As Housing Problems Deepen, State’s Elites Have Lost the Plot

With a housing market in deep freeze and few good options, corporate, establishment Democrats have unsurprisingly coalesced around private equity’s preferred view of the problem.

"Photo Credit: Saru Robert and Unsplash"

On October 18th, Massachusetts Governor Maura Healey announced her administration’s long anticipated housing proposal. 

On the very same day, The Boston Globe’s “Spotlight” bureau, the oldest continuously operating newspaper investigative journalism unit in the United States, went live with, “Beyond the Gilded Gate,” a series analyzing Greater Boston’s housing crisis.

The Spotlight story opens with a large graphic of a gated community’s arched metal gates, flanked by stucco walls—the sort of thing one might see in elite enclaves like the Hamptons or Beverly Hills, but most certainly not in the town of Milton, Massachusetts, the town whose name is posted on a sign fixed to the middle of the gate in the story’s graphic.

The story begins: “This is what subversion of the law looks like in an affluent Boston suburb. It is the town planner being buttonholed about Milton’s obligation to zone for more apartments and condos, as a historic new law requires of communities served by the MBTA...” Section 3A. (a)(1) An MBTA community shall have a zoning ordinance or by-law that provides for at least 1 district of reasonable size in which multi-family housing is permitted as of right; provided, however, that such multi-family housing shall be without age restrictions and shall be suitable for families with children.

When you talk to regular people throughout Massachusetts about the struggle of trying to buy a home you often hear about the astronomical prices that do not align with a working wage. In today’s market, where demand remains high and interest rates have more than doubled, buying a house is simply not possible for some.

The Spotlight story goes on to regurgitate largely self-evident statistics highlighting that Boston area real estate has skyrocketed in value in the last 50 years - no kidding! As Boston has continued to grow into one of America’s safest, large cities, surrounded by higher education and robust life sciences, the demand to live in and around the city continues to increase.

The remainder of the October 18th piece then focuses almost exclusively on channeling anger at zoning, with the takeaway being that zoning is somehow the genesis of all the nation’s housing woes.

The Governor’s newly unveiled policy proposal represents a similar departure. Governor Healey’s proposal that was sent to the Legislature, some 74 pages in length, the bulk of which is just the technical, statutory revisions put forth to carry out her highlighted policies, focuses on boosting low-income housing, increasing transit-oriented housing with large apartment blocks built around MBTA stops, amending state law to allow for the creation of a tax for high dollar real estate at the local level to offset affordable housing developments, taking a hatchet to local zoning, and other measures intended to damn the torpedoes, and move full speed ahead towards boundless raw apartment units all across the Commonwealth. In other words, in a world where community and local politics are overlooked for “the big picture”, Massachusetts housing policy is following suit, taking the power of zoning away from towns who have historically controlled the zoning and development in their communities.

Healey’s proposal of course doesn’t speak to the aspirations held and burdens faced in pursuit of those aspirations by regular people throughout the state trying to buy a home. Buyers are left staring up at astronomical and oftentimes nonsensical runaway valuations in many communities, as well as the state’s aging and ancient homes that range from being in a state of gross disrepair, laden with lead paint, asbestos, poor insulation, and in need of serious work, all the way to outright obsolescence. Even if one can close on their dream home, it is all the more out of reach when facing the crushing burden of stratospheric mortgage rates. Instead, in the view of Gov. Healey’s proposal that reads more like a white paper from Black Rock, trying to lean on legislators to nix regulations that are frustrating a new speculative bubble scheme: it’s time to give up on the American Dream of home ownership, the yard, the picket fence, and all that comes with it, and instead commit to allowing private equity and large banks to build and commodify endless Soviet-style apartment blocks that Wall Street landlords can rent to you forever.

It’s obvious to anyone paying attention to these dynamics over the last few years that housing, like most things these days, is an area of great division politically, and now culturally. We are not just talking about diverging policies, but diverging ideas rooted in diverging senses of culture. On one side is the dystopian view held by the housing “activists”, that we all ought to live in “social housing”— large complexes of apartment blocks built around mass transit, with no cars, no single-family homes, and controlled rent. This dovetails neatly with the access economy vision of corporate America, where everything is a subscription, you own nothing and are happy with that. For those whose solution to the housing crisis is simply adding infinite “units” to the market, they see no difference in values, goals, or ideals between generic rental and home ownership.

These folks will tell you that not only cars, but “car culture” must be banned, due to some purported combination of the environment (and sub arguments decreeing that even electric vehicles are not good enough for the environment) using “car storage” for more housing, “car violence,” etc. If you comb through this neurotic, addled corner of social media, you will no doubt find that these attacks have been worked backwards from their position of abject hostility towards single family homes, cars, the picket fence, the dog, and the rest of the Norman Rockwell painting.

"Photo Credit: Scott Webb and Unsplash"

You will also no doubt hear of course from these corners that zoning is nothing more than insidious rules that frustrate their cultural vision rather than a lawful function of local government, which must be vilified, crushed, and done away with.

If you think the edicts of the MBTA Communities Act aren’t right for your community and you’d prefer to pass on the state’s money, you’re now what Beacon Hill elites have decreed to be no longer a city or town of the Commonwealth but instead a sort of monochrome “MBTA Community” that must take marching orders from the state. By rejecting their proposed solution, you risk getting dragged under the Massachusetts Antidiscrimination Law and the Fair Housing Act, seethed the Attorney General in a March advisory. This argument of course features the absurdist, authoritarian, bill of attainder reasoning that by passing on the grants in the new ‘MBTA Communities’ law, the main thrust of which from on high being that if you don’t allow Beacon Hill to commandeer what the Attorney General described as the “broad authority to enact local zoning ordinances and by-laws to promote the public welfare” that is reserved to “Massachusetts cities and towns”, and open the floodgates to hulking developments around MBTA stops in your community, you’ve somehow committed all the constituent elements needed to make out a violation of these more serious, premeditative, and longstanding laws. These laws, the Massachusetts Antidiscrimination Law and the Fair Housing Act, were created in whole and in part to prohibit actual efforts by “towns and cities [to use] their zoning power for a discriminatory purpose or with discriminatory effect”, as the Attorney General describes in her warning.

The agenda is clear: snuff out zoning, write off single family homes— the cradle of the American Dream — as being everything from racist to unworkable, and circle the wagons around building as many raw “units” as possible.

So, who benefits from this? Private equity, large national landlords, and big banks. Who does not benefit? The people. Those who actively participate in their communities, who volunteer to be on zoning boards to help sustain and improve the communities and neighborhoods they call home. This form of local politics, unlike positions higher up the food chain, are often volunteer roles, taken on by members of the community looking to make a difference as they are the most in touch with the wants and needs of their local voter base.

With sweeping legislation that removes the self-determination of each town, saddling every ‘MBTA Community’ with the same, state level standing orders, we are once again seeing another example of the authoritarian excesses of elite power, the deterioration of local rights, and the things that make certain towns unique in their own right.

“Wall Street’s Big Landlords Are So Hungry for Houses They’re Building Them”, reads a headline from the WSJ from a few years ago, which goes on to write, “A shortage of homes in the entry-level price range where first-time buyers and big rental-home companies both shop is prompting some institutional landlords to start building new ones themselves. These companies are racing to meet demand for rental homes from a wave of young families too saddled with student debt to buy [emphasis added], as well as from investors wagering that the suburban renter class that swelled after last decade’s housing crash is here to stay”.

“Blackstone, Starwood to Merge Rental-Home Businesses in Bet to be America’s Biggest Home Landlord”, reads another headline, calling the move, “one of the clearest signs that Wall Street is betting homeownership rates will remain low [emphasis added] and that a growing number of U.S. families will rent”.

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If you live in the Greater Boston Area, odds are you can throw a baseball from your front porch (if you have one) and hit a couple new large multi-family developments, or at least a property that one of these people has designs to build one on. “Five over one” boxy apartment developments with their hallmark industrial, homogenous designs featuring retail on the first floor are going up faster than the national debt. Everyone is familiar with this development boom. And ever so quickly, these developments are becoming the only realistic option for first time home buyers. Those on a working wage are now competing with private equity to purchase single family homes, as the price to income ratio has skyrocketed for the now first-time home buying generations.

The “housing wage,” or wage needed for a person to avoid being cost-burdened — spending more than 30 percent of their income on housing costs — in Massachusetts has climbed by nearly $4 (per hourly wage) just in the last year”, wrote The Boston Globe in mid-June.

The Globe goes on to point the finger, correctly, at the fact that “As costs have shot up, wages have not kept pace at all”. Almost everyone recognizes and feels the nation’s stubbornly flat wages, wages that have been heavily outpaced by record inflation.

The only conclusion to draw from this data is an inevitable indictment of large, national corporate employers who jump through hoops to keep labor costs low, turning to “gig work”, access economy business models, outsourcing, leaning on the McKinsey class to guide them in minimizing their own costs and inflating the costs they charge to the public, privatizing profits, socializing losses, favoring “scale” and being “lean”, absorbing their competition and maintaining pricing power, antitrust violations, and developing non-resilient “just in time” supply chains held together by scotch tape that collapsed entirely during the pandemic, scrambling supply and demand and helping create the crushing inflation and remedial high interest rates our economy is languishing from today.

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However, large, elite corporate interests have found a comfortable home in the Democratic Party, which long ago abandoned working class Americans. As such, don’t expect to see many stinging indictments of these corporate interests in elite media or from corporate Dems.

The Boston Globe in the above referenced article, in the next two paragraphs after casting blame on the unaffordability of housing correctly on stagnant wages, then bizarrely takes a detour to fix its sights instead on racism, and needing to commit to building even more rental units (which it separately noted has not fixed the problem), writing that “Black and Latino workers are more likely than their white counterparts to be employed in sectors with lower median wages” and that “A big part of the solution, Heller said, is to start building more homes, as well as being ‘more intentional about the kind of homes we build’”.

The Globe here is tantalizingly close to making the point that’s right there for the taking — that wages have remained too flat relative to inflation, particularly relative to the cost of housing.

Instead, the focus remains on stopping single family homes (see “more intentional about the kind of homes we build”), building more rental units, and resigning ourselves to flat wages and a future of permanently paying the bulk of our income back to large national corporate landlords and their private equity benefactors forever.

“A Private Equity Firm Might Be Your Next Landlord” ,wrote The New York Times in August, describing the trend of institutional money vacuuming up the nation’s housing supply.

The business model by now is clear: launder taxpayer money through taxes bound for rental unit development and the substantial economic value of red tape cutting couched as zoning reform to enable large corporate developments to build more and more with little to no appreciable difference in the cost of home ownership or even rent. With a thumb on single family homes, high interest rates and flat wages goad the masses towards renting, grinding out a future in which all but the top one percent are restrained within a bell curve of middling, immovable wages, permanently indentured to spending their income on rent, subscriptions, and services in which no savings are established. No capital assets are owned, money is funneled back to big business, and the shareholders of these companies, in essence the only ones who can afford to own anything, get richer and richer and continue to live on, disconnected from those struggling to own their own home and live out what they’ve been told is the American Dream.

Officials are right to identify that bold policy proposals are needed to make progress on the housing crisis. The solutions they’ve identified however, are not solutions at all. In a free society, where capitalism is proven to be the opportunistic outlier and competition is necessary, government exists to protect the liberty and aspirations of those who elect them. Unfortunately, what we are seeing out of Massachusetts is the opposite; selling out the American Dream to the highest bidder and assisting in that process through legislation.

Serious action is needed at the federal level to restrain corporate grift, block predatory patterns of mergers and acquisitions to dilute the pricing power that large corporations use to squeeze the American people, increase wages and sharply curtail the ability of institutional money to purchase housing that will never come up for resale and exist purely as rental assets. Congress should also take a hard look at foreign investment in American real estate and do everything possible to ensure as many people as possible have a pathway to home ownership, without creating a subprime mortgage crisis, or hurting homeowners’ equity in their homes. Policies that promote freedom, home ownership, and access to the American dream is what we need and that ultimately requires preserving rights at the local level.

No matter how many rental units are built, even if those units were drastically lowering rent in Massachusetts, which has not at all happened, the cost of home ownership would remain virtually the same. Building indistinguishable, gentrified apartments is not lowering the cost of a single-family home or making ownership palpably more in reach. These are two different markets.

At the state level, Massachusetts suffers from the longstanding critique that triggers eyerolls on Beacon Hill — that policymaking in Massachusetts is far too Boston centric.

Indeed, outside the Rt. 128 beltway, you’ll find sprawling communities and open land — towns whose best days have long since passed. In the new world of hybrid and remote work, living in a commutable distance of Boston is no longer as necessary as it once was. As residents flee Massachusetts’ lack of affordability in concert with the exodus from other cities to more bucolic and affordable parts of the nation, an opportunity exists to promote economic development, that is the development of homes, shopping centers, schools, and the like, that enhance communities in Central and Western Massachusetts, where the supply and demand curve of housing is not so skewed.

Building endless apartments does little if anything to open the American Dream of home ownership and wealth creation to more people. It efficiently routes money to large corporate interests, siphons money out of the community and back to Wall Street, and furthers a fixation upon an unwelcoming, rigid urbanist dogma that does little to unite a fractured country, whose political divisions flow sharply from the physical divisions between its cities and ‘exurbs’.

Instead, what we have is a set of out of touch elites who have lost the plot and are marching invariably towards a future commandeered by large corporate and elite interests in which families live paycheck to paycheck, with each dollar going into one hand and out of the other to pay rent, subscriptions, and debt payments for a future that folks have little to no ownership of. By settling for policy that is selling out the American Dream to Wall Street, we are indirectly selling out our freedom as well!