essay on the housing crisis

Housing Breaks People’s Brains

Supply skepticism and shortage denialism are pushing against the actual solution to the housing crisis: building enough homes.

A nyone who’s been in a dumb recurring fight knows that the entire problem could be cleared up if everyone could just agree on exactly what was said or done . But you can’t, so you end up stuck in a cycle of relitigation. Housing-policy discussions are like that. They descend into crushing bickering because even the basic facts are up for debate.

The most basic fact about the housing crisis is the supply shortage. Yet many people deny this reality. Before I get to the veritable library of studies, our personal experiences compel us to recognize that housing scarcity is all around us. The most dire signs of a shortage are when even rich people struggle to find homes. Viral clips of hundreds of yuppies lining up to tour a single Manhattan apartment or stories of real-estate agents acting as bouncers at open houses to keep things orderly—these vivid examples demonstrate that demand has far outstripped supply.

Annie Lowrey: The U.S. needs more housing than almost anyone can imagine

Once you accept the existence of a housing shortage, the obvious policy response is to build a bunch of homes. Research looking at San Francisco , New York , Boston , and 52,000 residents across 12 U.S. metropolitan areas have all found that new housing brings down prices. This research makes intuitive sense: If new housing is built, most of the people who move in first vacate other units. Those units then become available to newcomers, and so on. Solving a supply problem is of course harder than making the number of homes equal the number of people—different people want different sorts of homes—but the fundamental point is that we need more homes near good jobs and schools, and that give people access to the communities and amenities that make life more enjoyable.

Despite the avalanche of agreement from experts, the general public still doubts cause and effect. A new study from a trio of professors at the University of California (Clayton Nall, Chris Elmendorf, and Stan Oklobdzija) reveals that shortage denialism is not the only missing “shared fact” plaguing housing discourse. The researchers ran two nationwide surveys of urban and suburban residents and found that 30 to 40 percent of Americans believe, “contrary to basic economic theory and robust empirical evidence,” that if a lot of new housing were built in their region, then rents and home prices would rise . This posture is referred to as “supply skepticism.”

Shortage denialism, which I have observed in my own reporting, and supply skepticism, which these researchers revealed through their survey data, are related phenomena. Not only are they false, but they are false in the same direction. They push against the actual solution to the housing crisis: building enough homes. After all, if there is no shortage or if building new homes doesn’t reduce rents, then no one has to tackle NIMBYism , no one has to work to bring down housing-construction costs, and no one needs to build millions of new homes in America’s cities and suburbs. In fact, this magical thinking goes, we can fix our housing crisis without changing much of anything at all.

O ne odd thing about supply skepticism is that it’s seemingly limited to housing. The UC researchers also asked about cars, grain, plumbers, and increased trade in general. Significantly fewer respondents expressed supply skepticism about those categories than housing. For example, 85 percent of respondents said a snag in the supply chain for cars would cause the price of used cars to increase; well under half of respondents were able to apply this same logic to the housing market.

Why is housing different? Perhaps because the supply argument seems to defy lived experience. People look around their community and sense that a lot has changed. They see new homes and developments cropping up, even as prices keep rising. This eyewitness account results in people thinking that these new developments either do nothing to alleviate rising prices— or worse, actually cause prices to increase.

Derek Thompson: The housing market has gone from bad to worse

The UC researchers note that “the mass public tends to personalize and moralize economic phenomena.” Further, they cite a theory that because our brains evolved to engage in cooperative behavior in small groups, people tend to be better at building narratives that revolve around “detecting intentions and effort, and at policing turncoats” than at “systems-level thinking.” This bias could explain why so many Americans believe that inflation is largely the result of price gouging by greedy private companies, rather than sharp increases in demand for goods and services meeting supply shortages for those same goods and services. Or, more germane, why so many Americans believe that private equity is primarily responsible for the housing crisis (despite owning a near-negligible share of America’s housing stock) or that developers are the only ones who will benefit if we reduce barriers to building new housing. Unsympathetic actors like private-equity firms or developers are easy to cast in a simple tale of good versus evil. What’s harder is conceptualizing the web of regulations, norms, and incentives that has led us to a supply issue with no obvious villain. (Harder still is recognizing the complicity of sympathetic actors like homeowners who have stood in the way of much-needed housing.)

Another factor behind shortage denialism and supply skepticism may be motivated reasoning. They both stem from a desire to reject the necessary policy solution. Building millions of homes is disruptive; it means changes to the built environment, acceptance of multifamily residences in more neighborhoods, and construction, lots and lots of construction. Some people are averse to construction at scale because their intuitions about density are binary: Either you have a major metropolis with supertalls stretching above you, or you have a quiet suburban road; there is no in between. Others are averse because they see developers and development as inherently bad, and thus promoting that as a solution to any problem feels wrong.

Whatever the case, the UC researchers found that supply skepticism makes people less likely to support home construction, a finding that could seriously inhibit state and local governments’ attempts to address rising rents and home prices. If the shortage doesn’t exist, then there is no need to build new homes. If supply doesn’t bring down prices, then it’s not a solution to the pain that middle-class and low-income families feel as they struggle to make rent or save for a down payment.

F acts have a way of asserting themselves. When a crisis gets bad enough, motivated reasoning, denial of obvious truths, and contradictions in logic bend and often break under the pressure. Maybe you ignore the fact that your kid isn’t doing his homework when he’s bringing home B’s and C’s, and you defend him to his teachers or other concerned family members because his laziness is not that big of a deal. But when he’s at risk of failing? When he can’t pass the basic literacy requirements to go to the next grade? At some point—for most people—avoiding reality becomes too costly.

For a long time, experts have been warning of the housing-supply crisis. But only in the past few years, as the national median home price has topped $450,000 , has the policy landscape shifted. Notably in California (where that number is above $800,000 ), lawmakers have passed a flurry of housing-production bills. Governors in Montana and Virginia, legislators in Maine and Utah, and policy makers at every level of the federal government are coalescing around the need to build more homes.

Voters often give their elected officials conflicting mandates. More affordable housing! No construction on my commute! Optimizing for those concerns, not executing contradictions to the letter, is the role of elected officials. Magical thinking can flourish in a world where things aren’t that bad. We are able to pretend that cities can be preserved in amber when most people are doing okay. But as a growing number of high-income renters find themselves shut out of homeownership and as the population of the chronically unsheltered soars, reality has begun to set in.

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A growing share of Americans say affordable housing is a major problem where they live

Prospective homebuyers and renters across the United States have seen prices surge and supply plummet during the coronavirus pandemic . Amid these circumstances, about half of Americans (49%) say the availability of affordable housing in their local community is a major problem, up 10 percentage points from early 2018, according to a Pew Research Center survey conducted in October 2021.

This Pew Research Center analysis about the levels of concern among Americans about the affordability of housing draws from a Center survey designed to understand Americans’ views and preferences for where they live.

The survey of 9,676 U.S. adults was conducted from Oct. 18 to 24, 2021. Everyone who took part is a member of Pew Research Center’s American Trends Panel (ATP), an online survey panel that is recruited through national, random sampling of residential addresses. This way nearly all U.S. adults have a chance of selection. The survey is weighted to be representative of the U.S. adult population by gender, race, ethnicity, partisan affiliation, education and other categories. Read more about the  ATP’s methodology .

Here are the questions used for this report, along with responses, and its methodology .

References to White, Black and Asian adults include only those who are not Hispanic and identify as only one race. Hispanics are of any race.

“Middle income” is defined here as two-thirds to double the median annual family income for panelists on the American Trends Panel. “Lower income” falls below that range; “upper income” falls above it. Read the  methodology  for more details.

References to respondents who live in urban, suburban or rural communities are based on respondents’ answer to the following question: “How would you describe the community where you currently live? (1) urban, (2) suburban, (3) rural.”

Another 36% of U.S. adults said in the fall that affordable housing availability is a minor problem in their community, while just 14% said it is not a problem.

Americans’ concerns about the availability of affordable housing have outpaced worries about other local issues. The percentage of adults who say this is a major problem where they live is larger than the shares who say the same about drug addiction (35%), the economic and health impacts of COVID-19 (34% and 26%, respectively) and crime (22%).

Opinions on the question of housing affordability differ by a variety of demographic factors, including income, race and ethnicity, and age. A majority of adults living in lower-income households (57%) say availability of affordable housing is a major issue in their community, larger than the shares of those in middle- (47%) or upper-income households (42%) who say it is a major problem.

Fewer than half of White adults (44%) say that availability of affordable housing is a major problem where they live – lower than the shares of Black (57%), Hispanic and Asian American adults (both 55%) who say the same.

Adults under 50 are more likely than their older counterparts to say affordable housing availability is a major problem locally. More than half of adults ages 18 to 29 and 30 to 49 say this (55% in both age groups), compared with smaller shares of those 50 to 64 and those 65 and older (44% and 39%, respectively).

Americans’ perceptions of this issue also vary based on where they live. About six-in-ten U.S. adults living in urban areas (63%) say that the availability of affordable housing in their community is a major problem, compared with 46% of suburban residents and 40% of those living in rural areas.

Regardless of income level, city dwellers generally tend to view affordable housing availability as a bigger issue than those living in the suburbs or rural areas. Two-thirds of urban adults with lower household incomes (66%) say affordable housing in their area is a major problem, compared with 56% of suburban dwellers with lower incomes and 52% of those with lower incomes living in rural areas. Among upper-income adults, 58% of those living in urban areas say housing affordability is a major problem, compared with 43% of upper-income Americans living in suburban places and 25% of upper-income rural residents.

There are also regional differences. Around seven-in-ten Americans living in the West (69%) say affordable housing availability is a major problem locally. This compares with 49% of Northeasterners, 44% of Americans in the South and 33% of those living in the Midwest.

Since 2018, there have been increases across demographic groups in the shares who say that the availability of affordable housing in their community is a major problem. For example, 55% of adults under 30 now say this is a major problem – a 16 percentage point rise from the 39% who said so in 2018. The share of adults ages 30 to 49 who hold this view has also risen from 42% in 2018 to 55% last year.

About six-in-ten Democrats and independents who lean to the Democratic Party (59%) said in 2021 that affordable housing availability is a major problem in their community, compared with 36% of Republicans and GOP-leaning independents.

These partisan differences remain when looking separately at those who live in urban, suburban and rural communities. Among urban residents, two-thirds of Democrats (67%) see the availability of affordable housing locally as a major problem, compared with 54% of Republicans in urban areas. In suburban or rural communities, smaller majorities of Democrats hold this view (56% in the suburbs and 54% in rural places), compared with around a third of Republicans in those areas (35% and 31%, respectively).

Note: Here are the questions used for this report, along with responses, and its methodology .

• Economic Conditions
• Economic Inequality
• Homeownership & Renting
• Issue Priorities
• Personal Finances
• Rural, Urban and Suburban Communities

Katherine Schaeffer is a research analyst at Pew Research Center .

Public’s Positive Economic Ratings Slip; Inflation Still Widely Viewed as Major Problem

Economic ratings are poor – and getting worse – in most countries surveyed, trust in america: how do americans view economic inequality, in u.s. and uk, globalization leaves some feeling ‘left behind’ or ‘swept up’, public’s 2019 priorities: economy, health care, education and security all near top of list, most popular.

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As the United States has grown and the quality of the nation’s housing has improved, it has also become more expensive and less affordable to much of the nation’s population. Millions of Americans today find themselves spending so much for housing that they have difficulty meeting other necessities of life, while many others are thwarted in their dreams of homeownership.

Since the onset of the COVID-19 pandemic, the crisis in housing affordability has been a recurrent theme in the media, while solutions have been put forward by organizations and people across the political spectrum. But much of what is written about the problem is often misleading, while the solutions being most widely promoted would have little or no effect on the families most severely affected. In this article, I will describe the elements that make up the affordability crisis, and why they have just recently become so much more severe. Then I discuss the current efforts to address the problem and suggest what may be needed if it is ever to be truly resolved.

1. Breaking Down America’s Affordability Problems

There is no one affordability problem. There are many affordability problems, depending on one’s income, where one lives, and whether one is an owner or tenant. The most important, though, in terms of the suffering it causes and its significance for housing policy, is rental affordability or cost burden. It affects people of different incomes differently and varies greatly across the United States. A second problem is homebuyer affordability, or the extent to which high housing costs prevent households from becoming homeowners, but which mostly affects families of higher incomes than those whose lives are most deeply blighted by high rental costs. Most of this article will focus on rental affordability.

Households spending more than 30% of their gross income for rental costs, including utilities, are considered cost burdened. Those spending more than 50% of their gross income for rental costs are considered severely cost burdened. In 2021, 21.6 million renter households, almost half of all American renter households or one in six American households, were cost burdened. More than half of those, or 11.6 million renters, were severely cost burdened. The great majority of these households were very low-income households. While the percentage of cost burdened renters dropped slightly between 2014 and 2019, it has risen sharply since then. Two distinct and separate affordability problems, however, are nested in this total. I call them systemic cost burden and strong-market cost burden. They are very different.

Systemic Cost Burden

Very low-income families face the most severe rental affordability problems. They must contend with a systemic imbalance in the nation’s economy between what low-level jobs pay and what it costs a private landlord to provide a modest but decent rental dwelling unit. For example, the 25th percentile hourly wage (25% earn less and 75% earn more) in the United States for retail workers in 2021 was $12.43/hour. A worker in such a job, working 35 hours/week for 50 weeks (if she’s lucky) will earn a total of $21,131 for the year. If she is the sole support of her family, she can afford to pay no more than $528/month for rent without being cost burdened.

Most rental properties in most American communities are either single family homes or a small multifamily buildings. When you add up the operating costs, including maintenance, reserves, property management, taxes, insurance, water and sewer fees, and allowances for vacancies and collections, they typically run between $400 and $600 per year. Assuming the landlord’s cost to acquire and upgrade the property is a modest $100,000 and she aims for a 6% annual return on her investment, or has to pay a mortgage at that interest rate, the lowest rent they can charge and still come out ahead is $900 to $1100 per month, almost double what the 25th percentile retail worker and her family can afford.

Severe cost burden is concentrated among America’s poorest families. Of these families, 87% of renter households earning under $10,000/year and 67% of those earning $10,000 to $19,999 spend 50% or more of their gross income for housing. The poorest 20% of renters account for 60% of all households with severe cost burden. These families live in chronic instability. They struggle to pay for food, transportation, and other essentials, while their ability to pay their rent can easily be derailed by unexpected medical expenses or a car breakdown. Cost-burdened households, particularly single mothers with children, are at greatest risk of eviction. They move more frequently than other families and often experience episodes of homelessness, undermining their family life, their children’s future, and their neighborhood’s stability.

Strong Market Cost Burden

Systemic affordability problems exist everywhere in the United States. But in high-demand housing market areas like coastal California, New York City, or Washington, DC, the pressure created by strong demand and limited supply leads affordability problems to migrate upward; that is, families at progressively higher income levels experience affordability problems. Renters earning between $30,000 and $74,999 (roughly 40 to 100% of the national median) are much more likely to be cost burdened in Los Angeles than, say, in Philadelphia or Cincinnati. These renters are hurting, but the amount of money a family earning $75,000 and paying 40% of their income for rent has left over for other necessities is far greater than that available to the family earning $20,000.

Strong-market affordability flows from two intersecting problems: the cost of housing has been bid up by demand from more affluent households and is made worse by the difficulty and high cost of building in these areas. Housing production in areas like Los Angeles or San Francisco is severely constrained not only by restrictive regulations but by many other factors, including natural and environmental constraints. Those constraints, along with extremely high land costs, the high cost of labor and materials, and the effects of rigorous building and safety codes, have led the cost of building to skyrocket. A 2022 report pegged average construction costs in San Francisco at $439 per square foot. Using this construction cost, adding modest land and soft costs, a small new two-bedroom apartment would cost over $750,000, and would have to rent for over $4,000/month to break even. While building enough of those apartments might lead older buildings to filter down in price to where some middle-income families could afford them, tight land supply means that building enough to make a major difference might be well beyond what is realistically possible in San Francisco and many other supply-constrained strong market areas.

Affordability and the Ability to Buy a Home

Most American families aspire to homeownership. While for many years house prices and household incomes tended to move in parallel, starting around 2000 (except for a dip during the Great Recession) house prices have been rising faster than incomes. In addition to the price of the home, though, a family’s ability to afford a home depends on the interest rate on the mortgage, as well as the size of the down payment and the annual cost of property taxes, insurance, and other fees, which vary widely from one part of the United States to another. To measure this, the National Association of Home Builders and Wells Fargo have created a Housing Opportunity Index (HOI), which combines incomes, prices, and interest rates to estimate what percentage of the houses in any given housing market area are affordable to a family earning the median income for that area. The lower the HOI, the fewer homes that are affordable to such a family. See Figure 1.

The HOI goes up and down. Affordability dropped during the 2000–2007 housing bubble, rose sharply during the Great Recession, and stayed fairly stable between 2013 and 2020. Although house prices were rising during these years, their effect was mostly offset by dropping mortgage interest rates, which bottomed out in 2020. The steep drop in affordability since 2020 comes partly from rising prices and partly from rising interest rates. As with rental affordability, the affordability of homes for sale also varies widely across the country. There are areas where almost all homes are affordable to a median-income household (like Cumberland, Maryland or Elmira, New York) and those where hardly any are affordable (like Orange County, California). The 11 least affordable housing market areas are all in California, while of the 40 areas (out of 234) where a median-income family can afford 75% or more of the homes, 39 are in the Northeast or Midwest.

The ability of middle-class families to buy a home fluctuates widely over time and geography. Within 15 years, the HOI has yo-yoed from 40% to 80% and back to 40%. But there are still many places in the United States—although not necessarily those where most people want to buy homes—where homes are highly affordable. As we turn to the way the perception of affordability as a metastasizing crisis has grown seemingly overnight, it is important to maintain that perspective.

2. COVID and the Unexpected Crisis

While housing affordability has long been seen as a problem, it took on new urgency during the COVID-19 pandemic. Soon after the onset of the pandemic in early 2020, rentals and sales prices both began to rise much faster than ever before, even more than during the height of the bubble years. From the second quarter of 2020 to the fourth quarter of 2022, the median sales price for homes in the United States rose from $322,600 to $479,500, or nearly 50%. Although prices then began to tail off, the recent decline has been more than offset by rising mortgage interest rates. Rents also increased, by 13.5% in 2021 alone. While sales prices and rental growth are slowing down, they will likely never return to pre-pandemic levels. What can account for this increase, which was largely unpredicted by either researchers or industry professionals?

Many different factors came together in 2020 to create the conditions for sharp price and rent increases, as shown in Figure 3. New housing production has lagged behind demand since the onset of the Great Recession, creating a cumulative shortfall in supply, while new household formation, the main driver of housing demand, which was sluggish for many years, increased significantly during the late 2010s. At the same time, mortgage interest rates, which had been gradually declining since the 1980s, bottomed out at 2.66% in December 2020.

On top of this, the pandemic triggered both even greater demand and even less available supply. Many affluent renters realized that low mortgage interest rates made homeownership more attractive than continuing to rent. With people working from home rather than commuting to an office, many began to look for larger quarters, while others chose to relocate to communities farther from their workplace. Cities two or three hours from Manhattan—like Kingston, New York, or Bethlehem, Pennsylvania; or with strong natural amenities like Provo, Utah, or Sarasota, Florida—experienced sharp demand surges. The increase in demand was strongest among high-wage, upper-income households, disproportionately pushing prices upward.

At the same time, the number of homeowners putting their houses on the market dropped sharply. Many reasons have been suggested for this, including older owners’ reluctance to move or have strangers in their homes during the pandemic. As the market further tightened and mortgage interest rates began to rise, owners holding cheap mortgages realized that moving could mean much higher housing costs. Whatever the reasons, available housing inventory, which is highly seasonal, failed to rise as usual during the spring and summer of 2020, and then dropped precipitously during the second half of the year, just as demand was rising. By mid-2023, although the pandemic is no longer driving people’s behavior, inventory levels have remained far below pre-pandemic levels.

The increase in house prices and rents, however, has inserted the issue of affordability squarely into the American political mainstream. But what does that really mean for the millions of people impacted by high housing costs?

3. Can We Solve the Affordability Problem?

Housing costs have been on the national agenda for a long time. In 1978, the federal government created a Task Force on Housing Costs, whose final report opens by noting, “The high cost of housing is now a major problem for millions of Americans.” In 1990, President George H. W. Bush convened an Advisory Commission on Removing Barriers to Affordable Housing, while in 2004, president George W. Bush announced the America’s Affordable Communities Initiative to “bring homes within reach of hard-working families through regulatory reform.”

In some ways, nothing is new. But what people are talking about today is different in important ways. For one thing, the focus is overwhelmingly on a single issue: underproduction of new housing. While an undersupply of new housing, particularly in high-demand areas like coastal California, certainly contributes to the affordability problem, it is far from the only contributor to the problem. The focus, moreover, is on one specific obstacle to building more housing: land use regulation. That is, reforming the zoning laws local governments use to regulate the use, density, height, and other features of development.

This focus has brought together an unusually broad coalition, including homebuilders, as well as so-called YIMBY (“Yes in My Back Yard”) pro-development voices from left to right, libertarian tech bros, and left-wing housing advocates. However, the voices of those who argue that other strategies are needed, particularly organizations serving very low-income families, are barely heard.

The strength of the coalition pushing for zoning reform has already led to major changes in many municipal zoning ordinances and in the laws of a number of state governments. The latter is most important, since under the American system of government, state law defines how towns and cities regulate land use. Any change to a state’s zoning laws, therefore, changes the ground rules for hundreds of separate municipal zoning ordinances.

The first notable state zoning change was in Oregon in 2019, when it amended the state zoning law to abolish exclusive single-family zoning in cities over 10,000 in population. All such cities must now allow two dwelling units where only one could be built before, while cities over 25,000 must allow at least four. Reforms have since been enacted in California, Connecticut, Maine, Massachusetts, Montana, New Hampshire, Rhode Island, Utah, Vermont, and Washington. Eight states now require municipalities to allow accessory dwelling units (ADUs)—second dwelling units on the same single family lot, either within the existing house or as a smaller separate structure—in single family zoning districts.

Ending the historic practice of exclusive single-family zoning, meaning zones where only single-family detached houses are allowed, has been a major goal of the zoning reform movement. That restriction governs the great majority of residentially zoned land in the United States, including almost all suburban land and large parts of central cities, including 70% of the residentially zoned land in Minneapolis and 81% in Seattle. Indeed, many people point to the moment in 2019, when Minneapolis amended its zoning laws to eliminate single-family zoning districts and to permit up to three housing units to be built on each individual building lot as the first major victory of the zoning reform movement.

This turnabout on zoning, although still embryonic, must be recognized as a major achievement on an issue that until recently was seen as all but politically untouchable. Yet is it the “solution” to the affordable housing crisis, or even, as has been argued, to homelessness? While some of the reforms will help, usually in small ways, the answer is an unequivocal no. Although the much-heralded Minneapolis reform affects 70% of the city’s land area, after two and a half years it had resulted in only 100 new housing units; put differently, it increased housing production in the city over that time by only 1%.

Part of the problem is that, as I have written elsewhere, there are compelling economic reasons why increasing density in already-built-up single-family districts—which describes almost all urban single-family districts—not only fails to lead to large-scale housing production, but all but dictates that any new housing will be significantly more expensive than the homes it replaces. Indeed, it is hard to escape the conclusion that—leaving aside ADUs, which are truly helpful—rezoning of built single-family areas is more about symbolism than about substance.

Although rezoning of urban commercial or industrial areas for higher-density residential use may be somewhat more productive, zoning reform in heavily developed central cities like Minneapolis or San Francisco is likely to have only a limited effect on housing supply, if only because of the inordinate cost and difficulty of site assembly and the disproportionately high cost of construction, as discussed earlier. If enough new housing gets built, it may have some effect on reducing existing rents through the filtering process, but in most cases the effect is likely to be quite modest.

Increasing housing production in the suburbs is easier and likely to have far more impact. Vacant or underutilized sites, such as low-density strip commercial areas along arterial roads, are widely available and considerably less expensive to develop than urban sites. Rezoning those areas, along with rezoning underutilized office parks to allow multifamily housing, while changing the zoning of as-yet-undeveloped land currently zoned for single family homes, could actually lead to significant increases in housing production.

But the shortfall in housing production is not just a matter of zoning. Many other factors stand in the way of significantly increasing housing production, including non-zoning regulations, the difficulty and cost of site assembly in largely built-up cities, shortages of skilled construction workers and qualified subcontractors, and high barriers to entry for start-up land developers. None of these issues have yet been seriously tackled, and some have hardly been discussed. It is important to remember, moreover, that many regulations, like limits on building in floodplains or wetlands, are there for good reason.

All of this, however, fails to address the most urgent question. At best, a program of extensive zoning reform, coupled with other measures to increase housing production, may help ameliorate the problems of some struggling middle-class households squeezed by high costs and limited supply in high-demand markets such as coastal California and New York City. Even those effects are likely to be limited because of the inordinately high cost of the new housing that will be built. It will not begin to meet the needs of low-income families, whose lives are far more devastated by housing cost burdens, because the systemic gap between housing costs and incomes makes it impossible, however many units we build, for costs to filter down to where those families can afford housing in the private market. Even less will it help meet the needs of homeless people, who (more or less by definition) have very low incomes and who are often further burdened by social, mental, or physical disabilities.

It is widely held that where the cost of an essential public good exceeds the ability of people who need that good to pay for it, the public sector should help bridge the gap. Thus we provide minimum levels of health care and food through Medicaid and SNAP as entitlements for people whose incomes are too low to pay for those goods. But that is not true for housing. Instead of being an entitlement, housing assistance is a lottery. The most widely cited estimate is that only 24% of eligible households in need are able to obtain housing assistance, in most cases through a housing choice voucher, which pays the difference between the full market rent and what a low-income family can afford, while paying 30% of their income for rent. Almost all the other 76% are cost-burdened.

The single most important thing we can do to solve the affordability crisis among low-income families is to provide a housing allowance—whether through the current voucher program or a redesigned and improved program—for every household whose income is too low for them to afford modest but decent housing in the private market.

In many communities, where supply is adequate and prices relatively low, a well-designed entitlement housing allowance program might in itself largely address the affordability problem. In higher-priced strong market areas, it would have to be combined with a program to subsidize construction of affordable or mixed-income housing to provide an adequate supply of moderately priced dwellings where people could use their allowance, including supportive housing for homeless people. This would be expensive, but well within the means of the federal government. It would be a small part of what we currently spend on Medicaid and might well reduce Medicaid costs by improving family health in the bargain. Even then, however, it would have to be a regional, not a local program. Given the cost and scarcity of building sites and the exorbitant construction costs, it is hard to see how some cities like San Francisco could ever create enough housing to meet the needs of their lower-income residents.

This is not an either-or proposition. Zoning reform is long overdue, and recent reforms are a good step forward. But they address only one small piece of what is a complex systemic problem. Treating it as the solution is not only dangerously misleading, but ignores the urgent needs of millions of low-income families for whom zoning reform by itself is little more than a cruel hoax.

ALAN MALLACH is a senior fellow at the Center for Community Progress, Washington, DC.

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The U.S. Averted One Housing Crisis, but Another Is in the Wings

A moratorium on evictions did little to address the bigger problem: The country is running out of affordable places for people to live.

By Conor Dougherty and Glenn Thrush

The United States averted the most dire predictions about what the pandemic would do to the housing market. An eviction wave never materialized. The share of people behind on mortgages, after falling steadily for months , recently hit its prepandemic level.

But a comprehensive report on housing conditions over the past year makes clear that while one crisis is passing, another is growing much worse.

Like the broader economy, the housing market is split on divergent tracks, according to the annual State of the Nation’s Housing Report released on Wednesday by Harvard’s Joint Center for Housing Studies. While one group of households is rushing to buy homes with savings built during the pandemic, another is being locked out of ownership as prices march upward — and those who bore the brunt of pandemic job losses remain saddled with debt and in danger of losing their homes.

“Millions of households were financially unscathed coming out of the pandemic,” said Alexander Hermann, senior research analyst at the Joint Center for Housing Studies. “But the pandemic has left millions of others struggling to make their housing payments, especially lower-income households and people of color.”

For the past year, lower-income tenants have relied heavily on government support to pay their monthly bills. These measures have helped — about a third of renters used unemployment or stimulus payments to pay rent at some point during the pandemic — but the majority of renters still had to borrow or draw on savings to cover bills, leaving them less able to weather future emergencies, much less save for personal investments or a down payment for a home.

The result is that even with a patchwork of federal, state and local eviction moratoriums, and some $5 trillion in federal relief that included expanded unemployment benefits and tens of billions in housing assistance, roughly seven million tenants were behind on rent earlier this year. With savings tapped out and unemployment benefits set to lapse, the financial damage to low-income households remains severe enough that they will need more support if they’re to recover with the broader economy, the Harvard report said.

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Eric Adams on how to end America’s housing crisis

Yimbyism, not nimbyism, is required.

G ROWING UP in New York City, I carried a trash bag to school filled with my clothes because my mother worried that the locks on our home would be changed and we’d be forced onto the streets without warning. Housing insecurity is a global crisis that transcends national wealth or geography. Today, millions of children and families face housing insecurity, just like I did. Research shows that stable housing is crucial to health, education, employment and intergenerational prosperity.

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Housing insecurity isn’t just a big-city problem. America has a housing shortage of at least 3.8m units, which has sent rents and purchase prices soaring, far outstripping wage growth. This housing crisis affects us all—from people experiencing homelessness, to young adults who can’t afford to move out of their parents’ homes, to families crowding into too-small apartments.

Although many factors contribute to the problem, at its core we have a housing crisis because we are not building enough housing. The reason for that is simple: for generations, well-housed people across the country have fought efforts to build more homes in their neighbourhoods. It is time to shift the narrative—and say “yes” to new housing instead. That starts with first acknowledging how we got here.

Racism made us say no. Redlining housing policies discriminated against black and brown families, in effect excluding them from a pathway to prosperity. Practices like density caps, and bureaucratic and regulatory barriers, prevented the construction of high-density housing in suburban and urban neighbourhoods, and are part of that legacy of classism and racism.

Bureaucracy and inertia made us say no. In New York City, the process for changing our zoning rules has devolved into a byzantine ordeal that can take years to complete and adds millions in costs to new developments.

Finally, political and cultural rhetoric made us say no. Small but vocal groups block any new construction, saying “not in my backyard” ( NIMBY ) each time someone proposes a new investment that would benefit those in need. There are some—on both sides of the political spectrum—who choose politics over people.

In New York City, we recently saw a small group of homeowners try to block a relatively modest plan to build 350 apartments in the Bronx, including affordable homes for pensioners and veterans. Community meetings turned into shouting matches full of racially charged language. Threats were made against local elected officials.

In May 2022, a plan to build more than 900 new apartments in Harlem was withdrawn after local opposition meant there were not enough votes to approve a required zoning change. Instead of providing affordable homes for hundreds of families, the site is now slated to be converted into a truck depot.

Since I took office, we have been charting a new course. We’re becoming a City of Yes—yes in my backyard ( YIMBY ), yes on my block, yes in my neighbourhood.

We’re becoming a City of Yes—yes in my backyard, yes on my block, yes in my neighbourhood

We’re proposing dozens of alterations to our citywide zoning rules to make it easier to build new homes that will support families of different economic means and right the racist wrongs of the past. We’re using new technologies and innovative processes to speed approvals of new development by government agencies. And we’re trying to amend the political process by which bigger projects are approved so that the entire city, and not just a small number of anti-development residents, has a voice in the decisions that determine whether a large swathe of New Yorkers can continue to live in the city they call home.

We’re bolstering those changes with $22bn of public investment in housing over the next decade—the largest in city history. And we’re accelerating construction of housing for individuals and families experiencing homelessness.

We’re not alone. In Boston, Mayor Michelle Wu recently signed an executive order speeding up the construction of new housing. In California, Governor Gavin Newsom and the state legislature now require every county in the state to take responsibility for more housing production. And we’re looking forward to working with our state legislature to spur more construction across our region.

But these efforts will only work if we all stand together. Voices saying no have always been the loudest—and they need to be answered with a chorus of yes, so we can overcome NIMBY ism with YIMBY ism. The housing crisis affects us all. We must work together to solve it. ■

Eric Adams, mayor of New York City

This article appeared in the United States section of the print edition of The World Ahead 2023 under the headline “From NIMBYism to YIMBYism”

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America’s Housing Crisis Term Paper

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The housing crisis is an economic bubble affecting many areas in the United States. House prices were high and peaked in 2006. Gradually, the prices began to decline in 2006 and 2007.

They’re still lowering to date. As this picture unfolds, it emerges that any form of the housing bubble of the United States leaves a ripple effect which directly hits not only the valuation of homes, but also the states home builder’s, the home supply retailing outlets, the real estate industry as a whole as well as the mortgage markets. The crisis has posed a very huge risk to the American economy.

As Randel stated, “the Federal Reserve lowered interest rates during the period of 1995-2000 which created easy credit for banks to make loans. Rates were extremely high by 2006 hence lowering demand and increasing monthly payments for adjustable mortgages” (Randel, 144). This increased supply and consequently ended up in further lowering housing prices.

Popular belief that houses as opposed to other investments do not fall in value sparked the huge number of Americans to buy homes. However this is not the case.

Furthermore, it’s also widely believed that homes result in above average returns on investment. It is therefore only reasonable to take for granted that the price of houses only just manage to top price increases over the elongated term.

In the years of 2005 through to 2006, there were copious advertisements as well as shows on television which were aimed at enhancing investment in the real estate sector. Books on real estate investment were being marketed and sold all over. This sparked investment in the housing industry.

Clarey observed the fact that, “as home prices began to rise in early 2000-2001 following reduced interest rates, purchase of homes was on the rise” (Clarey, 256). Speculators bought houses in large numbers with an intention of selling them back for a quick profit.

Although the undertakings occurred well over twenty years ago, Fannie Mae and Freddie Mac were considered responsible for the credit crisis that resulted after the housing bubble of 2001-2007 burst. The two companies had a huge government backing and were both chartered by the US government as government sponsored enterprises (GSE’s).

The treasury department of the United States of America has been widely criticized for going out of their jurisdiction in the field of spending taxpayer’s money. This authority is preserved for congress only and this is held in the constitution of the United States of America.

The treasury also stands accused of overstepping boundaries that are put in place by the Housing and Economic Recovery Act of 2008. The two companies operating as monopolies had more disadvantages than benefits. Scrutiny by Sowell revealed that “the two companies made huge profits because they purchased and invested in mortgages and mortgage based securities with lower capital requirements than other financial institutions and banks” (Sowell, 213).

In 1977, the (C.R.A.) Community Reinvestment Act was passed. The act offers a scaffold for organizations that deal with finances, institutions of the community as well as local and national governments to be able to mutually encourage banking services geared towards the entire people of a society.

The C.R.A. basically ruled out lending of money in biased ways with consideration to factors such as race; this is referred to as “redlining”. The Community Reinvestment Act also gives confidence to efforts to fit the credit requirements of all categories of people in a society. These include inhabitants of modest to lower income areas

The US congress, being in charge of the government regulatory authority largely contributed to worsening of the housing crisis. In the year 2008 alone, the government of the United States of America apportioned well over US $ 800 billion to extraordinary credit as well as salvage that was relation to the housing bubble in the United States of America.

More than half of that money was directed to the quasi- governmental organizations of the Federal Housing Administration as well as the Fannie Mae and Freddie Mac. Furthermore, the treasury department on December 24, 2009 went ahead and made an unprecedented pronouncement stating that it was going to support Fannie Mae as well as Freddie Mac by giving them unending financial aid for a period of three years from there henceforth.

This was against a backdrop of their recognition of the fact that they had incurred losses of much more than US $ 400 billion till then. During the large number of house buying, some brokers handed low interest mortgages to parties that were not qualified to handle large debt.

Lenders did not factor customers’ claims of income and promoted adjustable rate mortgages as they promised greater returns than fixed rate mortgages. Currently uninformed house buyers are unable to meet the terms of their respective contracts and are defaulting on their payments. Many Americans have already lost their houses to foreclosure. It is the laxity in government regulation that has greatly affected the mortgage industry.

By signing the 2008 housing and economic recovery act into law after it had been passed by the congress of the United States of America, President G. W. Bush made wider the ability of the institution FHFA to control Fannie Mae and Freddie Mac that had spiraled out of control.

The law also enabled the treasury department of the United States, the clout that would lend finances to the ailing institutions of either Fannie Mae or Freddie Mac. This would be bordered by the sole fact of the quantity of liabilities that the federal government as a whole is allowed to obligate to by the law.

The law that was signed on July 30, 2008 by President G. W. Bush, pushed up the maximum of the treasury departments debt by US $ 800 billion, adding up to a whopping grand total of US $ 10.7 trillion. This apparently was in the hope of the latent want for the treasury department to have the elasticity that would enable those help the Federal Home Loan Banks, Fannie Mae or Freddie Mac.

In a synopsis, avoiding a repetition of the housing predicament hardly deserves an overhaul of the financial or any other structure. What would work better is an acknowledgement that the key policies on housing in the United States are highly flawed and need to be restructured.

The first step in correcting the situation is to straighten out the United States government policies on housing. Strict requirements may be enforced so as to regulate lending and borrowing activities. Added to that, rules that promote fair, easier and responsible lending practices should be strictly adhered to by the stakeholders. This will be of benefit to both borrowers and lenders in the economy

Works Cited

Clarey, Aaron. Behind the housing crash . South Carolina: Book Surge Publishing, 2011. Print.

Randel, Jim. What every homeowner and homebuyer needs to know: The housing crisis . Connecticut: Rand Media Co., 2009. Print.

Sowell, Thomas. The housing boom and bust . New York: Basic Books, 2010. Print.

• Dealing with Private Housing: Landlord Acceleration Scheme in Motion
• Housing finance management and organizations
• Servant Leadership in Fannie Lou Hamer
• US Economy Recession in the Too Big to Fail Film
• The Conflict Between Banks and Financial Speculation
• Cleveland's Poor Economy and Deplorable Housing Conditions
• The Housing Crisis Of 2007
• Housing Problems in Saudi Arabia: Challenges Facing Sustainable Housing in the Region
• Decision making: Purchasing a House
• The Role of Trade Unions in 2011
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2018, December 27). America's Housing Crisis. https://ivypanda.com/essays/the-housing-crisis/

"America's Housing Crisis." IvyPanda , 27 Dec. 2018, ivypanda.com/essays/the-housing-crisis/.

IvyPanda . (2018) 'America's Housing Crisis'. 27 December.

IvyPanda . 2018. "America's Housing Crisis." December 27, 2018. https://ivypanda.com/essays/the-housing-crisis/.

1. IvyPanda . "America's Housing Crisis." December 27, 2018. https://ivypanda.com/essays/the-housing-crisis/.

Bibliography

IvyPanda . "America's Housing Crisis." December 27, 2018. https://ivypanda.com/essays/the-housing-crisis/.

Home — Essay Samples — Life — Housing — The Issue of Housing Crisis in Modern America

The Issue of Housing Crisis in Modern America

• Categories: Affordable Housing Gentrification Housing

About this sample

Words: 1064 |

Published: Mar 18, 2021

Words: 1064 | Pages: 2 | 6 min read

Table of contents

Introduction, the factors of the housing crisis, a solution: eliminating ownership and restructuring the system, works cited, the housing market and its implications, airbnb's role in the crisis, homelessness vs. vacant homes.

• Amnesty International. (2019). USA: 3.5 Million Homeless and 18.5 Million Vacant Homes - No Excuse for Vacant Homes When So Many People are Homeless. https://www.amnesty.org/en/latest/news/2019/06/usa-35-million-homeless-and-185-million-vacant-homes-no-excuse-for-vacant-homes-when-so-many-people-are-homeless/
• Engels, F. (2008). The Housing Question. Pluto Press.
• Hoffman, C. (2018). The Housing Crisis and the End of American Liberalism. Johns Hopkins University Press.
• Hwang, S. W., O'Connell, J. J., Lebow, J. M., Bierer, M. F., O'Carroll, P. W., & Hough, R. L. (2001). Unemployment among patients with newly diagnosed tuberculosis: a follow-up study. Archives of internal medicine, 161(8), 1077-1082.
• McCarthy, K. J. (2018). Gentrification and the neoliberalization of housing in the US. Geoforum, 91, 176-184.
• Poppick, S. (2016). The Housing Market is Finally Starting to Look Healthy. Time. https://time.com/4487624/housing-market-recovery/
• Ross, A. (2019). Rentier capitalism: Who Owns the City? Verso Books.
• Schwartz, A. E., & Wilson, I. (2019). The housing affordability crisis? Not in the 1980s. Journal of Housing Economics, 43, 110-117.
• Stewart, H. (2019). How Airbnb Short-Term Rentals Exacerbate Los Angeles’s Affordable Housing Crisis: Analysis and Policy Recommendations. Urban Affairs Review, 56(3), 761-799.
• United States Census Bureau. (2021). Housing Vacancies and Homeownership (CPS/HVS). https://www.census.gov/housing/hvs/index.html

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Home / 2024 / July / An overlooked side-effect of the housing crisis may be putting Californians at increased risk from climate disasters

An overlooked side-effect of the housing crisis may be putting Californians at increased risk from climate disasters

July 29, 2024

By Allison Arteaga Soergel

In a new article for the journal Proceedings of the National Academy of Sciences , UC Santa Cruz researchers laid out the foundation for their highly-anticipated upcoming study of how lack of affordable housing in urban areas of California may be driving increased development in and near wildlands, leading to more severe climate change impacts. 

Since the 1990s, California has led the nation in the growth of Wildland-Urban Interface (WUI) development, with more than one in three households in the state now located immediately next to or within natural areas. This proximity to wildlands puts WUI residents at higher-risk for climate-related natural disasters like fires, floods, and landslides. Extensive WUI development also makes wildfires more likely, while negatively impacting wildlife habitat and resulting in longer commutes, which increases greenhouse gas emissions. 

Despite growing recognition of the serious hazards and massive scale of WUI development, the causes of this type of growth are still not well understood. UC Santa Cruz Sociology Professor Miriam Greenberg, lead author of the new article, believes that incorporating new perspectives and methods from the social sciences will help to change that. 

“In the past, most approaches to studying the WUI have been from a natural systems perspective,” she said. “But our research aims to demonstrate that you can’t extricate these environmental and ecological dynamics from urban and housing dynamics—it’s all interconnected. So we’re really excited to be doing primary research that will help us understand, for the first time, the drivers, demographics, and related dynamics of WUI growth, taking the broader context of the housing crisis into consideration.”

Greenberg added that California has the unfortunate distinction of facing both the most extreme housing crisis in the United States and a rate and scale of WUI growth that is unequaled elsewhere in the country. That makes the state a particularly important laboratory for studying these issues and the potential relationships between them. 

For the upcoming research, which is currently in progress, the team is using a mixed-methods approach that will include surveys and ethnographic interviews and will integrate census data with WUI mapping and ecology data. Another aspect of the study, which was not a focus of the recent article, will explore Indigenous land stewardship, habitat restoration, and prescribed burning in the context of WUI growth. The research will be conducted along California’s Central Coast, one of the most unaffordable housing markets in the U.S.

The project will involve a wide range of community partners and faculty and staff across UC Santa Cruz and San Jose State, including Associate Professor of Sociology Hillary Angelo and Environmental Studies Professor Chris Wilmers, who are coauthors of the current article alongside Greenberg and UCSC Sociology graduate student Elena Losada. 

The paper shares three main predictions for trends that the research team thinks they will find in the WUI. First, they believe there has been a major shift in what motivates people to move to WUI areas. While people may have historically chosen to live in the WUI because of generational ties to an area or a desire to be closer to nature, the researchers believe that housing affordability has become a main driver of increased migration to the WUI since the 1990s, as a growing number of Californians have been priced out of urban areas due to the state’s worsening housing crisis. 

The demographics of this may play out differently in different types of WUI areas, which themselves are shaped by a combination of political, economic, and environmental factors. For example, WUI “interface” development that sprawls out from urban areas to the edges of wild areas is likely to be filled primarily with middle-income commuters, the researchers suspect. Meanwhile, they expect that more remote development within wildland areas—called WUI “intermix” development—will have particularly stark inequality, featuring a combination of estates for the wealthy, modest older homes, and informal, off-the-grid living, including in trailers and vehicles.

The paper argues that the rise of affordability-driven migration has likely resulted in overall growth of inequality in the WUI, and this has exacerbated the impact of environmental disasters fueled by climate change. While all residents of these communities face the same risks, differences in wealth, time availability, and knowledge of the local landscapes mean that households have very different abilities to prepare for and recover from disasters, researchers believe. As a result, newer and lower-income residents who move to the WUI primarily for affordability reasons may end up suffering disproportionately when disaster strikes. 

Overall, the paper’s authors anticipate that their findings will demonstrate the need to treat the affordable housing crisis as not only a major social issue but also a significant sustainability problem that must be addressed in order to protect communities from climate change. 

Tackling that challenge will require integrating planning and policy for housing and climate change at the local, state, and federal levels, as well as routinely bringing the social sciences and natural sciences together for research on these issues, the paper says. Ultimately, the research team argues that affordable housing production and preservation and protection of tenants in urban areas are crucial actions that shape sustainability, both within cities and far beyond.

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Why housing security is key to environmental justice

Housing is crucial for good health, but it's not just what's inside the home that matters..

Since 2018, I can often be found at our local community center—listening, learning, sharing, and strategizing around the table with community members on ways to push the city for more affordable housing and prevent the displacement of neighborhood residents.

We are members of Dorchester Not for Sale   (@DotNot4Sale), a grass-roots alliance of more than 100 residents organizing for a community vision that protects residents most at risk of displacement; prioritizes affordable housing, good jobs, and community safety for current residents; and preserves ethnic-specific services that make our community of Dorchester, Massachusetts, home.

I am passionate about housing security because it determines where we can afford to live and the quality of housing we can live in— all of which affects our health, the health of our communities, and of future generations.

This essay is part of "Agents of Change" — see the full series

As an environmental health PhD student studying housing and health, and as a renter in Dorchester, I joined DotNot4Sale. I wanted to better understand if and how my research mattered on the ground, and in my own neighborhood. I wanted my home to not just be an address but a community, and through DotNot4Sale, I found it.

After attending several community dinners hosted by DotNot4Sale, I learned that the diverse fabric of our community was threatened by massive incoming developments.

The city plans to rezone an 86-acre area for residential and commercial development, called PLAN: Glover's Corner . Rents for the proposed housing developments, most of which will be luxury condos, will be unaffordable to most Dorchester residents.

Dorchester is also a neighborhood of families and multigenerational households. Yet most proposed developments are studios, compact units, or one-bedrooms—too small to accommodate existing residents.

Seeing these proposals flood our neighborhoods, we ask: Who is the city building for?

This essay is also available in Spanish

The housing crisis and threats of displacement affect not only Dorchester but neighborhoods across Boston and in many parts of the U.S.—as previously discussed in a prior Agents of Change blog.

• More than 550,000 Americans were homeless in 2018.
• More than 805,000 renters were threatened with evictions in 2017.
• From 2010 to 2017, about one-third of the country, or 37.8 million households, paid more than 30 percent of their income on housing costs like rent and utilities.

Dorchester Not for Sale in the annual neighborhood parade, June 2019 (Credit: Cristina Eduardo, Dorchester Post)

And guess what? These hardships continue to disproportionately affect minority, Black, Brown, and immigrant households at a higher rate than White households.

Throughout the country, access to affordable housing is under threat. There is a severe shortage of affordable housing supply that is driven by compounding factors, such as increases in real estate speculation, construction and land costs; stagnant federal funding for affordable housing programs; loss of existing affordable housing stock; and slower production of new housing since the 2008 recession—all of this coupled with sluggish wage growth in the past few decades.

Related: Black and brown families displaced and erased

Also, let's not forget about the U.S. history of redlining , predatory lending practices, and refusal of federal housing loans to millions of Black, Asian, Hispanic, Jewish, and immigrant families. These racist policies, many of which were instituted by the federal government, robbed Black and Brown families of the opportunity to own a home, decide where they want to live, and create intergenerational wealth.

Following redlining were government urban renewal programs that targeted communities of color, designating them as "slums" and "blighted" to justify new housing and construction projects. In turn, these programs led to the mass displacement of thousands of Black and Brown families.

Simply put: Black and Brown families were forced to live in undesirable areas. Years later and still today, especially as land becomes scarce, families are now being forced out of their homes for capitalist interests. This is what DotNot4Sale organizes against.

Credit: Dorchester Not for Sale, @DotNot4Sale

Inequality and evictions 

The impacts of institutional racism prevail today in Boston, where the median net worth of Black households is $8 compared to $247,500 for White households.

Dorchester, one of Boston's neighborhoods that experienced redlining , is home to a diverse and working class community with the highest number of immigrants and non-English speaking households in the city. About two-thirds of residents are renters, and the average income for workers is $41,000 a year. The increase in large-scale and luxury housing developments throughout the city and the speculation of development have driven up housing prices and living costs. As of right now, the average rent in Dorchester is $2,894 per month—or $34,728 a year.

Residents are feeling the harm.

One DotNot4Sale member shared with me (translated from Vietnamese): I like this neighborhood; I like living here. Low-income people here live very peacefully—don't disturb anyone and keep the city safe. If there is new development, there will be no benefits for people like me—there will be more traffic, rents will increase, and more displacement. These developments will only benefit landlords, developers, and those that have a lot of money.

Many residents have already left. Since 2011, the number of eviction cases filed to the Boston Housing Court was approximately 5,200 per year, or 14 cases per day. While alarming, we know this number is likely underestimated. Many families that are displaced don't make it to housing court out of fear of retaliation from their landlord and/or lack of legal support.

“I get sick a lot” 

In areas of high housing demand, several community residents have shared that landlords have ignored making housing repairs in order to drive tenants out more quickly and resell or re-lease the property for a higher profit.

As one DotNot4Sale member shared with me (translated from Vietnamese): I call my landlord to fix the hole above my sink, but he ignores me. Water is leaking from the upstairs kitchen into mine. There is no heat in the main living areas of my apartment. I get sick a lot.

Imagine you are a single parent of two children, making $40,000 a year and paying $1,600 a month, or almost 50% of your income a year, for a one-bedroom. With the surge of luxury condos in your neighborhood, there are few places that you could afford in decent enough condition for your children.

You worry about making ends meet in the short-term, like paying for groceries, daycare, utilities, and bus passes.

Your apartment is owned by a slum lord who has not repaired the holes in the walls, the broken windows, nor addressed the mold and pest issues that were there when you moved in. Money-strapped and not able to take time off work, you cannot make these repairs on your own.

You are afraid to ask your landlord to fix these issues for fear they may increase the rent or kick you out and find other tenants.

These unaffordable and unsafe living conditions are causing you stress and taking a toll on yours and your children's mental and physical health- their ability to focus in school, your ability to sleep.

You and your children live in constant fear of having to move again.

Now take a deep breath.

While this may be an exercise for you, millions of Americans are in this situation right now.

What has been done?

"Community in Action: A Mural for Vietnamese Folks in Fields Corner", Fields Corner, Dorchester, MA. (Credit: Ngoc-Tran Vu )

Currently, there are three main forms of governmental housing assistance in the U.S.: public housing, income-restricted units, and Section 8 housing vouchers. All are for low-income tenants and require a home inspection, but they vary in the type of housing, who manages them, and levels of income eligibility. Public housing is government-owned, while income-restricted units are privately-owned and rent is subsidized by the government. The Section 8 voucher program leaves it up to tenants to find their own housing that accepts vouchers.

These programs are not enough. Some even fail to adequately protect residents. In 2017, only 37 percent of the 11 million extremely low-income renters received housing assistance. The average national wait time to get a Section 8 voucher is two years. Many landlords also discriminate against renters with vouchers .

Even with vouchers, renters are facing evictions. For example, in Boston , we still see many eviction cases involving tenants on housing assistance.

As a country, we need a progressive affordable housing agenda and comprehensive policies and programs in both public and private sectors to make a dent in the housing crisis.

In recent years, nonprofit, philanthropic and religious organizations, and hospitals have stepped up. Some case examples include:

• Community land trust s (CLT) like the Dudley Street Neighborhood Initiative that have been a tool for permanent affordability, equity generation through homeownership, and community-centered decision-making. As of 2018, there are more than 225 CLTs across the country.
• A $3 million Innovative Stable Housing Initiative from three Boston-area hospitals to fund policy and systems-level housing security approaches, community-centered advocacy, and cross-neighborhood organizing.
• Donation of church lands in New York City to build 2,000 affordable units in the next 10 years.

Going beyond physical hazards

It is time for the environmental health community to also step up and be at the forefront of addressing housing insecurity.

Traditional environmental health research and funding priorities have focused on making our buildings more energy efficient and/or specific physical or chemical hazards, such as air pollution, lead, pesticides, and mold.

While this research has led to major public health improvements—such as more stringent housing codes, a ban on lead-based paint, integrated pest management, and lowering energy costs—it can fall short of addressing the root causes of why low-income and communities of color continue to face homelessness, higher housing-cost burden, and poor housing conditions.

"Homes For All" Assembly, Dorchester, MA, June 2019. (Credit: Lisa Thompson)

If we focus on just the physical and chemical hazards of the indoor environment, how can we adequately address and prevent the root causes of health problems associated with housing insecurity?

I believe that housing is a human right. My experience in the community has pushed me to expand my definition of environmental health and contextualize my research in the existing affordable housing crisis. It has shown me that housing insecurity is a core environmental public health issue.

Housing insecurity increases a household's risk of living in unsafe and unhealthy conditions , their risk of being displaced, which in turn perpetuates the cycle of housing insecurity. Households experiencing evictions report worse self-reported health, higher stress levels, depression, and material hardship. They also have a greater risk of suicide . For children, evictions and having to move frequently can lead to poor mental and physical health, disrupted schooling, and a lower earning potential in future jobs.

Knowing this, I cannot turn a blind eye to the urgency of the affordable housing crisis in my own community and across the country. I cannot turn a blind eye to my neighbors who are being evicted and/or moving away because they cannot afford rent.

 The role of researchers and practitioners

As environmental health researchers and practitioners, we have the responsibility to continually ask: Are we addressing the root causes of poor health?

We need to incorporate housing security in our environmental health research, funding, curriculum, and community outreach initiatives. If we don't, we will miss key opportunities to address the health of millions of households currently burdened by unaffordable housing and homelessness. We will miss important pathways for equitable and long-term public health interventions.

So, what can we do? Some initial steps we could take:

• Lead public health research that fills the evidence gap about the impacts of affordable housing policies and programs on environmental exposure, health, and economic well-being at the household and community level. For example, important but unanswered questions include: how do gentrification and housing insecurity impact indoor environmental quality? How many pediatric hospitalizations or deaths can be prevented by investing in long-term housing solutions such as community land trusts or rent control? These data can be very useful for housing policy and programmatic decisions.
• Dedicate funding towards housing insecurity research and community engagement. Currently, priorities of the National Institute of Environmental Health Sciences, and in particular their 2018-2023 strategic plan , omit the role of housing and housing insecurity on health.
• Revamp our environmental health curriculum to better address environmental justice and the role of housing security on health. Our curriculum can benefit from more collaborations with other disciplines like urban planning, sociology, and public policy that also look at housing but may focus less on health. We need to also further engage with community partners to better understand housing challenges that they face and ways they are working to address them.
• Collaborate with community, clinical, business, and government partners to identify solutions for permanent housing affordability and for tenant support to keep and maintain their homes. Support the capacity of local nonprofit organizations and community development corporations through funding and/or technical assistance. Solidify these relationships at the institutional level so that they can sustain beyond funding cycles and/or staffing turnovers.

It's an uphill battle that won't be fixed overnight. But already in my almost two years with DotNot4Sale, I've seen the power of community residents challenging the status quo about what's possible for our neighborhoods.

I fight with DotNot4Sale as a resident who cares about her community and its people.

I fight as an environmental health researcher and a public health advocate who believes that safe and secure housing access is a key determinant of health.

Today, I urge you to support the many housing assistance measures at the federal and state levels to ensure that tenants, homeowners, and homeless individuals can access safe housing and afford to stay in their homes during this pandemic, including:

• Emergency rental, mortgage, and eviction prevention assistance
• A national moratorium on evictions and foreclosures
• Emergency funding for homelessness service providers, housing authorities, and housing providers
• Expanding unemployment insurance, food, and fuel assistance
• Expanding paid sick leave, paid emergency leave, and health care access

National and state updates about housing assistance resources and policies can be found at Citizens' Housing & Planning Association , National Low Income Housing Coalition , and the Health Housing Guarantee initiative.

COVID-19 note: COVID-19 has brought significant challenges to communities and households across the country and in our own neighborhoods, including the loss of loved ones, jobs, and access to stable income, social services, and health care. All of this significantly hurt our homeless populations, as well as tenants and homeowners and their ability to pay rent, mortgages, and other housing costs. This pandemic has exposed the limitations of our existing housing safety nets. Now more than ever, we need immediate and long-term affordable housing solutions to keep residents safe and secure in their homes.

Banner photo: Rent control rally, Massachusetts State House, January 2020. (Credit: Lori Hurlebaus)

• Beyond coffee and condos: Black and brown families displaced and ... ›
• Op-ed: A radical solution to make US affordable housing healthy and community-driven - EHN ›
• Una propuesta radical para viviendas asequibles, salubres y al servicio de la comunidad en Estados Unidos - EHN ›
• Tapping into the power of community to make informal settlements healthier - EHN ›
• Aprovechar el poder comunitario para hacer más sanos los asentamientos informales - EHN ›
• Making informal settlements healthier - EHN ›
• Sabah Usmani on making cities healthy and just - EHN ›

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Enough With the Housing Crisis Already!

More US households are renting now than at any time since the 1960s. Nevertheless, owning a home outright is still widely perceived to be the sensible option. For the middle class, this partially stems from the desire to make good on the promise of homeownership — a desire made all the more acute by the destruction of pensions and the need to plan for retirement. However, the desire is also fueled by insane rental costs, as owning a home is thought to be a way to escape the viciousness of the home-rental hamster wheel. For the huge swaths of people who no longer believe they’ll ever be able to buy, the white-knuckle ride of renting feels like a permanent nightmare.

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Reintroduced housing bill would address construction, rehab, land use and more

The bill is spearheaded by a coalition of Democratic lawmakers, including Elizabeth Warren and Raphael Warnock

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A coalition of Democratic lawmakers in the U.S. Senate and House of Representatives have reintroduced a bill designed to address housing issues by rehabilitating or constructing millions of additional units in an effort to bring down costs for renters and homeowners.

Known as the American Housing and Economic Mobility Act, the bill would provide funding to “build or rehabilitate nearly 3 million housing units over the next decade and bring down rents for lower-income and middle-class families by 10%, saving the average family $140 per month,” according to an announcement issued by the office of Sen. Elizabeth Warren (D-Mass.) that cites analysis from Moody’s Analytics .

The proposed funding would come primarily through returning estate tax thresholds to the levels they were at in January 2009. The legislation would also implement “more progressive rates above those thresholds, and closes certain loopholes,” the announcement stated.

Democrats are the only lawmakers who have signed on. The bill was introduced in the Senate by Warren and Raphael Warnock of Georgia, who are both members of the Senate Committee on Banking, Housing and Urban Affairs. The House version was introduced by Rep. Emmanuel Cleaver of Missouri, ranking member of the Housing and Insurance Subcommittee of the House Committee on Financial Services.

Six senators — five Democrats and one Independent — have signed on as co-sponsors in the upper chamber, while the House version has gained support from 20 Democratic members.

“The only way to dig our country out of this housing crisis is to build more housing so everyone has a place to call home,” Warren said in a statement. “My bill will make bold investments in our country’s housing and encourage local innovation to lower housing costs even more — and it’s all paid for by getting America’s wealthiest families to chip in.”

Sen. Warnock and Rep. Cleaver added that addressing housing issues remains a critical part of establishing better wealth and security among more Americans.

“The failure to address our national housing shortage has driven up costs that make homeownership difficult, increased rent burdens in communities across the country, and pushed far too many Americans into homelessness,” Cleaver said in a statement.

“Not only does this preclude working class Americans from obtaining safe, stable, and secure housing, but it prevents millions of our fellow citizens, particularly those in minority communities, from climbing the economic ladder and building generational wealth.”

In addition to providing funding for an estimated 3 million housing units, the bill would also seek to “provide assistance to people hurt by federal housing policy failures” by providing down payment assistance; U.S. Department of Veterans Affairs (VA)-guaranteed loan eligibility for the descendants of certain veterans; the creation of incentives for local governments to “eliminate unnecessary land use restrictions;” and limits to the role of private equity in the housing space.

The proposed bill has garnered support from almost 50 nonprofit organizations, including unions and housing advocates. Some groups that have signaled support include the National Low Income Housing Coalition (NLIHC), the National Community Reinvestment Coalition (NCRC), and the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO).

Additionally, a coalition of Massachusetts mayors, civil rights and housing interest groups have submitted letters of support. The Native American Indian Housing Council adopted a resolution endorsing the bill in 2019, which Sen. Warren’s office said “remains effective today.”

The announcement from Warren’s office includes several resources for the bill, including its direct text , the aforementioned Moody’s analysis , and statements of support from unions, interest groups and others.

Housing continues to be a significant issue during the 2024 political season as Americans prepare to go to the polls in November to decide the next president, along with the balance of power in both houses of Congress. Younger voters — particularly Gen Z voters — have recently expressed serious concerns about the cost of housing,

Earlier this year, House lawmakers formed a bipartisan real estate caucus in recognition of the large role that the sector plays in the U.S. economy. While some lawmakers have signaled or engaged in more activity related to housing, many also understand that passing any meaningful legislation in a period immediately preceding an election is an uphill battle .

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Commentary | Solving America’s affordable housing crisis | Opinion

Half of U.S. renters are considered rent-burdened, spending 30% or more of their income on rent and utilities — a record high . We’re short more than seven million affordable, available rental homes for extremely low-income Americans.

State by state, city by city, millions of Americans are struggling. Many are living on the streets of our largest metropolitan areas. The struggle is so real that affordable housing has emerged as a  top political issue in 2024. According to the latest polling, 77% of Americans report an affordable housing crisis in their local communities, with even more (80%) claiming their city and county officials are not doing enough to solve the problem.

Never before have so many people — across the political aisle — agreed that the housing affordability problem needs to be solved now, not later.

It is perhaps the most unifying issue of our time, especially in Florida. Nearly 60% of Floridians personally know someone suffering because of the affordable housing crisis, with almost 80% of South Florida residents urging local officials to take action on the issue. Three out of four  of Miami residents say the current cost of living is not manageable.

So how do we tackle it? There are several practical solutions to consider — from rent control to new construction to adaptive reuse, which converts existing buildings into affordable housing. In truth, all of these should be on the table.

But, first and foremost, we need to agree on one thing: All Americans should have a roof over their heads, with no exceptions. Once we agree on that, today’s problem solvers need to acknowledge that solutions are not necessarily straightforward or obvious. They are situation-dependent, subject to change based on a given city or state. There are numerous constraints and challenges, such as infrastructure, zoning regulations and costs, and they influence design decisions within the built environment.

Only through partnerships can we hope to overcome these obstacles. This is not a public or private sector issue. To the contrary, it’s going to take all of us together. Academia too will play a pivotal role, grooming the next generation of problem solvers to tackle affordable housing.

Fortunately, we already have a viable case study in place. The AIDS Healthcare Foundation (AHF) — the world’s largest HIV/AIDS organization and a firm believer that housing is the number one social determinant of health — recently partnered with a professional architecture office, Fort Lauderdale-based Glavovic Studio , and an academic institution, Florida Atlantic University , to approach the affordable housing crisis from different perspectives.

Most design studios within architecture schools like FAU’s operate within the autonomy of an academic silo. But FAU and other leaders in the architecture field no longer can sit this one out. The stakes are too high, and the problem too critical in regions like South Florida, with one of America’s largest growing populations and not enough affordable housing to accommodate sky-high demand.

Scrambling to pay rent or being priced out of communities altogether, college students and recent graduates understand the need for affordable housing better than most. Consider Miami, where recent grads barely can afford 2% of the city’s rental market.

Young Americans bring creative brain power that can translate into unique, previously underused approaches to affordable housing. Through the FAU partnership, students developed a guidebook to help identify which kinds of existing vacant properties may be most viable for affordable housing projects. They then developed comprehensive architectural designs on specific sites in South Florida. The students also took advantage of the state’s new “ Live Local Act ,” which allows certain properties to be rezoned for housing.

Over time, the FAU students’ design proposals will become new models for adaptive reuse and sustainable living in the South Florida region. As Dr. Joseph Choma, Director of FAU’s School of Architecture, put it, “pragmatic constraints” are “poetic design opportunities.” Imagine if the same partnership model is applied in other cities across America, from New York to Los Angeles.

We are facing an unprecedented housing affordability crisis, but there is still hope. It is still a solvable problem, as long as we work together.

Margi Glavovic Nothard is the founder and design director of Glavovic Studio in Fort Lauderdale. Ebonni Chrispin, of Pompano Beach, serves as director of legislative affairs and community engagement at AIDS Healthcare Foundation.

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Study shows international students are not to blame for the housing crisis

by Chantal Vallis, University of Waterloo

There have been ongoing accusations that international students are flooding university towns and taking up all the affordable housing. These narratives paint international students as the culprit, but a new study affirms that there is no basis for blaming international students for Canada's housing crisis and looks to change the narrative.

The study was led by a team of researchers at the University of Waterloo's Faculty of Environment and debunks popular myths about international students. For example, international students are often perceived as temporary visitors who are young, hyper-mobile and care-free individuals.

While some may fit this demographic, the researchers point out that the reality is much different. Currently, one in five international students is estimated to live with their partner and children during their studies, and these families are overlooked in Canada's policy and planning in higher education, migration and housing.

"The needs of international student families haven't really been discussed," says Dr. Alkim Karaagac, researcher in the Department of Geography and Environmental Management and principal investigator of the new study. "There is an invisibility and silence, which is a perfect recipe for vulnerability and exploitation."

Focusing on this vulnerable population, the researchers conducted a two-year case study on the housing experiences of 21 international student families living off-campus in the Waterloo region. The region is a unique location to investigate given it has the largest purpose-built student housing market in the country and is reported to have one of the least affordable housing markets among Canadian university towns.

Their interviews centered on the lived experiences of international students making a home in Canada and the challenges they face in the housing market. The findings suggest that all international student families face many hurdles to finding adequate housing, plus there are not enough diverse options to meet their needs.

"We talked to a family who had been living in an Airbnb for the last eight months who used up all their savings on tuition and housing," Karaagac says. "While the Airbnb is expensive, when you settle somewhere and the kids start school, you cannot just move somewhere else. Especially when there aren't a lot of options."

Other countries don't share these problems. Subsequent interviews with experts that can speak about the housing crisis detailed how the United States and United Kingdom support their international students with subsidized housing. From these conversations, plus a review of government documents and reports, Karaagac and her team put forward a series of recommendations.

"We don't have to wait years for major policy changes. There are small changes that we can make now to have a positive impact. One thing is that international students should receive accurate information on university housing, waiting lists, cost of living and housing in the local context. They also need hands-on support when applying for housing, so they don't fall victim to fraud, and help upon arrival as they navigate their first week," Karaagac says.

The researchers believe these short-term actions can be complemented by longer-term actions, such as implementing polices and bylaws that curb rental scams and discrimination by property owners. They also share that creating partnerships with housing market actors can lead to creative affordable housing solutions and that it is essential to expand how universities in towns can be more interconnected with town centers.

At Waterloo, international students comprise 19% of our total graduate student body. Developing solutions within the institution and with partners to improve the graduate student housing experience is a key area of focus. For example, the Graduate Student Association, a key project partner, is using the findings to propel their advocacy work for affordable housing in the region and recently held an event with international student families.

Moving forward, they would like to continue creating events to bring together international student families and share resources and programs available within the region.

Later this year, Karaagac and the team will be presenting their findings and recommendations with actors in the community. They are also scheduled to present at conferences held by the Canadian Association of Geographers and British Association of Geographers.

"We need to see international students as complex and more than one type of student. They are a diverse group which you can't house in a standard dormitory. We need to step up and be prepared as towns, universities and provinces to support them."

Provided by University of Waterloo

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Under President Milei, the worst economic crisis in decades puts Argentine ingenuity to the test

FILE - Police disperse anti-government protesters with water canons outside Congress, as lawmakers debate a reform bill of austerity measures promoted by Argentine President Javier Milei in Buenos Aires, Argentina, June 12, 2024. Milei scrapped price controls and slashed subsidies, causing prices to skyrocket in a country that already had among the world’s highest inflation rates. (AP Photo/Natacha Pisarenko, File)

A makeshift dry bathroom inside a tent with a bucket stands in a plaza during an anti-government protest in Buenos Aires, Argentina, Thursday, June 6, 2024. Alejandra, an Argentine street vendor, saw people with nowhere to urinate and launched a business that has surged alongside Argentina’s protests and sky-high annual inflation rate. She charges whatever people are willing to pay. (AP Photo/Natacha Pisarenko)

A spray bottle of sanitizer sits next to a makeshift dry bathroom inside a tent at a plaza during an anti-government protest in Buenos Aires, Argentina, Thursday, June 6, 2024. Alejandra, an Argentine street vendor, saw people with nowhere to urinate and launched a business that has surged alongside Argentina’s protests and sky-high annual inflation rate. She charges whatever people are willing to pay. (AP Photo/Natacha Pisarenko)

FILE - People eat a hot meal provided by the organization “Red Solidaria,” or Solidarity Network, at an open-air soup kitchen set up every night in the Plaza de Mayo, a few meters from the government house in Buenos Aires, Argentina, June 6, 2024. Argentine President Javier Milei has scrapped price controls and slashed subsidies, causing prices to skyrocket in a country that already had among the world’s highest inflation rates. (AP Photo/Natacha Pisarenko, File)

Armando Fernández, front, and Mariano Quinteros, eat a hot meal provided by the civil society group “Red Solidaria,” or Solidary Network, at an open-air soup kitchen set up every night in the Plaza de Mayo, a few meters from the government house in Buenos Aires, Argentina, Monday, July 1, 2024. Last month Fernández trekked hundreds of kilometers south by foot from his impoverished hometown in Santa Fe province, seeking work. Now he sweeps the capital’s litter-strewn sidewalks for whatever pesos that shop owners toss his way. (AP Photo/Natacha Pisarenko)

FILE - A woman culls through produce discarded by vendors at a market on the outskirts of Buenos Aires, Argentina, Jan. 10, 2024. Argentine President Javier Milei has scrapped price controls and slashed subsidies, causing prices to skyrocket in a country that already had among the world’s highest inflation rates. (AP Photo/Natacha Pisarenko, File)

A clothesline hangs at the home Patricio López where he and his mother run a laundry service for neighbors who lack a nearby service in Buenos Aires, Argentina, Wednesday, June 19, 2024. The mother-son pair make ends meet thanks to the laundry service they started as an impromptu income boost during the pandemic. (AP Photo/Natacha Pisarenko)

Patricio López, 21, folds laundry at his home where he and his mother run a laundry service for neighbors who lack a nearby service in Buenos Aires, Argentina, Wednesday, June 19, 2024. The mother-son pair make ends meet thanks to the laundry service they started as an impromptu income boost during the pandemic. (AP Photo/Natacha Pisarenko)

FILE - A view of the Villa 31 neighborhood in Buenos Aires, Argentina, April 3, 2023. Argentine President Javier Milei scrapped price controls and slashed subsidies, causing prices to skyrocket in a country that already had among the world’s highest inflation rates. (AP Photo/Natacha Pisarenko, File)

Maybel Delvalle poses for a photo at her office in Buenos Aires, Argentina, Thursday, July 4, 2024. Growing up destitute and finding herself as a single mom unable to feed her two hungry toddlers, the 25-year-old is a now a successful content creator on the platform OnlyFans, where she sells sexual fantasies to subscribers around the world and shares her story to other women. Her monthly income of $6,000 would be unthinkable for any Argentine doctor, lawyer or professor. (AP Photo/Natacha Pisarenko)

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BUENOS AIRES, Argentina (AP) — In the crush of anti-government protests paralyzing downtown Buenos Aires in the last months, some Argentines saw a traffic-induced headache. Others saw a reaction to President Javier Milei’s brutal austerity measures.

Alejandra, a street vendor, saw people with nowhere to urinate.

Plazas provided no privacy and cafes insisted on pricey purchases to use the toilet. With little more than a tent and a bucket, Alejandra started a small business that has surged alongside Argentina’s angry rallies and sky-high inflation rate. She charges whatever people are willing to pay.

“I haven’t had a job for a year, it’s now my sole income,” said Alejandra, who declined to give her last name for fear of reprisals from neighbors. Every four or five patrons, she puts on gloves and empties her bucket into the trash.

A makeshift dry bathroom inside a tent with a bucket stands in a plaza during an anti-government protest in Buenos Aires, Argentina, Thursday, June 6, 2024. (AP Photo/Natacha Pisarenko)

The political establishment’s failure to fix decades of crisis in Argentina explains the tide of popular rage that vaulted the irascible Javier Milei , a self-declared “anarcho-capitalist,” to the presidency.

But it also explains the emergence of a unique society that runs on grit, ingenuity and opportunism — perhaps now more than ever as Argentina undergoes its worst economic crisis since its catastrophic foreign-debt default of 2001.

“It’s the famous resilience of Argentines,” said Gustavo González, a sociologist at University of Buenos Aires. “It’s the result of more than three generations that have grappled with adverse circumstances, great uncertainty and abrupt changes.”

The libertarian leader warned that things would get worse before they got better.

To reverse the decades of reckless spending that brought Argentina infamy for defaulting on its debts , Milei scrapped hundreds of price controls . He slashed subsidies for electricity, fuel and transportation, causing prices to skyrocket in a country that already had one of the world’s highest inflation rates.

He laid off over 70,000 public sector workers , cut pensions by 30% and froze infrastructure projects, pushing the country deeper into recession. Supermarket sales fell 10% last month . The International Monetary Fund lowered its 2024 growth outlook for Argentina, projecting a 3.5% contraction.

Poverty now afflicts a staggering 57% of Argentina’s 47 million people , and annual inflation surpasses 270% — a level unseen in a generation.

A view of the Villa 31 neighborhood in Buenos Aires, Argentina, April 3, 2023. Argentine President Javier Milei scrapped price controls and slashed subsidies, causing prices to skyrocket in a country that already had among the world’s highest inflation rates. (AP Photo/Natacha Pisarenko, File)

People eat a hot meal provided by the organization “Red Solidaria,” or Solidarity Network, at an open-air soup kitchen set up every night in the Plaza de Mayo, a few meters from the government house in Buenos Aires, Argentina, June 6, 2024. (AP Photo/Natacha Pisarenko, File)

“Argentina is at a turning point,” Milei said in his Independence Day speech on July 9. “Breaking points in the history of a nation are not moments of peace and tranquility but moments of difficulty and conflict.”

Well-heeled Argentines have responded by stashing stacks of $100 bills in safe-deposit boxes and resorting to cryptocurrency to avoid their country’s chronically depreciating pesos.

Middle-class families — whose energy bills shot up last month by 155% — have pared down comforts they once took for granted: No more eating out. No more travel. No more private school. Public hospitals say they’re overwhelmed.

In a country where barbecued beef, or asado, is not only a national dish but a social ritual, meat consumption has dropped to the lowest level ever recorded, according to the Rosario Board of Trade.

The crisis has hit the poor hardest.

A woman culls through produce discarded by vendors at a market on the outskirts of Buenos Aires, Argentina, Jan. 10, 2024. (AP Photo/Natacha Pisarenko, File)

“They cannot hedge,” said Eduardo Levy Yeyati, an economist at Torcuato Di Tella University in Buenos Aires. “They cannot save, they cannot travel. They are stuck here and are most affected by inflation and the fiscal adjustment.”

In the last five months, the official unemployment rate jumped two points to 7.7%, a figure that appears far lower than it really is, experts say, because Argentina’s underground economy accounts for some half of its gross domestic product.

Rising joblessness and poverty have forced even more Argentines into the informal workforce. “Those who cannot find a job must invent one,” said Eduardo Donza, a poverty researcher at the Catholic University of Argentina.

For 34-year-old Armando Fernández, a broom has become a tool of survival.

Last month Fernández trekked hundreds of kilometers south by foot from his impoverished hometown in Santa Fe province, seeking work in Buenos Aires. Now he sweeps the capital’s sidewalks for whatever pesos that shop owners toss his way.

Armando Fernández, front, and Mariano Quinteros, eat a hot meal provided by the civil society group “Red Solidaria,” or Solidary Network, at an open-air soup kitchen set up every night in the Plaza de Mayo, a few meters from the government house in Buenos Aires, Argentina, Monday, July 1, 2024. (AP Photo/Natacha Pisarenko)

As Milei takes his chainsaw to the state’s anti-poverty programs , the poorest Argentines don’t have the coping mechanisms they once did.

“Politicians talk a lot but do nothing,” Fernández said, scarfing down chicken stew provided by Solidarity Network, a charity born out of Argentina’s successive crises. “I survive thanks to these soup kitchens, these people who offer me a bit of food.”

Seven days a week at nightfall, hundreds of people line up for free meals in the capital’s downtown square outside the presidential palace, which Solidarity Network turns into an open-air dining hall.

“We are serving more and more people every night,” said 31-year-old volunteer Pilar Cristiansen. “There are more and more people who cannot afford to buy food.”

In line on a recent evening were homeless men like Fernández, but also newcomers — a chef whose work had dried up, a bank employee who was recently laid off, an electrician whose salary had lost the bulk of its value.

Argentina’s downward spiral has long been visible in the southern suburbs ringing Buenos Aires. Streets are unpaved. Sewer lines don’t reach. The walls of Noelia López’s home are covered in haphazard patches of concrete.

A clothesline hangs at the home Patricio López where he and his mother run a laundry service for neighbors who lack a nearby service in Buenos Aires, Argentina, Wednesday, June 19, 2024. (AP Photo/Natacha Pisarenko)

Patricio López, 21, folds laundry at his home where he and his mother run a laundry service for neighbors who lack a nearby service in Buenos Aires, Argentina, Wednesday, June 19, 2024. (AP Photo/Natacha Pisarenko)

From an attic spangled with laundry lines, López and her 21-year-old son Patricio run the only laundromat in their urban slum. By dawn their floor is shaking with the rumble of washing machines as they sort coats and quilts for some dozen neighbors a day.

What started as an impromptu income boost during the pandemic has become their livelihood.

“There is no greater thing than being able to recognize that this country is just like this,” López’s said of Argentina’s volatility. “Now we have to bite the bullet once again.”

Growing up destitute as the daughter of Paraguayan immigrants in Buenos Aires, Maybel Delvalle was determined that her own children avoid the same fate.

She soon found herself a single mom with two hungry toddlers and realized that selling empanadas wouldn’t cover her bills.

Today the 25-year-old is a successful content creator on the platform OnlyFans , where she sells sexual fantasies to subscribers around the world and promotes her bootstraps story to legions of like-minded women. Her monthly income of $6,000 would be unthinkable for any Argentine doctor, lawyer or professor.

Maybel Delvalle poses for a photo at her office in Buenos Aires, Argentina, Thursday, July 4, 2024. (AP Photo/Natacha Pisarenko)

The work wasn’t easy. Few had heard of the platform in 2020 when Delvalle stumbled across it. She had to teach herself how to stay anonymous and safe while posting explicit content, convert her dollar income to pesos at a favorable exchange rate and speak enough English to act as a “virtual girlfriend” to U.S.-based subscribers.

Once she got her windfall, she became Argentina’s premier OnlyFans teacher. Delvalle is scrambling to keep pace with demand for her classes. “It’s been amazing,” she said of the past seven months since Milei took office.

Some 5,000 female students, 4,000 of them from Argentina, have enrolled in her trainings as they try to claw their way out of their country’s deepening poverty.

“There won’t be a miracle to get us through this,” she said. “You have to trust yourself more than anybody else.”

Associated Press writer Natacha Pisarenko contributed to this report.

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The evolution of China's growth model: challenges and long-term growth prospects

Prepared by Alexander Al-Haschimi and Tajda Spital

Published as part of the  ECB Economic Bulletin, Issue 5/2024 .

1 Introduction

China’s rapid economic transformation to become the world’s second-largest economy is inextricably linked to its investment-led growth model. This investment has been financed by high levels of domestic savings resulting from a number of government policies. [ 1 ] These savings have been channelled into a financial system that has provided highly-subsidised lending for infrastructure, manufacturing and real estate investment. As a result, China has achieved high rates of economic growth by ramping up its level of investment faster than most other countries at a similar level of development (Chart 1, panel a). [ 2 ]

Nevertheless, this investment-led growth model is coming under increasing pressure. First, diminishing rates of return imply that it is becoming more difficult to generate growth from one additional unit of investment, and some observers believe that China has long passed the point at which it can productively absorb these high rates of investment. Second, a policy-driven severe downturn in China’s property sector, which accounted for about 30% of GDP before the real estate downturn in 2021, is set to sustainably diminish this major pillar of domestic demand. Third, external demand is also shrinking, as trade tensions are increasing and a rising number of trading partners are unwilling to further accommodate higher trade deficits with China. More generally, structural challenges, including an ageing population and low productivity growth, are adding to the headwinds faced by China’s economy.

In response to these challenges, China’s government is redoubling its efforts to spur growth through investment-centric policies. This additional push to boost investment appears to be driven almost exclusively by the state-owned sector, whereas fixed asset investment by the private sector has stalled since the onset of the housing crisis in 2021 (Chart 1, panel b). Government policies to expand output in the face of slowing demand have potential implications for China’s trading partners. A supply-driven expansion of production could materially affect trade prices and hence inflation in their economies. The shift towards manufacturing previously-imported advanced goods is designed to enhance China’s self-reliance, thereby reducing the import intensity of its growth while shifting competitiveness and trade balances in relation to its trading partners.

Against this background, this article will briefly summarise China’s investment-led growth model and assess supply-demand imbalances in its manufacturing sector. It will then evaluate the potential spillover effects for China’s trading partners and review the policy implications for key advanced economies.

China’s investment-led growth model

Source: World Bank, Penn World Tables, National Bureau of Statistics of China and ECB staff calculations. Notes: GDP per capita from 2020 to 2022 is extrapolated based on World Bank data. The starting point for investment shares is GDP of USD 2,000 or above. The latest observations are for 2022 (panel a) and April 2024 (panel b).

2 The evolution of China’s economic growth drivers

Investment remains a major growth driver in China. In the 30 years leading up to 2010, the share of investment in China’s GDP gradually rose from 35% to 47% (Chart 2). By comparison, the typical investment-to-GDP ratio for developed economies is about 20%, whereas post-Soviet countries averaged about 30% in the first ten years after their transition to a market economy. Over the same 30-year period, the share of final consumption fell steadily from about 65% to below 50% in 2010. By comparison, the contribution of net trade to annual growth ranks significantly below that of investment and consumption. The net trade contribution to annual real GDP averaged 0.9 percentage points in the 1990s and since 2000 has averaged 0 percentage points. While integration into global value chains was instrumental in its technological development, China continued to have a high rate of imports, partly due to imports of intermediate goods processed for manufacturing exports but also imports of investment goods, such as machinery, to upgrade its productive capacities. For many decades, high investment rates provided the necessary upgrades to infrastructure and modernised China’s production technology, helping the country to become a global manufacturing powerhouse.

However, over time, high rates of investment face diminishing rates of return. Despite already high rates of investment, China’s government proceeded with two further investment waves after the global financial crisis. The first was a response to the Great Recession, which saw the Chinese government implement a large-scale stimulus programme focusing on infrastructure and real estate, bringing annual state-financed fixed asset investment growth rates in 2008 and 2009 to 36% and 60% respectively. Once the stimulus policies came to an end, however, significant overcapacity had built up in a number of sectors. By 2015 the government reacted with supply-side reforms, which among other things aimed to reduce excess industrial capacity in specific industries, resolve unprofitable firms and reduce the stock of unsold housing. [ 3 ] The second investment wave started in 2020 as a response to the coronavirus (COVID-19) pandemic, when the Chinese government targeted its support programmes at firms with the aim of increasing growth across all manufacturing sectors, including those previously subjected to capacity reduction efforts in 2015. As a result, productive capacity built up again owing to supply-driven factors, outpacing demand, which was more subdued as a result of the zero-COVID policy.

Long-term trend in China’s output components

Source: OECD and ECB staff calculations. Note: The latest observations are for 2022.

Structural and cyclical factors are increasingly weighing on demand

Since the global financial crisis, GDP growth has been on a secular decline in China, partly due to structural headwinds. Total factor productivity (TFP) began to decline as additional infrastructure spending enhanced productivity less over time. While aggregate annual TFP growth was 2.8% in the ten years leading up to the Great Recession, it slowed to 0.7% over the period 2009-18. In addition, China’s working age population started to decline in 2011. According to UN estimates, by 2050 it will have declined by nearly a quarter. These headwinds are already depressing China’s potential growth rate and this downward trend is likely to persist (see Box 1 for a model-based analysis).

In addition, cyclical demand factors became negative during the pandemic. Consumer demand fell sharply during the pandemic, as uncertainty amid pandemic restrictions led to a rise in precautionary savings (Chart 3). This was sustained by the housing crisis, which started in 2021 and further depressed consumer demand, given that the dominant share of household wealth in China is linked to the property sector.

Consumer confidence and real estate sector developments

(standardised index and index, 2019=100)

Source: National Bureau of Statistics of China and ECB staff calculations. Notes: The latest observations are for April 2024 for consumer confidence and May 2024 for the real estate climate index. The real estate climate index summarises a set of indicators for real estate investment, capital, area and sales.

The current housing crisis is likely to make future investment less inward facing

The housing crisis severely impaired one of the three main pillars of investment growth. Total fixed asset investment in China consisted predominantly of three categories in roughly equal parts: infrastructure, real estate and manufacturing. The rapidly growing housing sector increasingly coincided with rising levels of leverage among developers, while the stock of housing began to outstrip demand in a growing number of regions. The Chinese authorities took steps in 2020 to rebalance and derisk the sector. With new restrictions on leverage, the derisking policies are also designed to achieve a long-term reduction in the overall size of the sector in terms of share of GDP. The resizing of the sector, amid a liquidity crisis among developers, led real estate investment growth to turn negative in late-2021 (Chart 4). In the absence of the real estate investment pillar, the investment-led growth model now relies more heavily on infrastructure and manufacturing investment to support economic growth.

Fixed asset investment by sector

(year-to-date year-on-year growth)

Source: National Bureau of Statistics of China. Note: The latest observation is for April 2024.

Infrastructure and manufacturing investment are more likely than housing investment to be export oriented. China’s push to become self-reliant and further develop its high technology sector implies that its infrastructure spending is changing. There will be less emphasis on building roads and bridges and more on building new infrastructure aimed at developing sectors, such as telecommunications networks, high-speed rail networks, and research and development facilities, which support advanced manufacturing. The most recent announcements made by China’s government to build “new productive forces” to shore up growth targeted these sectors. Specifically, the government aims to support new technology sectors such as electric vehicles (EVs), microchip technology and new materials. Given the subdued outlook for domestic demand as a result of the ongoing housing sector weakness, this additional capacity will materialise over the next few years to a significant extent in the export sector, which will have potentially important implications for China’s trading partners.

Box 1 China’s long-term growth prospects

Prepared by Sergiu Dinu and Seng Guan Toh

The recent decade has seen a slowdown in China’s growth trajectory, particularly after the global financial crisis. As income levels in China approach those in more advanced economies, a further slowdown is expected, mirroring the convergence experienced in other fast-growing East Asian economies. Demographics would also suggest lower potential growth, as China’s population is declining and it is faced with growing external constraints (e.g. tariffs and export controls imposed by advanced economies) that may hinder its attempts to catch up with the technological frontier.

This box summarises the findings of a model-based analysis of China’s longer-term growth prospects to quantify several structural drivers that are pertinent to its growth model. [ 4 ] The model is based on an extension of the neoclassical growth framework entailing a total factor productivity (TFP) catch-up process which describes how China catches up with the world technology frontier (represented by the United States). [ 5 ] This model uses Penn World Table data covering 1995-2019 and is calibrated to match historical data on labour developments, capital and TFP. The findings of the analysis point to the importance of both demographics and productivity as structural determinants to understand and address China’s growth-related challenges.

A baseline scenario evaluates potential long-term economic growth based on the following assumptions: a stable labour force participation rate, demographic developments based on UN medium-fertility forecasts and a continuation of historical TFP trends. [ 6 ] Baseline projections indicate that ageing and the downward trend in productivity growth would lead to a decline in the annual GDP growth rate from 5.3% in 2025 to 3.7% in 2035 . [ 7 ] In other words , these two structural factors would reduce the annual growth rate by 1.6 percentage points over the decade to 2035. The baseline projections are necessarily subject to high uncertainty. To assess the impact of variations in the baseline, these projections are then compared with two alternative scenarios which quantify the impact of more adverse structural developments on the GDP growth rate. They are: (i) less benign demographic developments reflecting a stronger fall in the fertility rate; and (ii) a more adverse TFP growth slowdown scenario based on an Asian Development Bank paper, further compounded by additional foreign direct investment (FDI) outflows assumed to be the result of global value chain (GVC) fragmentation. [ 8 ]

China’s fast demographic shift to a declining population threatens to limit the labour supply. The repercussions of China’s now defunct one-child policy exacerbate the current issues of decreasing fertility and gender imbalance, which contributed to a fall in the population in 2022 for the first time since 1960. In the medium term, less optimistic demographic developments in the form of lower population growth are expected to cut the aggregate GDP growth rate per annum in 10 years’ time by more than 0.2 percentage points relative to the baseline (Table A).

China’s ability to deepen its domestic technological base faces risks from further fragmentation of GVC. Moreover, increasing uncertainty relating to regulatory and geopolitical risks coincides with rising outflows of FDI. A rise in GVC fragmentation could lead to further FDI outflows and accelerate the slowdown in TFP growth. This in turn could lower the 10-year-ahead baseline GDP growth rate by 0.6 percentage points.

Long-term structural growth of China

(percentages)

Sources: Penn World Table 10.01, UN, OECD, Peschel and Liu, op. cit., State Administration of Foreign Exchange of China, ECB staff calculations. Note: The numbers in brackets correspond to the percentage point (pp) deviations of the scenarios’ projections from the baseline projections.

3 China’s development of manufacturing capacity

The build-up of manufacturing capacity in China is historically unparalleled. China’s share of gross global manufacturing production rose from 5% to 35% over the course of 1995-2023, and it currently has a higher manufacturing output than that of the next nine largest manufacturing countries combined (Chart 5). This unprecedented rise in productive capacity did not just serve China’s large and growing domestic market but coincided with a rapidly rising share of world manufacturing exports, which grew from 3% in 1995 to 20% by 2020. If China is now aiming to invest further in productive capacities, this raises the question of whether the additional capacity will be absorbed domestically or externally.

Shares in global manufacturing value added by country or area

(percentage share)

Source: World Bank. Note: The latest observations are 2021 for the United States and 2022 for the others.

There are signs that the recent rise in manufacturing output is creating distortions in the Chinese market. The supply of Chinese industrial firms outpaced demand, resulting in a build-up of inventories and a decline in prices, ultimately reducing firms’ profitability. The number of loss-making firms has doubled to 28% since 2018 in tandem with a considerable increase in the inventory-to-sales ratio (Chart 6).

Loss-making firms and inventories

(percentage share and ratio, 12-month moving average)

Sources: National Bureau of Statistics of China and ECB staff calculations. Notes: The inventory-to-sales ratio refers to the ratio between the end-of-month inventories and monthly operating income of Chinese industrial companies. The latest observation is for April 2024.

China’s trading partners have been increasingly vocal about their level-playing-field concerns, as production surpluses are often linked to extensive government support. China’s industrial policy measures account for a much larger share of GDP relative to other economies (Chart 7). While direct subsidies account for only a small share of all measures, indirect subsidies, such as preferential access to lending, lower financing costs and land allocation are much more common. [ 9 ] These policies are predominantly accessible to public firms and government-linked private firms, while private and foreign firms do not have the same preferential access. [ 10 ]

Industrial policy comparison across countries

State subsidies as a share of GDP

(percentage share and percentage point contributions)

Source: Center for Strategic and International Studies. Note: The estimates refer to 2019. For more details, see DiPippo, G. et al., “ Red ink: estimating Chinese industrial policy spending in comparative perspective ”, Center for Strategic and International Studies, May 2022.

Tracing excess capacity in China’s manufacturing sectors

Signs of rising overcapacity can materialise in different forms across sectors. The building of excess capacity can be defined as a level of production that cannot be absorbed by demand at current prices. An increase in output would thereby increase inventories, be sold at lower prices, or a combination of both. We provide three types of evidence for the existence of overcapacities in China, namely an overview of Chinese inventories and profits by sector, the latest business survey data of European companies in China, and a structural Bayesian VAR analysis of Chinese exports. First, we find that in a wide range of sectors, which together represent the majority of China’s manufacturing sector, the inventory-to-sales ratio has increased, highlighting that Chinese domestic output is currently expanding faster than sales (Chart 8). This is particularly evident for sectors linked to real estate, which faced a sudden and severe decline in domestic demand (especially in the cement, steel and metal products industries). Second, recent survey evidence confirms the existence of overcapacities and their disinflationary effects. In a recent survey by the European Union Chamber of Commerce in China, over one-third of respondents among European companies in China observed overcapacity in their industry in the past year and cited overinvestment as the main reason. [ 11 ] Moreover, in the sectors where overcapacities were observed, prices tended to decline. Overall, it emerges that where domestic demand cannot absorb the additional output, producers will aim to direct this excess capacity to export markets, often by lowering prices.

Overcapacity in Chinese sectors

Change in inventories-to-sales ratios and profit growth rates

(change and percentage point change between 2023 and 2015-19)

Sources: National Bureau of Statistics of China and ECB staff calculations. Notes: The red columns refer to industries classified as “advanced manufacturing”, while the green columns refer to industries closely linked to the real estate sector. The remaining industries are shown in blue.

The rise in Chinese output is predominantly supply driven. As a third piece of evidence for the existence of overcapacities, a structural Bayesian VAR analysis is carried out to disentangle demand and supply factors in Chinese export growth. [ 12 ] It shows that in real estate-related industries, such as steel and other metals, exports over the past year have been almost entirely driven by supply factors, while foreign demand remained broadly neutral or negative (Chart 9, panel a). The same dynamics can be observed for motor vehicle exports (Chart 9, panel b). More generally, when comparing the share of supply factors in exports by sector, we find that over the past year, supply factors have become a growing driver of exports across a range of sectors compared with the 2017-19 period (Chart 9, panel c). The results show that the share of foreign demand in the exports of sectors related to the real estate and advanced manufacturing sectors in particular appear to be falling.

BVAR historical shock decomposition of Chinese exports

c) Change in domestic supply contribution by sector

(percentage share of domestic supply shocks in total deviations from the mean)

Sources: National Bureau of Statistics of China and ECB staff calculations. Notes: Panels a) and b) show the median posterior distribution of the historical decomposition of Chinese exports in deviation from its initial condition. All variables are measured in log levels, while the chart shows the decomposition in year-on-year growth rates. In panel c), the x-axis measures the share of domestic supply shocks in total deviation from the mean between 2017 and 2019 based on a BVAR historical shock decomposition. The y-axis shows the average share between the second quarter of 2023 and the first quarter of 2024. For sectors above the diagonal line, it could be implied that domestic supply factors are behind the increase in exports, and thus more likely to have built up overcapacity. The latest observations are for March 2024.

4 Global implications of China’s investment policies

China’s efforts to further invest in the productive capacities of highly subsidised industries has global implications for its trading partners. To the extent that additional output cannot be entirely absorbed domestically and external demand remains broadly constant, a rise in China’s exports necessitates a further increase in its global share of manufacturing exports. Given recent tariff action against China, a further expansion of its export market share may not go unchallenged in global markets. Moreover, by lowering prices or increasing exports of heavily-subsidised products, a rise in exports could lead to international spillovers of disinflationary pressures. These could be further exacerbated if trading partners’ domestic firms in turn lower their prices to remain competitive with Chinese exports. Finally, with China’s development of its advanced manufacturing capacities, particularly in green technology sectors, the relatively larger size of state subsidies in China could also affect the competitiveness of trade partners in these relatively new and growing advanced manufacturing sectors.

Impact on euro area prices by sector

A static exercise modelling a further decline in Chinese export prices in sectors with overcapacity would have a downward impact on euro area consumer prices, which could be amplified through a subsequent decline in euro area producer prices. To quantify the potential impact, we perform a sectoral bottom-up analysis based on the elasticities of international production networks captured in input-output tables. [ 13 ] We first assume a 30% drop in Chinese export prices in sectors identified as having overcapacities in our BVAR analysis. [ 14 ] The decrease in price is calibrated by considering past price movements in the solar panel industry, as this industry can serve as a case study for potential developments in other green technology industries. [ 15 ] The simulation results find that the decline in Chinese export prices would lead to a 0.3 percentage point fall in euro area consumer price inflation. This result consists of a smaller direct impact through consumption of Chinese final products, and a larger indirect impact through intermediate input linkages, reflecting the rich interdependencies of euro area and Chinese production networks. Second, we look at how this change is amplified if euro area producers lower their prices in response to cheaper Chinese products. We consider a 7% decrease in the prices of euro area producers. This is calibrated by considering the differential in government subsidies between China and Germany, as German subsidies account for about one-quarter of those of Chinese producers. [ 16 ] The price reduction by euro area producers in affected sectors results in an additional 0.6 percentage point drop in euro area consumer price inflation (Chart 10). While the imposition of tariffs could mitigate this impact, it could vary across different products and producers and potentially lead to retaliatory measures.

Impact of declining Chinese trade prices on euro area prices by sector

a) Cumulative impact and contribution of individual sectors

(percentage point changes)

b) Impact on individual sectors and contribution of direct and indirect spillovers

Sources: Trade in Value Added (TiVA) input-output tables and ECB staff calculations. Notes: The chart shows analysis based on the elasticities of international production networks captured in input-output tables. The chart shows the cumulative impact of declining prices on euro area consumer prices in Chinese sectors previously identified as having overcapacity (panel a) (see BVAR analysis above). It also shows the contribution of individual sectors (panel b). The positive technology shock is standardised to produce a 30% decrease in Chinese export prices in each sector and a reciprocal 7% decrease in euro area producer prices. The blue and red bars show the direct impact that changes in Chinese export prices have on final consumption in the euro area, while the yellow and green bars show the indirect impact, accounting also for intermediate input interlinkages. The latest observation is for 2020.

Impact on China’s competitiveness

China’s share of global exports has been consistently increasing, particularly in the advanced manufacturing and green technology sectors. These gains in market share can be observed across the board, including in industries where we find traces of overcapacity (Chart 11). [ 17 ] Rapid expansion is particularly evident in the new green technology industries, where China’s growing share of the solar panel industry serves as a cautionary tale for other emerging green industries (Chart 12). To assess the potential scenario where the electric vehicle industry follows a similar trajectory to the solar panel industry, Box 2 attempts to quantify the potential impact a 50% decrease in EV prices would have on prices and market shares in the euro area and other countries.

Increase in China’s competitiveness

Changes in Chinese export share

(percentage share of total exports)

Sources: Trade Data Monitor, UNCTAD and ECB staff calculations. Notes: The chart shows changes in China’s export share in total exports by sector. The latest observations are for 2023 and 2022.

Changes in market share in green technology industries for China, the euro area and the United States

Sources: Trade Data Monitor and ECB staff calculations. Notes: The chart shows exports as a share of total exports in different green technology sectors. The data refers to trade flows in US dollars. Exports from the euro area exclude trade between euro area countries. The latest observation is for April 2024.

China has increased its competitiveness in sectors traditionally dominated by advanced economies. Along with rising market share, China’s value added in global value chains has also been growing. [ 18 ] This increase in value added is enhancing China’s competitiveness and exposing advanced economies to competition in a greater number of sectors, as China gradually develops a comparative advantage in sectors in which the latter specialise. In the last 20 years in particular, China has become increasingly competitive in sectors previously dominated by other advanced economies (Chart 13). Of these advanced economies, Italy appears to be most exposed because China has become competitive in 60 sectors where Italy holds a comparative advantage. On the other hand, Germany has seen the largest surge in exposure to Chinese competitiveness, which has increased from 20 sectors in 2000 to 50 in 2022.

China’s aim of boosting its self-reliance will impact its demand for imports and its competitiveness in third-country markets. It has been aiming to reduce its reliance on global trading partners by importing less and by vertically integrating its value chains. [ 19 ] As it gradually replaces imported goods with domestically-produced ones, China’s demand for imported industrial goods will decline. A surge in the domestic production of industrial goods will also increase competition from China in third-country export markets. Both phenomena will put downward pressure on the trade balance of industrial goods exporters, such as the euro area. At the same time, the change in the trade balance is likely to affect the renminbi exchange rate, which will offset part of the gain in China’s price competitiveness.

China’s increased competitiveness

Countries exposed to China’s increased competitiveness

(number of product categories with comparative advantage)

Sources: UN trade and development and ECB staff calculations. Notes: The chart shows comparative advantage, referring to the revealed comparative advantage indicator, measuring the ratio between the share of a country’s exports in a particular product category in its total exports and the same share for the world as a whole. A country has comparative advantage if the value of this ratio is over 1. The latest observation is for 2022.

Impact on competitors’ prices

China’s competition will also give rise to further disinflationary pressures through second-round effects emerging as a result of competitors being forced to lower the prices of their products. While Chinese production surpluses in some sectors may not affect the market shares of firms in advanced economies directly, they could lead to the reallocation of production from third markets to China, leading to overall lower prices for these products. At the same time, competitive Chinese prices could force producers in advanced economies to also reduce their prices. Both cases could potentially trigger second-round effects on consumer prices in advanced economies.

Box 2 A model-based assessment of the spillovers of Chinese subsidies to electric vehicles

Prepared by Maria-Grazia Attinasi, Lukas Boeckelmann, Bernardo de Castro Martins and Baptiste Meunier

China increasingly subsidises electric vehicle producers, mirroring what happened in the solar panel industry where it has become a global leader thanks to massive state aid. Overall, industrial subsidies in China are estimated to be three to nine times higher than those in advanced economies, with conservative estimates showing subsidies amounting to €221 billion (2% of China’s GDP). There has recently been a huge increase in subsidies to Chinese green tech companies, notably to producers of electric vehicles. [ 20 ] This approach mirrors how China has become a world leader in the solar panel industry, increasing its global market share from 5% in 2000 to 50% in 2024 through massive government subsidies. [ 21 ]

Global spillovers are quantified using a state-of-the-art, multi-country, multi-sector model run on a newly-developed granular input-output table. We use the Baqaee and Farhi (2024) model, which accounts for amplification effects of shocks through global production networks and substitution effects via international trade. [ 22 ] The model makes it possible to simulate the propagation of shocks both downstream to consumers and upstream to suppliers, and to derive the non-linear effects of shocks across countries and sectors. By enhancing the granularity of available input-output tables in the calibration of the model to isolate green sectors, such as EVs, our methodology enables us to simulate shocks targeted only at green sectors and to recover the sectoral impact on the industries of interest. [ 23 ] We simulate a hypothetical and stylised scenario where the relative price of Chinese EVs and electric batteries drops by 50% following government subsidies, in line with estimates of the price differential between Chinese and EU producers. [ 24 ]

Massive Chinese subsidies would lower the price of EVs for consumers across the globe but would also severely downsize their domestic production in the rest of the world. Heavily-subsidised Chinese EVs are estimated to lower the price consumers pay for EVs by 30% globally and 15% in the EU (Chart A, panel a). This leads to a 6% increase in the global production of EVs, as consumers substitute thermal vehicles for cheaper EVs, but EU domestic production would decline by 70% (Chart A, panel a) as consumers switch to cheaper Chinese products. As a result, China substantially increases its global market share in EVs by 60 percentage points, notably at the expense of EU producers, whose share shrinks by 30 percentage points (Chart A, panel b), of which 18 percentage points relate to German producers. This scenario closely resembles what happened in the solar panel industry, where Chinese subsidies made products cheaper and enabled China to gain a dominant market share while producers in the rest of the world were forced to scale back production. Finally, even though the sectoral impact on the EV industry is sizeable, the global impact is limited: total consumer prices decline by only 0.2% and overall EU production falls by a mere 0.1% owing to the small size of the EV industry.

The estimates presented in this box should be considered an upper bound for losses in market shares for the euro area as the model abstracts from potential mitigating effects. First, EU producers may react endogenously to Chinese subsidies by lowering their prices or by bridging the price competitiveness gap through more innovation and digitalisation. [ 25 ] The EU could also impose countervailing duties, such as the new tariffs announced in June 2024 and not accounted for in the box. [ 26 ] The scenario considered in the box instead illustrates, other things being equal , the risks related to sizeable Chinese subsidies. Second, consumer preferences for EVs might be less price sensitive than assumed in our scenario. While we account for this in the Baqaee-Farhi model by setting a product-specific elasticity of substitution, estimates in the literature relate to all vehicles and not specifically to EVs. [ 27 ] Should price sensitivities for EVs be lower than for other vehicles, this could lead to an over-estimation of the substitution effects towards Chinese EVs.

Global sectoral spillovers of Chinese subsidies to electric vehicles

Sources: Baqaee and Farhi, op. cit., OECD, International Energy Agency, Fally, T. and Sayre, J., “Commodity Trade Matters”, Working paper , No 24965, National Bureau of Economic Research, August 2018 and ECB staff calculations. Notes: The non-linear impact is simulated through 25 iterations of the log-linearised model. The granular input-output tables isolating electric vehicles are obtained following the methodology of Attinasi, M-G.et al., op.cit.

5 Conclusion

China’s recent policy approach to address economic weakness by doubling down on its investment-driven growth model and identifying new productive sources is widely expected to increase already existing overcapacities. Given diminishing marginal returns to investment, the continued emphasis on the supply side of the economy is leading to rising inventories, lower profitability and growing supply-demand imbalances in a number of sectors and industries. Against a background of subdued domestic demand, efforts to direct additional productive capacities to export markets is fuelling tensions in global trade relations.

Trade policies vis-à-vis China are changing rapidly. The United States recently introduced a sharp increase in tariffs on Chinese imports, notably raising tariffs on Chinese EVs from 25% to 100%. Moreover, other countries are also increasing tariff and non-tariff barriers to Chinese imports (Chart 14). In the EU, several trade policy instruments were introduced that address level playing field considerations in public procurements and also review dumping practices. The changing trade policy dynamics are also increasingly visible in trade flows. Since 2017-18, China’s share of imports has been on a declining path in the United States and Japan, albeit briefly interrupted by the pandemic, when demand initially focused temporarily on medical products and then on manufacturing goods made in China. By contrast, China’s share continued to rise in the EU, currently standing above pre-pandemic levels (Chart 15).

Trade measures introduced on Chinese products

(number of trade measures)

Sources: Global Trade Alert and ECB staff calculations. Notes: The chart shows new trade measures introduced on Chinese products with HS 6-digit detail since 2008. The latest observation is for December 2023.

Given these shifting trade policy dynamics, the role of the EU as an export market for China could potentially become more central. In the event that non-EU countries further close their markets to Chinese products, China could redouble its efforts to export to the EU, thereby exacerbating the impact on Europe in terms of rising disinflationary pressures, a loss of competitiveness in advanced manufacturing sectors and a declining share in both manufacturing output and exports. Given the potentially significant effects on output, inflation and labour markets, the European policy response needs to be carefully calibrated to ensure level playing field conditions. [ 28 ]

Share of imports originating from China

(change since 2015; 12-month moving average)

Sources: IMF and ECB staff calculations. Note: The latest observation is for January 2024.

The one-child policy introduced in the late 1970s reduced the amount of old-age support from dependants, thereby raising retirement savings. The shift from a centrally-planned economy towards a greater role for markets in the 1990s reduced the social safety net, driving up precautionary savings, and the switch from employer-provided housing to private property ownership required higher savings for down payments and mortgage payments. See Zhang, L, Brooks, R., Ding, D., Ding, H., He, H., Lu, J. and Mano, R., “China’s High Savings: Drivers, Prospects, and Policies,” IMF Working Paper, No 277, International Monetary Fund, December 2018.

See also Dorrucci, E., Pula, G. and Santabárbara, D., “ China’s economic growth and rebalancing ”, Occasional Paper Series , No 142, ECB, February 2013; and Dieppe, A., Gilhooly, R., Han, J., Korhonen, I. and Lodge, D. (editors), “ The transition of China to sustainable growth – implications for the global economy and the euro area ”, Occasional Paper Series , No 206, ECB, January 2018.

The industries targeted included steel, coal, cement, glass, real estate and agriculture. See Boulter, J., “ China’s supply-side structural reform ”, Bulletin , Reserve Bank of Australia, December 2018.

See Dinu, S. and Toh, S.G., “China’s structural growth prospects - scenario analysis with demographics and productivity”, Working Paper Series , European Central Bank, forthcoming.

See Fernández-Villaverde, J., Ohanian, L. E. and Yao, W., “ The Neoclassical Growth of China ”, Working Paper Series , No 31351, National Bureau of Economic Research, June 2023. This model allows the construction of scenarios that can quantify the impact of structural and secular issues on China’s GDP growth rate.

The most recent World Population Prospects report, which presents demographic trends and projections, was published by the United Nations in 2022.

Note that the projected growth rate measures underlying structural potential long-term growth and hence does not include the unique effects of the COVID-19 pandemic nor recent cyclical drivers, such as the real estate downturn or policy stimulus.

See Peschel, D. and Liu, W., “ The Long-Term Growth Prospects of the People’s Republic of China ”, Working Paper Series , No 54, Asian Development Bank, December 2022. Their TFP projections for China incorporate additional information about challenges in technological advancements.

Chinese government policies promoting firms in strategic industries largely fall under two initiatives: the “Made in China 2025” initiative aimed at promoting high-tech industries, and the “10,000 Little Giants” initiative targeted at small and medium-sized enterprises.

For more details, see García-Herrero, A. and Schindowski, R., “ Unpacking China’s industrial policy and its implications for Europe ”, Working Paper, Issue 11, Bruegel, 13 May 2024.

Business confidence survey 2024 , European Union Chamber of Commerce in China, May 2024.

The Bayesian VAR analysis decomposes supply and demand shocks in Chinese export growth. Structural shocks are identified using sign restrictions, estimated using monthly samples ranging from January 2012 to March 2024. In particular, aggregate foreign demand shocks are identified by assuming that real exports and export prices move in the same direction, while aggregate domestic supply shocks assume they move in opposite directions.

The production network framework assumes a positive technology shock affecting Chinese sectors with overcapacities, propagating forward to export prices and accounting for input interdependence in the supply chains. The framework also assumes nominal rigidities, namely that there exists some wedge between the final price and marginal cost, which softens the overall impact on euro area prices.

The sectors identified are pharmaceuticals, electrical machinery, chemicals, basic metals, motor vehicles, non-metallic minerals, and timber and wood.

As Chinese solar panel prices fell on average by about 30% each year between 2007 and 2011 (from 5.5 USD/kW to 1 USD/kW), our simulation considers a similar magnitude, to gauge the largest potential impact on euro area consumer prices. For more insight into the solar panels industry, see Wen, D., Gao, W., Qian, F., Gu, Q. and Ren, J., “ Development of solar photovoltaic industry and market in China, Germany, Japan and the United States of America using incentive policies ”, Energy Exploration & Exploitation , Vol.39, Issue 5, pp.1381-1836, September 2021.

See also di Sano, M., Pongetti, G., Schuler, T. and Toh, S.G., “ Spillovers to the euro area from recent negative inflation in China ”, Economic Bulletin , Issue 7, ECB, 2023; see also the box by Dieppe, A., Frankovic, I. and Liu, M., “ Could China export disinflation? ”, Eurosystem staff macroeconomic projections for the euro area, ECB, June 2024 .

Analysis by Jean, S. et al., “ Dominance on World Markets: the China Conundrum ”, Policy Brief, No 44, CEPII Research Center, December 2023. This Policy Brief shows that, at a more detailed level of harmonised trade classification, China’s export market share surpassed 50% for more than 600 products. In comparison, the United States had 100 dominant products while the EU had 300.

Value added in Chinese exports to the EU is growing. This is particularly evident in industries reliant on Chinese inputs within international supply chains, such as basic metals, chemicals and electrical equipment. For more details see Vandermeeren, F., “ Understanding EU-China economic exposure ”, Single Market Economics Briefs , No 4, European Commission, 17 January 2024.

China owns entire value chains, ranging from raw material mines to final production processes in specific technologies, such as drones and electric vehicles. For more details, see Arjona, R. et al.,“ An enhanced methodology to monitor the EU’s strategic dependencies and vulnerabilities ”, Single Market Economics Papers , No14, European Commission, 18 April 2023.

See Bickenbach, F., Dohse, D., Langhammer, R. J., and Liu, W-H. (2024), “ Foul Play? On the Scale and Scope of Industrial Subsidies in China ”, Kiel Policy Brief, No 173. For example, direct subsidies to the car maker BYD increased from about €0.2 billion in 2020 to €2.1 billion in 2022.

See Gang, C., “ China's Solar PV Manufacturing and Subsidies from the Perspective of State Capitalism ”, The Copenhagen Journal of Asian Studies, Vol. 33, Issue 1, pp. 90-106, June 2015.

Baqaee, D. and Farhi, E., “Networks, Barriers, and Trade”, Econometrica , Vol. 92, Issue 2. pp. 505-541, March 2024.

While input-output tables feature sectoral granularity (e.g. 45 sectors in OECD TiVA tables), they are not granular enough to isolate specific green products. For example, electric vehicles are merged with thermal vehicles in the motor vehicles sector in the OECD TiVA tables. The construction of granular input-output tables relies on product-level trade data to decompose each broad sector in an initial input-output table into green and non-green products following the methodology of Borin, A., Conteduca, F. P., di Stefano, E., Gunnella, V., Mancini, M. and Panon, L., “ Trade decoupling from Russia ”, International Economics , Vol. 175, pp.25-44, October 2023. We refine the methodology to capture specific sectoral interlinkages in Attinasi, M-G., Boeckelmann, L., Borin, A., de Castro Martins, B., Mancini, M. and Meunier, B., “Climate change and trade fragmentation”, unpublished manuscript, European Central Bank, 2024.

For example, Rhodium Group estimates the price differential between German and Chinese EVs to be around 50%. The Baqaee-Farhi model does not include a fiscal block that would simulate the financing mode of subsidies.

See also de Santis, R.A., Neves, P., di Nino, V., Furbach, N. and Neumann, U., “Will the euro area car sector recover?”, Economic Bulletin , Issue 4, ECB, 2024.

As a result of the anti-subsidy investigation launched by the European Commission in October 2023 on imports of battery electric vehicles for passengers originating in China, in June 2024 the Commission announced new tariffs on Chinese EV producers ranging from 17.4% to 37.6% on top of a 10% duty that was already in place for all electric cars imported from China.

Trade elasticities are based on Fontagné, L., Guimbard, H. and Orefice, G., “Tariff-based product-level trade elasticities”, Journal of International Economics , Vol. 137, July 2022, as well as on Boehm, C.E., Levchenko, A.A. and Pandalai-Nayar, N., “The Long and Short (Run) of Trade Elasticities”, American Economic Review , Vol. 113, No 4, pp. 861-905, April 2023.

A report by the European Commission highlights how China is the main source of the EU’s dependencies, accounting for about one-third of all products identified as Single Origin Dependencies. For more details, see Arjona, R. et al., “ An enhanced methodology to monitor the EU’s strategic dependencies and vulnerabilities ”, Single Market Economics Papers, No 14, European Commission, 18 April 2023.

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