</a> than it has ever been. If political leaders continue to ignore widening wealth inequality, the gaps may become permanent, and that could be destabilizing both politically and economically. It will be harder to boost the economy in the future if blacks and Latinos are permanently relegated to an economic underclass that has little wealth.</p>
<p>It is not particularly surprising that the presidential hopefuls shy away from saying that race may determine a family’s financial well-being. Though a recent New York Times <a href="http://www.nytimes.com/2015/07/24/us/poll-shows-most-americans-think-race-relations-are-bad.html?emc=edit_th_20150724&nl=todaysheadlines&nlid=28708558&_r=0">poll</a> now shows that most Americans think race relations in this country are generally bad, making such a statement in a political climate that purports to be colorblind might quickly end the candidate’s presidential aspirations.</p>
<p>Until politicians are willing to admit that whether you thrive or struggle financially may be influenced by your race, however, the United States will remain racially split into groups of a few haves – and a lot of have-nots.</p><img src="https://counter.theconversation.com/content/43899/count.gif" alt="The Conversation" width="1" height="1" />
Last Saturday, presidential hopefuls Bernie Sanders and Martin O’Malley were booed and heckled by liberal activists at a town hall discussion at the Netroots Nation annual conference. Why would attendees…Mechele Dickerson, Professor of Law, The University of Texas at AustinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/438952015-06-26T10:06:37Z2015-06-26T10:06:37ZNews flash: affordable housing crisis is hurting all of us (except the well-heeled)<figure><img src="https://images.theconversation.com/files/86457/original/image-20150625-22659-13cxwb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Housing's in the news.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Until recently, affordable housing was mentioned only in conversations involving low-wage or unemployed workers – or the homeless. The only groups that focused on rising rental costs were low-income housing advocacy groups. </p>
<p>That has now changed.</p>
<p>For the first time since possibly the Great Depression, the lack of affordable housing is being viewed as a crisis that affects Americans of all ages, races and income groups. </p>
<p>While the US Supreme Court spotlighted the issue in Thursday’s <a href="http://www.supremecourt.gov/opinions/14pdf/13-1371_m64o.pdf">ruling</a> allowing parties to challenge housing practices even if they do not (or cannot) prove there was intentional bias or discrimination, the mainstream media is finally catching on as well. </p>
<p>In the last three weeks, the <a href="http://www.washingtonpost.com/blogs/wonkblog/wp/2015/06/24/how-renting-became-the-new-homeownership/?postshare=3541435160651298">Washington Post</a>, <a href="http://www.nytimes.com/2015/06/24/business/economy/more-americans-are-renting-and-paying-more-as-homeownership-falls.html?_r=0">New York Times</a> and <a href="http://www.wsj.com/articles/new-housing-crisis-looms-as-fewer-renters-can-afford-to-own-1433698639">Wall Street Journal</a> have all sounded the alarm about the country’s looming affordable housing crisis. In addition, well-heeled non-profit groups – like the <a href="https://www.facebook.com/JRThousing">foundation</a> recently formed by the former CEO of the nation’s largest apartment developer – have begun urging politicians to <a href="http://www.housingfinance.com/policy-legislation/terwilliger-speaks-out-on-silent-housing-crisis_o">address</a> the growing problem of rental housing unaffordability.</p>
<h2>Growing more somber</h2>
<p>Some of the recent media attention on the unaffordability of housing was triggered by the 2015 State of the Nation’s Housing <a href="http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/jchs-sonhr-2015-full.pdf">report</a>, just released by the Harvard Joint Center for Housing Studies (JCHS). While the JCHS has issued a similar report every year since 1988, the latest edition opens with an unusually somber tone about the state of housing in this country.</p>
<p>“Homeownership at 20-Year Lows,” bellows the opening line of the 2015 report.</p>
<p>By comparison, the first line in 2013 <a href="http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/son2013_0.pdf">highlighted</a> the “Housing Market Revival,” while the 2014 report only hinted at the growing problems with “Single-Family Slowdown.”</p>
<p>This change in tone was very slow in coming. The 2013 report optimistically reported that “the long-awaited housing recovery finally took hold in 2012.” The 2014 report, while less rose-tinted, still <a href="http://www.jchs.harvard.edu/sites/jchs.harvard.edu/files/sonhr14-color-full_0.pdf">noted</a> that “the housing market gained steam in early 2013.”</p>
<p>The 2015 report strikes a decidedly different and more alarmist tone by emphasizing that the housing recovery “lost momentum” as homeownership rates continued to fall. This report then chronicles the increase in the number of renters who are “cost-burdened” and cannot find affordable housing and the number of minority neighborhoods that still have not recovered from the recession.</p>
<h2>Who’s struggling</h2>
<p>While news sources have intermittently reported on housing affordability issues since the recession, what is new about the current affordable housing reports is who is struggling to find affordable housing. It’s no longer just millennials or the poor or homeless people.</p>
<p>Prior <a href="https://theconversation.com/homeownership-losing-role-as-lynchpin-of-the-american-dream-42397">accounts</a> have described the low homeownership rates of cash-starved millennials who live with their parents because of high student loan debt and low-wage jobs. </p>
<p>The recent New York Times article discusses former homeowners who are now forced to rent because they lost their homes to foreclosure and cannot qualify for a mortgage loan because of blemished credit. Likewise, the Washington Post article discusses middle- and even upper-income renters and the fact that many parents of millennials are now struggling to find affordable housing.</p>
<p>The JCHS report explains that homeownership rates for Americans aged 35 to 44 have now dropped to levels not seen since the 1960s. In describing the housing affordability crisis for renters, the report shows that from 2004 to 2014, older Americans (aged 45 to 64) became renters at greater rates than millennials households under the age of 35. </p>
<h2>Today’s rental crisis</h2>
<p>Housing affordability is no longer limited to the lowest-paid workers. The JCHS report stresses that renters whose earnings place them in the highest-income quartile now account for more than 20% of new renters.</p>
<p>Renters are no longer the low-income, working-class Americans typically featured in news <a href="http://www.nytimes.com/2014/11/13/opinion/a-new-model-for-affordable-housing.html">reports</a>. Today’s rental crisis is now affecting just about everyone but the really rich.</p>
<p>The Wall Street Journal article assumes that policymakers are either blissfully unaware of the affordable housing crisis, or they are unwilling to do anything about it. </p>
<p>Politicians have not been willing to make changes to popular housing laws or policies that benefit upper-income homeowners, like the mortgage interest deduction. And they haven’t been willing to provide additional relief to lower-income renters by, for example, expanding the low income tax credit.</p>
<p>Politicians may be unwilling to do anything to solve the affordable housing crisis. But, after these recent reports, they can no longer say they don’t know the crisis exists.</p><img src="https://counter.theconversation.com/content/43895/count.gif" alt="The Conversation" width="1" height="1" />
Until recently, affordable housing was mentioned only in conversations involving low-wage or unemployed workers – or the homeless. The only groups that focused on rising rental costs were low-income housing…Mechele Dickerson, Professor of Law, The University of Texas at AustinLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/432342015-06-16T14:50:06Z2015-06-16T14:50:06ZAnother housing crisis looms as millennials struggle to find homes they can afford<figure><img src="https://images.theconversation.com/files/85059/original/image-20150615-5832-f277j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Micro housing could be the solution to helping millennials afford a home. </span> <span class="attribution"><span class="source">Home change via www.shutterstock.com</span></span></figcaption></figure><p>I co-teach a freshman seminar at the University of Texas called “Debt: the Good, Bad and Ugly” that examines the different ways consumers borrow and spend. Do they reflect wise investments in the future (the good), unnecessary or frivolous spending that should be avoided whenever possible (the bad) or spending that can ruin your life (the ugly)? </p>
<p>Virtually every person in this country will end up in debt at one point or another, and understanding the ins and outs is essential for all of us. It’s also the reason I focus my seminar and research on the topic of consumer debt. </p>
<p>In the months to come, my new column will explore the same themes I teach freshmen at UT, such as the psychology of spending, the ways debt affects millennials and people of color, and how both individual knowledge and structural factors can help consumers avoid the traps of ugly debt. </p>
<p>This inaugural column expands on themes I <a href="https://theconversation.com/homeownership-losing-role-as-lynchpin-of-the-american-dream-42397">explored</a> in an article several weeks ago on National Homeownership Month, held every June since 2003, and how the housing industry has little to celebrate this year.</p>
<p>Homeownership rates have been <a href="http://blogs.wsj.com/economics/2015/04/28/the-homeownership-rate-is-now-the-lowest-since-1989-but-theres-a-silver-lining/">falling</a> since 2005 and are now at a 26-year low of 64%. And millennials are especially feeling the pinch, with the rate down 7.3% in the last decade for people aged 18 to 34.</p>
<p>Results of a <a href="http://www.macfound.org/press/press-releases/prolonged-housing-crisis-diminishes-confidence-american-dream-2015-housing-matters-survey-finds">survey</a> released last week by the MacArthur Foundation provide even more somber news for the housing industry. Also, demographic and other trends suggest that the US may be headed for another housing crisis and that home prices may plunge in the not too distant future. </p>
<p>While the looming housing crisis won’t be as serious as the recent subprime mortgage-fueled collapse that triggered a global financial crisis, it will be a major setback for the US economy, which is still struggling to escape the lingering effects of the Great Recession. </p>
<p>A temporary solution, however, may be available. This solution will work only if real estate developers and elected officials are willing to think outside the box and consider new and innovative ways to make housing affordable for millennials and others.</p>
<p>But first, on to the survey. </p>
<h2>Worst is yet to come?</h2>
<p>MacArthur’s 2015 How Housing Matters survey <a href="http://www.macfound.org/press/press-releases/prolonged-housing-crisis-diminishes-confidence-american-dream-2015-housing-matters-survey-finds">reveals</a> that three in five Americans either believe that the country is still in the midst of the 2007 housing crisis or think the worst is yet to come. More than half view housing affordability as a fairly or very serious problem.</p>
<p>Escalating rents and housing prices have forced the majority of Americans to make <a href="http://www.macfound.org/press/press-releases/prolonged-housing-crisis-diminishes-confidence-american-dream-2015-housing-matters-survey-finds/">tradeoffs</a> or sacrifices in order to pay their monthly housing expenses. Approximately 20% have been forced to hold a second job or find other ways to increase their income, 17% have stopped saving for retirement and 14% made ends meet by borrowing on their credit cards.</p>
<p>Millennials are particularly vulnerable. Americans across all generations believe that it is hard for millennials to find stable and affordable housing, and the MacArthur survey indicates that 67% are being forced to sacrifice in order to pay for housing.</p>
<p>Despite their views and aspirations (most still see homeownership as an excellent long-term investment and want to own one day), 80% of young adults reported that that it is hard for them to find affordable housing to purchase. </p>
<h2>A looming crisis</h2>
<p>And that bodes ill for the housing market because, by the end of this year, millennials <a href="http://www.pewresearch.org/fact-tank/2015/05/11/millennials-surpass-gen-xers-as-the-largest-generation-in-u-s-labor-force/">likely</a> will be the largest living generation. They are already the <a href="http://www.pewresearch.org/fact-tank/2015/05/11/millennials-surpass-gen-xers-as-the-largest-generation-in-u-s-labor-force/">biggest</a> group in the workforce. Their inability or unwillingness to buy the homes baby boomers own and will need to sell, or to buy the homes developers are building, foreshadows a looming housing crisis.</p>
<p>It is possible, though, that millennials are rejecting the homes boomers are selling (or the homes developers are building) because of a size mismatch, which bleeds into the affordability issue. Houses keep growing larger at the same time that US households are getting smaller. </p>
<p>For example, the <a href="https://www.census.gov/construction/chars/pdf/squarefeet.pdf">average size</a> of newly constructed single-family homes in 1980 was 1,740 square feet. By 2007, the <a href="http://www.nber.org/cycles.html">first year</a> of the recent recession, the average home had reached 2,521 square feet, a 45% increase. Home size began to come down for a few years after the crisis but hit a new record in 2014 at 2,657 square feet.</p>
<p>At the same time, the number of people who live in households <a href="https://www.census.gov/hhes/families/files/graphics/HH-6.pdf">continues to shrink</a>. The number of married households <a href="https://www.census.gov/hhes/families/files/graphics/HH-1.pdf">has dropped</a> from about 60% in the ‘80s to less than half of all households by 2014. Those consisting of only one person <a href="https://www.census.gov/hhes/families/files/graphics/HH-4.pdf">have climbed</a> to about 27% from less than 20% three decades ago. </p>
<p>The <a href="http://www.statista.com/statistics/183648/average-size-of-households-in-the-us/">average household size</a>, which was 3.33 in <a href="https://www.census.gov/prod/cen2010/briefs/c2010br-14.pdf">1960</a>, dropped to 2.76 in 1980 and reached a low of 2.54 last year. Millennials are especially likely to live in a single-person household because they are delaying both marriage and child rearing.</p>
<h2>Micro-housing may provide a Band-Aid</h2>
<p>A promising housing solution for people who are willing to trade square feet for lower costs is smaller (mini, minim, micro, tiny) houses or apartments that generally are less than 500 square feet – something much more common in major cities. </p>
<p><a href="http://www.npr.org/2015/02/26/389263274/living-small-in-the-city-with-more-singles-micro-housing-gets-big">Micro-housing</a> is generally associated with sustainable or environmentally conscious housing movements because the smaller size of the housing reduces the occupants’ carbon footprint. </p>
<p>But <a href="http://uli.org/wp-content/uploads/ULI-Documents/MicroUnit_full_rev_2015.pdf">micro-rental units</a> can also provide affordable housing for the growing number of renters who cannot find affordable rental housing, or who still cannot afford to buy a homes. </p>
<p>Smaller and less expensive rental housing can help millennials who want to become homeowners save enough money for a down payment. And, micro-homes may be appealing to single millennials who want to become homeowners but cannot afford or are not interested in buying homes that are suited for married couples who have children. </p>
<p>Unfortunately, zoning ordinances and building codes often make it <a href="http://www.bloomberg.com/news/articles/2014-07-09/tiny-houses-big-with-u-s-owners-seeking-economic-freedom">hard</a> for developers to place micro-housing in neighborhoods because of minimum square foot requirements and because of regulations that prevent builders from placing more than one structure on a single lot. </p>
<p>In addition, lenders often refuse to finance tiny houses that are smaller than 500 square feet. And existing homeowners routinely <a href="http://www.austinchronicle.com/news/2014-06-20/then-theres-this-split-views-on-adus/">oppose</a> having micro-housing in their neighborhoods.</p>
<h2>Making affordability a priority</h2>
<p>The real estate industry must do a better of job of ensuring that available housing meets the needs and desires of millennials, and US political leaders must ensure that housing policies are flexible enough to encourage and subsidize a broader range of housing types that can attract them. </p>
<p>While most Americans <a href="http://www.macfound.org/press/press-releases/prolonged-housing-crisis-diminishes-confidence-american-dream-2015-housing-matters-survey-finds/">surveyed</a> in the MacArthur poll wanted their state and local elected officials to treat housing affordability as a priority, only 14% felt they are doing so.</p>
<p>Given stagnant wages for most American workers, micro-housing will not completely solve the housing affordability problem. But smaller dwellings at lower costs will help financially struggling renters, should bring millennials one step closer to becoming homeowners, and potentially can avert another housing crisis.</p><img src="https://counter.theconversation.com/content/43234/count.gif" alt="The Conversation" width="1" height="1" />
I co-teach a freshman seminar at the University of Texas called “Debt: the Good, Bad and Ugly” that examines the different ways consumers borrow and spend. Do they reflect wise investments in the future…Mechele Dickerson, Professor of Law, The University of Texas at AustinLicensed as Creative Commons – attribution, no derivatives.