Nothing but Palaces 3

The previous article in this series pointed out that, despite demagoguery from the media and some politicians, the shortage of housing supply is not due to rich foreigners buying more houses than they need.  That's because these billionaires buy places that are simply out of reach for ordinary folk; you aren't going to be buying a $100m penthouse no matter how many foreign billionaires there are or aren't.

We also noted that when low-income foreigners enter American in large numbers, they increase demand for housing.  This certainly does increase demand for regular housing, and in the short term might be expected to raise prices - but normally, some sharp person would note an opportunity and provide housing to meet the demand.  That simply is not happening.  This article explores a primary reason for this "market failure."

The New York Post brings us a report that is either amusing or appalling - or possibly both:

A Lower East Side condo owner turned his small apartment into a mini-village — by converting it into an illegal duplex with 11 sub-units that had ceilings as low as 4 ¹/₂ feet high, officials said Friday.

The illegal micro apartments at 165 Henry Street are so cramped that condo owner Xue Ping Ni even put up bubble wrap as protection to keep residents from hitting their heads on the many low-hanging pipes.

The accompanying photo looks like something out of a superhero movie: a man, kneeling, just barely clears the top of a door, which in turn is just shy of the ceiling.  He looks like he's in a dollhouse.

Yet the tenants weren't happy at being rescued from this dire situation: instead, they seemed to regret being turfed out when the apartment complex was condemned by the health and building departments.

So far in this series, we've been exploring explanations for why housing prices have been increasing for decades, far faster than wages - none of which have been particularly satisfactory.  Here we see someone's ad-hoc solution to the housing problem: cram 11 people into a space made for one!

Now, your humble correspondent, being prone to claustrophobia, would feel extremely ill at ease in such a residence.  And, as the city building department inspectors rightly pointed out, what would happen in the event of a fire is the stuff of nightmares.

And yet...

One departing tenant who didn’t want to be named told The Post Friday night that he and the others had just been ordered to vacate their tiny units in No. 701.

He said the landlord — whom he would not name — had charged him $600 a month for his cramped space, where he’d lived  for the past two months.

“It was revolving door of people,” said a woman who pays $2,800 per month for her one bedroom apartment on the sixth floor. She has long suspected the building was dangerous.  [emphasis added]

Let's think this through.  Here we see a lady who paid, and apparently continues to pay, $2,800 monthly rent for an apartment in a building that she "long suspected was dangerous" - and with good reason, as the grossly overcrowded and overbuilt dollhouse apartments can't help but be firetraps.

On the other hand, we have the newly-evicted folks who were paying a far more affordable $600/month for a hole in the wall.  You wouldn't want to live there and neither would I.  But nobody forced them to; they clearly felt they were getting good value for their money.

In other words, they were better and safer homes than the alternative.

If you are living in New York City and working as a dishwasher, what are you supposed to do?  Your work is so menial that it isn't worth any more than minimum wage.  Yet the housing prices are so outlandish that there's no possible way you could afford a "legal" apartment.

You could sleep in the street - and many do - but that's dangerous everywhere, and particularly so in places like New York City thanks to adverse weather conditions.  California is suffering from overwhelming mobs of homeless, partly because it has no harsh winter to annually thin the herd.

Even the $2,800 lady, obviously far better paid than any dishwasher, felt that staying put was her best option despite knowing that her building was a firetrap.  Anything else safer would presumably have been even more expensive, and thus out of her reach.

But in this odd tale of unauthorized construction, we start to see glimmers of an explanation for our housing shortage.

Whither the Flophouse?

We've noted that, while America has always had poor people and often had bums, mass homelessness is a relatively recent phenomenon.  What happened to the equivalent derelicts a century ago - did they just up and die?

Well, a lot of them surely did.  But also, back then every city offered facilities that few if any do today: the flophouse, or lowest class of boardinghouse.

Back then, if you owned a home, you had every right to rent rooms in it out to other people.  Widows were particularly common in this profession: a successful husband buys his family a nice home, then dies without adequate life insurance.  Rather than sell out and move, the widow often decided to turn her asset into a business adequate to keep her family fed.

Of course, some did this better than others, and neighborhoods go up and down.  Once a city had been around awhile, it usually had a district that was populated with mansions built years ago, but now those tattered edifices were occupied by the poor.  As each building continued to degrade due to lack of maintenance, the rent for a room - or even just a bed - got cheaper and cheaper until eventually even drunken derelicts could afford a place for the night.

Naturally, these roach motels were dens of filth and disease, but back then filth and disease were the expected companions of the poor.  Even as late as the Great Depression, ordinary folks fallen on hard times eked out a living by creating a boardinghouse in their home as best they could.

But with postwar modernization, governmental authorities felt that everyone deserved a proper home, and with wealth filling the country coast to coast, why couldn't they have one?  Mass-built suburbs like the famous Levittown were thrown up everywhere, while decaying inner-city flophouses were torn down and replaced by modern high-rise projects and other infrastructure.

For example, Robert Moses built highways and bridges all across New York City, at the cost of "the wholesale destruction of thousands of homes."  Homes can be rebuilt; however, when you take out an entire swath of neighborhoods, it's far harder to build a replacement living neighborhood in its place, and Mr. Moses wasn't interested in that sort of building anyway.  Legend has it that he tried to make overpasses over his highways low enough to make bus traffic impossible.  This, he felt, ensured that the wrong sorts of people would not be able to intrude on his middle-class paradises.

As we now know, urban renewal worked great for the middle class who take care of their homes.  It didn't work at all for the poor who don't, and were now housed in wrecks just as filthy as the ones they were in before, but which had become much more expensive due to inadequate supply.

Meanwhile, the officious building inspectors make sure nobody dares enjoy the liberty their grandparents did, of renting out a room.  Even slick modern room-rental arrangements like AirBNB are under massive attack by regulators in cities who'd prefer tourists to have to pay the overinflated and overtaxed hotel rates while ordinary renters are regulated by rent control.

We've found one answer to why there's nowhere for poor people to live: Our city governments, in their all-knowing wisdom, tore down all the places cheap and ratty enough for them to afford!  The result?

During its heyday, between 25,000 and 75,000 men slept on the Bowery each night. Today, gentrification has transformed the 16 blocks that make up the Bowery, just like it’s remade much of New York City. All that remains of the old Bowery are a mission, a single liquor store, and seven “lodging houses,” which are home to less than 1,000 men.

The Bowery houses between 24,000 and 74,000 fewer poor men than in times past.  Where have they gone?  Obviously - the streets and alleys or to California, where else?

In spite of the attractiveness of this explanation, the great days of slum clearance ended a good while ago, so this isn't a full explanation for the recent surge in homelessness.  It also doesn't explain why other cheap residences haven't taken their place.

We'll keep digging in the next article in this series.