Market Madness

Road to Resilience


When it comes to real estate, we on Vashon, like the rest of the country, have a schizoid relationship.  We seem to cheer on the rising property values as a sign of prosperity while at the same time worrying that housing prices are ever more unaffordable for a larger and larger segment of the community.  About 145 years ago, the American politician, writer, and activist Henry George wrote a book, Progress and Poverty, that proposed that individuals or groups own what they create but land belongs to all equally.  At a time of dramatic growth, urbanization, and industrialization, a parcel of rural land that was purchased for a pittance could be worth thousands of dollars a front foot as a city grew around it.  George’s main argument was that the owner of that property did not earn the appreciation on his property.  It was the people and businesses that moved in nearby that created the value.  Although his book was very popular in his day, he was promoting an idea that was, and still is, anathema for wealthy speculators and it was quickly forgotten.  When George died in New York in 1897, tens of thousands came out to pay him tribute.  But his ideas went against the grain, and I would be surprised if anybody reading this column has ever heard of him.  I was introduced to him by a big fan of his, Rose Ballen, back in 1990 when we, as original board members, incorporated Vashon Household.

Rising property value in the housing market is directly responsible for the housing unaffordability crisis we are facing today.  Until the last 50 years or so, there were still plenty of options for a home buyer, and as the supply decreased, the population grew, and real estate values went up, many a speculator traded their way into wealth and have continued to do so.  The problem now is that demand greatly exceeds supply, so those of modest means entering the market for the first time can find nothing they can possibly afford.
The great advantage of being a homeowner is that you have the opportunity to build equity.  For a middle-income person, a home is usually the largest asset they own.  If your parents did not get on the gravy train early on, then you may have no assets to build on and will be effectively denied an opportunity to buy a home.  The inequality in our country is directly related to assets.  When the stock market goes up, 75% of us do not participate in any significant way.  For older Americans, 28% rely on social security for 75% or more of their income.

During the housing crash of 2008, many thousands, maybe millions, lost their homes and their only source of equity.  These were forced into the rental market where their money simply gets consumed by a landlord and no equity accrues at all.  I would imagine that many who are homeless today as a result of the pandemic had mortgages on homes in 2008, and their fortunes may have been very different if they had been able to weather the crisis then.  Today, 11% of homes are vacant.

On Vashon, as of 2019, a third of all homes are in the $750,000 range and another third are above that.  Only 6 % of homes are valued at $300,000 or less, only 2% a $100,000 or less.  These figures are now probably too modest as houses all over the region are being furiously bid up above the asking price.  Right now, the only landowners that are not wealthy are those—or their families—that bought land 40 or more years ago.

Our mission at Vashon Household was and still is to create a community in which people at all income levels would have the opportunity to obtain a secure place to live.  In the twenty years I spent with Vashon Household, it seemed to me that we could only apply a Band-Aid to the problem.  Certainly, we built housing for hundreds of people now living in VHH projects, but they all involved massive subsidies and strict requirements for the recipients.  With the Roseballen project, we did create a limited Community Land Trust that allowed us to sell homes to those below the existing threshold for home buyers, and we were partially successful in limiting the profits from appreciation on the later sales of those properties.  At least that was the case when I was last involved fourteen years ago.

Today, the housing affordability crisis is even worse than when we formed Vashon Household thirty years ago.  Certainly not because of VHH, but because we as a society have not decided to give up the windfall profits of land speculation in favor of seeing to the needs of all the members of our community.  There are solutions but they are institutional changes and all outside the box.  Next time you consider cheering about the rising property values, think about what that means for our propertyless fellow islanders.