Housing crisis
A housing crisis is either a widespread housing shortage in places where people want to live or a financial crisis in the housing market. Housing crises can contribute to homelessness and housing insecurity. They are difficult to address, because they are a complex "web of problems and dysfunctions" with many contributing factors.[1]
There is an ongoing decades-long increasing trend of cities around the world facing housing crises.[2][3] Some notable recent examples are the American subprime mortgage crisis in 2007-2008 and the Chinese property sector crisis beginning in 2020.
Global
[edit]In much of the world, incomes are too low to afford basic formal housing. In some places, this leads to informal settlement in slums or shantytowns, while in others such informal settlements are prohibited.[2] Even regions that are not experiencing an overall housing shortage may experience shortages for specific segments of the population, such as in affordable housing for very-low income populations or permanent supportive housing for those with disabilities.[citation needed]
Economists debate the causes of the crisis. In 2022, economists Christian Hilber and Olivier Schöni found that the primary strand in this debate argues that supply constraints such as land use restrictions prevented the meeting of growing housing demand, resulting in higher housing costs. Others strands in the debate found causes in macroeconomic factors, financing conditions, and poor forecasting of expected prices.[3] People's poor earnings also contribute to the global crisis.[2]
Although major cities around the world face housing shortages, substantial variation exists across countries and across planning systems.[4] Among developed countries, for example, cities in Japan have relatively abundant and affordable housing for their size, which some have attributed to nationalized control of zoning and easy and fast permitting for housing construction. Most English-speaking countries, on the other hand, stand out for planning systems that enable NIMBY obstruction of housing, with prices rising and housing falling into shortage as a result. Developed European countries, which favor higher density construction than Anglophone countries, have followed a path intermediate between these two.[5]
Impacts
[edit]Housing crises have contributed to social unrest in cities around the world.[3] They have especially hurt the finances of Millennials and Generation Z, who entered a more competitive housing market, resulting in paying a higher proportion of income towards housing costs.[6] Politico suggests that in many countries this has allowed populist politicians to stoke anti-immigrant sentiment among younger voters and has resulted in a generation more skeptical of the ability of democracy to deliver results.[6]
National
[edit]India
[edit]According to a 2012 report by the National Buildings Organisation (NBO), the shortage of housing units in urban areas was estimated to be 18.78 million. The shortfall is particularly acute for households belonging to the Economically Weaker Section (total household income does not exceed 300,000 rupees), with a shortage of 10.55 million units, as well as the Lower Income Group (total household income is between 300,000 and 600,000 rupees), with a shortage of 7.41 million units. The Middle Income Group and above (households with a total annual income exceeding 600,000 rupees) face a shortfall of 0.82 million units.[7][8][non-primary source needed]
New Zealand
[edit]Auckland quickly boosted supply and slowed the increase in rents and home prices by loosening constraints on the construction.[9][10] Auckland saw rents grow more slowly than in other parts of the country and more slowly than incomes since it started reforming its housing laws in 2013. As of July 2024, Ryan Greenaway-McGrevy estimated that rents were 28% lower than they would have been without the reforms.[11] Building on Auckland's success, the national government passed a bipartisan upzoning of much of the country's largest cities to allow 3 units and 3 stories on all residential parcels in October of 2021.[12][13]
United Kingdom
[edit]The United Kingdom faces regional shortages of housing, with undersupply and high demand in the south, relative to more abundant housing in economically depressed areas of the north.[14]
The UK National Planning Policy Framework uses the "standard formula" to assess local housing need. The formula uses household growth projections, adjusted for affordability[15] Critics of this method say that it does not account for the present backlog of housing. Households that live in poorly maintained or overcrowded accommodations would not be represented in the standard formula.[16] A 2019 report estimates that 4.75 million households in Great Britain are in need of adequate affordable housing.[17]
In the 2019 general election, both major political parties identified the housing gap as an obstacle for the country, and pledged to increase housing supply.[18][19] The Parliament has a stated target of 300,000 new homes a year by the mid-2020s.[20]
United States
[edit]See also
[edit]Financial crisis
[edit]Another use of the term "housing crisis" refers to financial crises related to the housing sector. Rapid swings and especially declines in housing asset prices can cause shocks to credit markets, the banking sector, and the wider economy.[21]
Foreclosure crises
[edit]Many homebuyers purchase housing on credit in the form of a mortgage, but changing economic conditions can leave them unable to pay back their loans. Guren and McQuade (2020) argue that widespread foreclosures can interact with the housing market to amplify declines in asset prices, leading to prices below levels determined by fundamentals: "When the housing market is hit by a shock that lowers housing demand and induces some foreclosures — for example a drop in employment . . . the dynamic interactions between falling prices, defaults, and credit constraints keep growing numbers of buyers out of the market. The scarcity of buyers lowers prices, intensifies the buyers’ market, and leads to a downward price-default spiral."[22]
Asset cycles and housing crises (financial)
[edit]In addition to long-run trends driven by fundamentals, house prices are also subject to asset cycles. Economists debate the causes of these cycles, but have studied links to changing beliefs about asset prices, broader economic conditions, credit constraints, and interactions with mortgage lenders. As part of an asset cycle, house prices can rise above levels determined by fundamentals ("Housing bubble"). During a correction, a financial-housing crisis can occur in the context of a downward price-foreclosure spiral. This "price-foreclosure spiral . . . pushes prices below their long-run level" leading to patterns such as the boom-bust-rebound of the 2000s housing cycle.[23] These foreclosure crises can have significant consequences for the wider economy.
See also
[edit]- Affordable housing
- Gerontocracy
- Intergenerational equity
- Missing middle housing
- Public housing
- Real estate bubble
References
[edit]- ^ Menendian, Stephen (November 30, 2022). "Deconstructing the 'Housing Crisis'". Othering and Belonging Institute (UC Berkeley). Retrieved 2023-12-30.
- ^ a b c Potts, Deborah Helen (2020). Broken cities inside the global housing crisis. London: Zed books. ISBN 978-1-78699-054-9.
- ^ a b c Hilber; Schöni (May 2022). "Housing policy and affordable housing" (PDF). London School of Economics: Centre for Economic Performance, Occasional Paper (56).
- ^ "What Can Be Done About the Global Housing Crisis? Plenty". Wired. 2022-04-24. Archived from the original on 2022-04-24. Retrieved 2023-12-30.
- ^ "The Anglosphere needs to learn to love apartment living". www.ft.com. Retrieved 2023-12-30.
- ^ a b Dettmer, Jamie; Cancryn, Adam; Hartog, Eva; Taylor-Vaisey, Nick (August 3, 2024). "Priced out of housing, many younger disillusioned voters embrace populism". Politico.
- ^ Housing Data Tables (PDF). National Buildings Organisation. p. 5.
- ^ Credit Linked Subsidy Scheme for EWS/LIG (PDF). Ministry of Housing & Urban Poverty Alleviation. January 2017.
- ^ Cruz, Diego Sánchez de la (2024-03-18). "El milagro de Nueva Zelanda: desregula la vivienda y los precios de los alquileres bajan". Libre Mercado (in European Spanish). Retrieved 2024-09-17.
- ^ Clark, Emily (2023-09-24). "Australia has long debated this housing idea, but in Auckland it's already working". ABC News. Retrieved 2024-09-17.
- ^ "YIMBY cities show how to build homes and contain rents". The Economist. July 17, 2024. ISSN 0013-0613. Retrieved 2024-09-17.
- ^ Greenaway-McGrevy, Ryan (January 24, 2022). "Commentary: New Zealand's bipartisan housing reforms offer a model to other countries". Brookings. Retrieved 2024-09-17.
- ^ "New Zealand's YIMBY Success - And How We Can Learn From it". Reason.com. 2024-04-03. Retrieved 2024-09-17.
- ^ Hatherley, Owen (2014-02-14). "All That Is Solid: The Great Housing Disaster by Danny Dorling – review". The Guardian. ISSN 0261-3077. Retrieved 2023-12-30.
- ^ "Housing and economic needs assessment". GOV.UK. 16 December 2020 [20 March 2015]. Retrieved 2022-11-24.
- ^ Bramlet, Glen; Pawson, Hal; White, Michael; Watkins, David; Pleace, Nicholas (November 2010). "Estimating Housing Need" (PDF). Department for Communities and Local Government.
- ^ Bramley, Glen (May 2019). "Housing Supply Requirements Across Great Britain For Low-Income Households and Homeless People" (PDF). Crisis and National Housing Federation: 10.
- ^ "Conservative Party Manifesto 2019". Conservatives. pp. 30–31. Retrieved 2022-11-24.
- ^ Labour Party (2019). "It's Time For Real Change: The Labour Party Manifesto 2019 Archived 2019-11-21 at the Wayback Machine". p. 77-80.
- ^ "Planning and the broken housing market: oversight and assurance". UK Parliament. 26 June 2019. Archived from the original on 24 November 2022. Retrieved 24 November 2022.
- ^ Garriga; Hedlund (July 2019). "Crises in the Housing Market: Causes, Consequences, and Policy Lessons" (PDF). St. Louis Fed. Oxford Research Encyclopedia, Economics and Finance.
- ^ "Foreclosures Can Amplify Downward Spirals of House Prices". NBER. Retrieved 2023-12-30.
- ^ Chodorow-Reich; Guren; McQuade (April 2023). "The 2000s Housing Cycle with 2020 Hindsight". The Review of Economic Studies. doi:10.1093/restud/rdad045. Archived (PDF) from the original on 2023-12-30.