How Wealth Inequality Impacts Lack Of Affordable Housing

Sep 6, 2018

These days, Warren and Jennifer Small host family get-togethers at their house in south Raleigh.

They look forward to trick-or-treaters. Warren can fish in the pond just beyond their backyard. And they've learned a few bird calls with their young son, Braeden. He already recognizes some of his favorites.

"We've got cardinals, squirrels and blue jays," said Braeden.

"The squirrels aren't a bird," his mother interjected with a laugh. "The rocks over there are for the squirrels."

Added his father, "Say, 'Get out of here squirrels.'"

The Smalls say they are grateful for the seemingly mundane parts of life, like fighting off squirrels and going fishing. It wasn't long ago that owning a house seemed out of reach for the family. Warren worked as a cook, but they were living paycheck to paycheck. They had bad credit, which made it difficult rent an apartment, let alone dream of buying a house.

"We had a hard time getting an apartment in our name, so my sister had leased it in her name. So our problem was since we had paid our bills on time, but not in our own name, we got no credit for that," said Jennifer Small.

Braeden Small in front of his family's south Raleigh house.
Credit Ben McKeown / For WUNC

Never mind that the place they could afford had serious problems.

"It was two bedrooms, it was mold, and just visible damage all over the house. The dishwasher reeked. Every morning when I went outside there were drug bags on the ground out in front of our door," said Jennifer Small.

Their lifeline came through Habitat for Humanity, the nonprofit that helps low-income families buy homes. After putting in the sweat equity, they got to put the key in their front door. Now they think about sending Braeden off to play with gangs of kids his own age.

"It's going from being in a disaster preparation mindset to going to a hoping and dreaming and planning mindset," said Jennifer Small.

The Small family, Warren, Braeden, and Jennifer, on the back porch of their house where they like to watch for birds.
Credit Ben McKeown / For WUNC

Fewer Affordable Options

While the Smalls are able to rest their heads on their pillows at night, many in Wake County cannot.

A house is the primary way that millions of Americans create wealth. It gives families an asset to borrow against to pay medical bills, or send their kids to college. Communities of homeowners can band together for meaningful change in their cities, and make their lives better.

However, a recent study found that Wake County has 56,000 working families who make less than $39,000 a year that can't find affordable housing, which is generally defined as having safe living accommodations that cost less than 30 percent of a family's income. What's more, estimates show that figure to increase to 150,000 households in just two decades.

Wake County will see an increased unmet affordable housing need.
Credit Wake County Government / HR&A Advisors

It's easy to think of housing affordability in terms of supply. But that misses the mark.

"The lack of affordability is more a symptom of wealth inequality that we currently see than it is that we don't have enough housing," said Henry McKoy Jr., a former N.C. Department of Commerce assistant secretary of community development who now teaches entrepreneurship at N.C. Central University.

Key housing trends in Wake County.
Credit Wake County government

Builders break ground on new developments seemingly every day, and general contractors have more than enough work refurbishing old houses. Amid the construction boom, however, are thousands of families who find themselves priced out of the market.

As the housing market booms, some even worry of a bubble. Through July, there were 12,205 closed sales in Wake County with a median sales price of nearly $304,000, an increase of 53 percent from the median sales price in 2009, according to data from the Triangle Multiple Listing Services. This summer in Wake County, homes are on the market for an average of just 23 days. For comparison, houses in Wake County were on the market for an average of 121 days in 2011.

Home prices across the Triangle have continued to increase. Triangle MLS provides statistical reports on the residential housing market in the Triangle region based on the properties entered into the Triangle MLS system.
Credit Triangle Multiple Listing Services

This flurry of home buying has driven up the price to rent as well, and edged more and more people out of the market, forcing them to move farther away from Raleigh or even out of the county. This puts them farther from their communities, jobs and access to public transportation or carpool options. It also segregates the haves from the have-nots.

"And so that's one of the – I say – the tragedies that's creating this vicious cycle, is that this re-segregation is happening, not only in racial lines, but economic lines, which correlate with one another. And that ultimately creates more challenges in the future to create these pathways and these ladders out of those communities," says McKoy. "When you are thinking about building a community economic ecosystem, then you have to think very intentionally about how you connect individuals and families and neighborhoods and communities to some pathway to prosperity. And then, that in a very significant way will impact the affordability question."

Factors That Impact Home Prices

There's no question the Triangle housing market is in a boom period.

"The housing market is very strong, and it's actually a situation where the demand is so high that the builders are having a hard time keeping up," said Paul Kane, CEO of the Raleigh and Wake Homebuilders Association.

According to Kane, there are a lot of factors why home prices have soared. Material costs are up. Land prices are higher. And then there are regulations to deal with.

"You have a community that has a tree ordinance to preserve trees. Well everybody loves trees and that's a wonderful thing, but there's a cost that comes with that," he said.

There's another factor at play. Kane said it's hard for builders to find workers. There has been a noticeable drop in the immigrant workforce that has correlated with President Donald Trump taking office.

"The industry does rely on an immigrant workforce. In fact our whole nation was built on immigrant workforce. It's just a different immigrant group at different periods in history. So there's nothing shocking about that," he said. "But the climate for immigrants − whether they're legal or illegal − is not a very friendly one right now, and so they might not be as inclined to go out seeking meaningful work in a hostile environment."

Jennifer and Warren Small in front of their house.
Credit Ben McKeown / For WUNC

Some Solutions

For their part, Wake County commissioners have not blinded themselves to the issue. In the recently approved 2018-19 budget, commissioners committed an extra $15 million to affordable housing, and will commit another $75 million over the next five years.

These funds will increase and preserve affordable housing units, fund a women's shelter, and increase the availability of housing vouchers. There's also more funding for a program to aid homeless veterans.         

"We're seeing a supply and demand issue that's driving up rental rates and also hurting opportunities for people to realize the American dream of owning their first home because cost is now being a barrier to homeownership," said Wake County board of commissioners chairwoman Jessica Holmes.

Raleigh has committed to beefing up bus routes.

"That is also a key part of affordability," said Mayor Nancy McFarlane. "What it costs you to live in the city is not just the price of your dwelling. If you can get to everything you need to get to, and you don't have to have a car, that's a huge financial relief."

Income trends in North Carolina
Credit Economic Policy Institute

But while Raleigh and Wake County leaders aren't turning a blind eye to the lack of affordable housing, their efforts aren't a panacea. Also, these solutions focus on reducing the price of housing, not on reducing income and wealth inequality. Furthermore, McKoy fears some voices can be drowned out.

"Diversity and inclusion and equity are not the same thing," McKoy said. "You can have a diverse group around the room, but that doesn't mean that the folks in the group are being included. And even if the folks are being included, that doesn't mean that outcomes are going to end up being equitable."

The number of Wake County families priced out of affordable housing is going to triple in just two decades. As this happens, it will continue to be a factor driving a wedge between the wealthy and poor. And the Triangle will see an already yawning wealth gap continue to broaden.