The Square Footage Divide and the Trickle-Down Theory of Real Estate Economics
These are two concepts that came to me while visiting a friend who is staying in a Manatee County neighborhood so hopeless that our Sheriff’s Office responded to a “shots fired” 911 call later that evening with nothing but a cursory drive-by. This isn’t way out in the country. It’s just one block away from the famous Miller’s Dutch Kitch’n on 14th Street. And I suspect that as the Square Footage Divide gets worse around here, the Trickle-Down Theory of Real Estate Economics will make that neighborhood worse, not better.
The Square Footage Divide
Remember the “digital divide” that concerned citizens talked about back in the 20th Century? They worried that people at the lower end of the economic scale wouldn’t get their hands on computers and learn computing skills, which would keep them from enjoying the fruits of our increasingly IT-based economy. Some of this concern has abated because prices for home computers and Internet connections have dropped through the floor in recent years, and those who still can’t afford a home computer and Internet connection can use computers at public libraries, nearly all of which seem to have them now.
Meanwhile, another divide has cropped up, this time in the real estate market, in many parts of America. Manatee County, Florida, has a particularly acute case of it, and I live here, so I’ll talk in local terms and let other people decide if it applies to where they live.
Here’s the essence of the theory:
New houses are larger than old ones, on average, but are occupied by fewer people than lived in the average house 50 or even 20 years ago. Meanwhile, people at the bottom end of our economy are finding it harder to find low-cost places to live, so they are forced to squeeze increasing numbers of people into each dwelling they occupy.
The shooterville neighborhood where my friend Mongog is staying has a large group of ratty apartments (owned by two local doctors) at its center, with a mix of duplexes and single-family homes on its periphery, some of which are owner-occupied (including the one where my friend is staying). Most of the apartments seem to have at least two or three people per room living in them. A majority of the residents I approached with questions spoke no English, only Spanish, and all the Spanish-speaking ones I talked to in (my very poor) Spanish told me they were from Mexico and were in the U.S. illegally.
The basic rental unit in this mini-neighborhood is a two-bedroom, one bath apartment. The highest number of people I personally confirmed in one (two-bedroom) apartment was 12 — eight adults and four children. It is rented in the name of a legal immigrant from Mexico who does not live there but sublets it to “friends.” I was told that the apartment’s owners know about the arrangement. The sublet rent is $100 per person (including children) per month, plus utilities, and the two people I talked to who lived there said their “friend” pay the landlord $800 per month and pocket the difference.
I talked to another man who shares a similar apartment with seven others — eight in a two-bedroom unit. He and six of his roommates pay $200 per month each to the eighth roommate, a legal immigrant who holds the lease and occupies one bedroom by himself.
Meanwhile, I know people whose families occupy 3000 or 4000 square foot houses, and we’re talking about nuclear families with only two, three or four members. My wife and I occupy approximately 950 square feet of living space, plus another 800 square feet of office and art studio space in a separate building. Our living space, while nowhere near as large as that occupied by some other empty-nesters we know, does not feel cramped to us. But we would feel cramped if we shared it with another couple or invited a daughter and her children to move in with us.
There are no new 900 or 1000 square foot houses being built around here. Almost all new standalone residential construction I have seen is between 2500 and 4000 square feet, which is certainly spacious. With new houses here starting at over $300,000, they ought to be spacious, but that kind of price tag puts them out of reach of most working people — who are being squeezed in the rental market too, since according to our local newspaper Manatee County has lost 2000 out of 9000 rental units countywide to condomization in the last year.
So what happens? The square footage divide worsens. Families that could have afforded their own homes or apartments only a few years ago are now forced to double up or stay — especially in the case of single mothers — with parents or other older relatives, which means they are occupying fewer square feet per person than they would have in the past.
This is the square footage divide in action. And in places where home ownership is a financial impossiblity for an ever-growing percentage of the population, and decent rentals at affordable prices are increasingly hard to find, the problem gets worse every year.
The Trickle-Down Theory of Real Estate Economics
Five years ago, when my wife and I first started looking at Florida property, we could have bought a waterfront or near-waterfont home if we’d been willing to sell our Maryland home first. Instead, we bought a small place here and maintained two residences, which in retrospect was a rotten financial decision, because homes near the coast around here are now far beyond our reach. Ditto brand-new homes or older homes on multi-acre lots out in the countryside. So we bought an older home in a neighborhood near downtown Bradenton instead.
We looked at a lot of houses before we bought this one. Many of them were in “edgy” neighborhoods we probably wouldn’t have considered before the recent price run-ups. While most of the other people we saw at open houses were investors, the few non-investors looking at those houses were, like us, the kind of people who could have bought pretty prime places before local real estate prices went crazy.
My wife and I don’t need an impressive dwelling to make us feel good about ourselves. Chances are, we wouldn’t have bought anything fancier than what we ended up with even if house prices here had stayed sane. But I’m sure many people in Sarasota and Bradenton have landed in less desirable neighborhoods than they might have bought into five or ten years ago. And in doing so, they displaced people farther down the financial totem pole, who then displaced people people a little lower than themselves, and so on down to the 12 illegal immigrants living in an apartment designed to house a maximum of four, who are paying $1200 a month between them for an apartment that would have rented for $500, at most, to legitimate people back in 2002 or 2003.
The owners of the $1200/month apartment only get $800 per month, but that’s still a shuddering amount for a rundown joint — and what place wouldn’t be rundown after a few years of being occupied by three or four times as many people as should ideally be living in it?
We also see old camping trailers occupied by whole families. That’s not an uncommon sight in the less savory parts of Manatee County. We’re not talking about mobile homes designed for permanent living, but pull-behind-your-pickup trailers.
I don’t sneer at folks who live this way. An awful lot of families are only a few missed paychecks away from a similar life if they don’t have friends or family members willing to take them in.
The old (obscene) Army saying goes, “Shit rolls downhill.” Now and then politically-motivated “economists” tell you that if the richest Americans get even richer (or pay less in taxes), they’ll spend more money and eventually some of that money will trickle down to the poorest members of our society.
The real estate version of the trickle-down theory (which I came up with myself) says:
When comparatively prosperous people are forced to live in low-class housing because it’s all they can afford, less-prosperous people are displaced, and this factor trickles all the way down the income chain until the lowest-earning people end up living in miserable, overcrowded circumstances or out on the street.
The Evil of Gentrification
My wife and I are modernizing and generally improving the run-down house we bought. Being typical middle-aged, middle-class people, we don’t want to be surrounded by noisy drug users and illegal immigrants. We want clean streets and sidewalks. We pay taxes and we vote, and we expect service from our public servants in return for those tax dollars and votes. When we don’t get those services, we scream. Loudly. And then, at the next election we work hard to get rid of any elected officials who haven’t served us well. If that doesn’t work we sue. And now, with the Internet at our disposal, we also post our concerns on blogs and other Web sites, which gives us additional power.
Now let’s look at us through the eyes of the illegal immigrants, drug people, and other low-lifes who live near us. From their perspective, my wife and I totally suck. What to us (and the city government) is “improvement” means higher rents and — in many cases — rental houses being sold to other gentrifiers, which means the people living in them now will get evicted. When my wife finally opens her long-awaited Debbie’s Art Garage as part of Bradenton’s Village of the Arts expansion, we may get police to patrol the area around our house as frequently as they patrol the “built up” Village section, which will make it a lot harder to live an illegal life around here than it is now.
But hey! The dregs of society have to live somewhere, too. If gentrification forces them out of our neighborhood (which it inevitably will), it’ll make the overcrowding and crime problems in the doctor-owned superslum apartments behind Miller’s Dutch Kitch’n even worse. The rattiest, most overpopulated trailer parks will become even more overpopulated. And neighborhoods inhabited by people with less media savvy and political clout than Village of the Arts denizens will degenerate as they become dumping grounds for the low-enders we don’t want around.
When you’re on the wrong side of the square footage divide, and crap from the trickle-down theory of real estate economics is landing on your head, gentrification is a horror, not a blessing.
Those damn gentrificators!
If I wasn’t one myself, I’d hate them all.
In fact, back when I was young and poor and renting an apartment in San Francisco’s Mission District, I supported a (half-joking) neighborhood plan to slash tires on cars that looked like they belonged to yuppies who might buy into the area and force us out of our homes.
But times change, yes they do, and yesterday’s gentrification victim can become today’s gentrification beneficiary. And this is not the only way in which times change.
What Shall We Do About All This?!?
I don’t know if there’s much that individuals like you and me can do to alter this growing sadness. I’ve long believed we should build something along the lines of the government-sponsored, low-cost, self-sustaining welfare housing system I proposed two years ago. But as I pointed out in that article, the landlords, contractors, and others who benefit from our current system will work hard to keep something as sensible as my idea from happening.
I expect our housing problems to get worse before they get better. As long as we have a plentiful supply of illegal immigrants to work for nearly nothing while their illegality forces them to overpay exploitive, “no questions asked” landlords for housing, the economic forces I’ve outlined above will continue to warp the “workforce housing” market.
Obviously, one of the best things we could do (for American working people) is to make illegal immigration illegal. But we aren’t ready to do that at the moment. In a future article I’ll explain how and why we will finally deal with illegal immigration, but that one’s going to have to wait a few days because I have a stack of income-producing writing, editing, and video production to do first.