Downsizing the American Dream


At this time of year, with Thanksgiving, Hanukkah and Christmas, there's a tendency to look back at our lives and those of our families. We should be thankful for the blessings of living in an America where small dreams could be fulfilled.

For many, this promise has been epitomized by owning a house, with a touch of green in the back and a taste of private paradise. Those most grateful for this opportunity were my mother's generation, which grew up in the Great Depression. In her life, she was able to make the move from the tenements of Brownsville, Brooklyn, first to the garden apartments of Coney Island and Sheepshead Bay, and, eventually, to a mass-produced suburban house on Long Island.

This basic American dream of upward mobility may not, according to the pundit class, planners and many developers, be readily available for my children. Indeed, in the years since the 2007 housing bust, there's been a steady stream of commentary suggesting a future that resembles the past, where most people were renters and, in urban centers, lived chock-a-block in crowded apartment buildings.

The advocates for a return to this not-so-great past are a diverse lot, spanning the ideological spectrum from the free-market Right to the green, regulation-loving Left. Many on the right, such as economist Tyler Cowen, suggest that the era of the “average” American is now past, and that most of us will have to dial down our expectations about how we live, particularly in costly places such as California. The blessed 15 percent might aspire to live high on the hog, and even in luxury, but for the rest of us it's eating rice and beans, and living small. Goodbye, Levittown, and back to Brownsville.

Some in the financial community also salivate at the possibilities contained in downgrading the American dream. The very people who rode the mortgage boom and left millions of homeowners to deal with the consequences, now hail the ushering of what Morgan Stanley's Oliver Chang has dubbed a “rentership society.” Rather than purchasing a home, the middle class is now being downgraded into either renting a foreclosed home snatched by the Wall Street sharpies or being stuffed into small, multifamily housing.

In either case, the financial hegemons win, since they, essentially, get to have someone else to pay their mortgages. As for society, it's a losing proposition. Rather than the yeoman with his own place, and the social commitment that comes with it, we now have the prospect of a vast lower class permanently forced to tip its hat to – and empty its wallet for – its economic betters. This is the fate ardently hoped for by many urbanists, who see a generation of permanent renters as part of their dream of a denser America.

One would expect that this diminution of the middle class would offend liberals, who historically supported both the expansion of ownership and the creation of a better life for the middle class. But today's liberals – or progressives – share Wall Street's enthusiasm, albeit for different reasons, for renting and ever-greater densities.

This reverses the policies of the New Deal and its successors. Half of postwar suburban housing, notes historian Alan Wolfe, depended on some form of federal financing. In fact, the progressive position increasingly is worse than that of free-market conservatives and their Wall Street allies. The Right sees profit in densification and renting, but would likely support other options if they seemed advantageous. In contrast, the progressive Left increasingly sees the single-family home and ownership – what made middle-class people like my mother lifelong Democrats – as outdated, even destructive.

This can be seen in the writings of progressive thinkers like Richard Florida, who, in the midst of the mortgage crisis, proclaimed homeownership as “overrated” and urged Americans to give up the dream of owning their own digs, particularly in the much-disrespected suburbs. In Florida's “creative age,” the proper aspiration is to live in a dense, expensive city, such as San Francisco or Manhattan, where only a fraction of the population can conceivably own their residence.

To accommodate this vision, we inevitably get back to a world that looks similar to that of the tenement era. Already, in part due to regulatory policies making new construction prohibitively expensive, there is severe overcrowding in New York, the Bay Area and throughout Southern California. According to the Center for Housing Policy and National Housing Conference, 39 percent of working households in the Los Angeles metropolitan area spend more than half their incomes on housing, along with 35 percent in the San Francisco metro area and 31 percent in the New York City area. The national rate is 24 percent, itself far from tolerable.

What we are witnessing today is oddly reminiscent of the Brooklyn of my mother's childhood. She and her four siblings generally lived in three or fewer rooms, sharing her bed with her sisters until she got married. Yet, over time my mother's generation did well, and all my relatives were able to ascend into the middle class, or even better, by the late 1950s. Most bought homes on Long Island, although one purchased a co-op in Brooklyn.

Today, our cognitive betters embrace a more déclassé vision, with fewer families, more singles and less focus on upward mobility. Indeed, some, particularly among the environmental community, actually embrace downward mobility. Millennials, by not buying homes and cars, and perhaps also not growing into family life, are portrayed by the green magazine Grist as “a hero generation” – one that will march willingly, even enthusiastically, to a downscale future.

How will we live in this brave new America? It won't be exactly a return to the tenements that housed Depression era families, but will involve much smaller, less-communal arrangements. To serve the hip and cool youthful urban crowd, planners embrace microunits of 200-300 square feet. These are either being built or planned in such cities as Seattle, New York, San Francisco, Santa Monica and Portland. Soon, they will become something every second-tier wannabe burg will want to duplicate in their often madcap drive to ape cool cities' hip urbanism.

Such units may make developers' mouths water with anticipation of ever more profitable cramming. But in the process, they will be further encouraging the shift away from housing for married couples, not to mention, children. Families do not make up the prime market for dense housing; married couples with children constitute barely 10 percent of apartment residents, less than half the percentage for the overall population.

And what if you can't afford a trendy “pad” in a hip downtown? The urban advocates embrace another dismal back-to-the-future solution: the boarding house. It's time, argues the Atlantic recently, to jettison our “middle-class norms of decency” governing housing and bring back the boarding house of the 19th and early 20th centuries.

All said, this is a dismal future being dialed up for the next generation, largely by boomer ideologues and their developer allies. It's not clear, fortunately, that the millennials will willingly go along. This gives us hope that, when families celebrate the holidays decades from now, they still will have as much to be thankful for as did my mother's generation, or for that matter, my own.

This story originally appeared at The Orange County Register.

Joel Kotkin is executive editor of and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

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In either case, the financial hegemons win, since they, essentially, get to have someone else to pay their mortgages. As for society, it's a losing proposition. Rather than the yeoman with his own place, and the social commitment that comes with it, we now have the prospect of a vast lower class permanently forced to tip its hat to – and empty its wallet for – its economic betters. This is the fate ardently hoped for by many urbanists, who see a generation of permanent renters as part of their dream of a denser America. I need it. Thank post
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End the Silly Tit for Tat Debate

Does anyone else reading these "debates" consider the ongoing dialogue of urban versus suburban to be a bit ridiculous?

Here is a thought:

Cites can be great. Suburbs can be great, too.

Let dense cities build micro-units.
Let lower density suburbs build single-family houses.

Reduce the regulatory restrictions that prevent folks from building and living in a variety of situations each suited to his or her own preference and needs.

Just be sure that the full cost of construction, maintaining and supporting the infrastructure for each mode of life be incorporated in the "sticker price" (first cost) to the owner as well as the cost to maintain the property and account for the larger environmental impacts going forward. No subsidies, hidden or otherwise.

I think what we would fine is that people would choose very wisely and take ownership of their decisions - even the decision to rent when that makes sense.

Probably we would then have no need for these sorts of endless back on forth about what people do or do not or should or should not prefer.

Maybe you guys could then go do something more productive (Florida and Kotkin) with your tremendous knowledge, intellect and experience - like trying to better understand and "price-in" the long term costs of different ways of living so that those costs can be better understood and accounted for by individuals and societies. I think, properly understood, those of us living now in cities and suburbs would have a lot to account for in terms of the costs of our lives being born by others (both in other places and by future generations).

The tit for tat has long since ceased to be productive in my humble opinion.

Maybe you guys could then go do something more productive

"Fortunately for the Kotkins of the world, there's plenty of cherry-picked data out there to support the conclusion that cities really are no place for children."

But hey, when you're a shill for the U.S Chamber of Commerce it's a pretty sweet gig.

"Equivalance" is far too gracious to the smart-growthers

The very distinguished urban economist Edwin S. Mills put it something like this in one of his papers a few years ago. It is not government's job to tell people how to live. All they should do is get the prices right and let the market sort everything out from there to the most efficient end.

I don't agree that there is equal blame in the "partisan sniping" that goes on. It is the anti-sprawl people who have picked a fight, and caused untold damage through their faulty assumptions and Procrustean "solutions". Pushback against them is entirely justified. They pretty much prove that the kind of person who has pictures in their head and desires "central planning" as a profession, is not endowed with even the most minimal capacity to grasp the most basic functioning of markets and prices and economics.

The causative role of growth containment in inflating urban land prices by some 2000% on average anywhere it is enacted, is something that almost every single one of them remains in denial about. I like to call urban planning "the Marie Antoinette profession". If people can't afford houses, evidently they just haven't learned to sensibly trade off space. Never mind that unconstrained markets have CBD apartments, like for like, that are 1/5 or less the rent in a "smart growth" city. It is never just fringe McMansions that are cheaper. Ironically, new fringe McMansions are about half the price, while older houses and higher density living closer to the CBD are proportionately much cheaper. Urban land rent curves are simply shaped this way, that is all.

And there is almost no "benefit", even the intangible stuff that the advocates love, to offset against these very tangible and socially unjust (to the younger generation and renters) costs. Traffic congestion is very much worse, not better; average commute times are longer, not shorter; health and social outcomes are worse, not better; local pollution is worse, not better; the cost-of-infrastructure "savings" are highly debatable; energy consumption and emissions are only lower due to lower discretionary income after grossly increased housing costs being sucked out of household budgets, not "efficiency" at all (and people being denied the choice of childbearing); economic productivity is reduced, not increased.

"Smart growth" is simply one of the biggest ideologically-driven, reality-denying failures in political history, deserving to rank alongside the dismal experiment of centrally planned economies in the Soviet Bloc. And we are nothing like as far on as we should be in putting a stake through its heart - the Obama Administration is in fact hell-bent on imposing it nationwide. This would be a disaster for America. America is blessed to still have the affordable-land urban powerhouses of the South and the rural heartland; this is what keeps the American economy stabilised in contrast to the rest of the first world which are having their economies and society destroyed by national uniformity of "save the planet" urban policy.

Actually it might be unfair to connect this with the Obama Administration - the various Federal administrations are so stacked with ideologues that changes in President make little difference. sizing. Reality sets in.

"How will we live in this brave new America?"

Just fine.

"rising levels of homeownership in a state “are a precursor to eventual sharp rises in unemployment in that state."

"Your home is not an investment...That means homes are a consumer item for most of us."

The causative mechanism is the problem

There is a massive problem with the "causative" mechanisms in that correlation. The causative mechanism is certainly government "home ownership" policies that affect the demand side. Stupid lending mandates and federal guarantees of securitized mortgages, that kind of nonsense.

There is absolutely no way that policies that inflate the price of urban land and force "downsizing" (and deny opportunity of home ownership and even household formation, period), are good for anyone in an economy except the land owning rentier class. This is not good for economic productivity, not good for social justice, not good for economic stability, not good for social stability.

Watch how all this is playing out in the UK, where they have been doing "smart growth" (under a different name) since 1947. Start with the video at the top of this article, to get the idea of the status quo:

As Leith Van Onselen says in the posting that accompanies it:

".....Watching the video and reading the associated story is frightening. Essentially, Generation Y (dubbed “Generation Rent”) is being unnecessarily forced to live in expensive, cramped living conditions, renting at exorbitant prices from asset rich Baby Boomers or investors, who are gaming the rigged housing system to their own advantage....."

Then watch THIS (from 12 minutes on), about the UK government's new "home ownership" policy being introduced in response to the crisis:

From 12 minutes on, it is a “must watch” on the subject of housing and finance and government policy. That discussion between Max Keiser and Michael Hudson is packed with insights, I agree with the whole lot of it.

Roughly from memory:

“The UK government is pretending to help the first home buyers, but they are really helping the banks. The banks will get the fatter profits AND the bailouts”

“This isn’t failed policy, it is a raging success from the point of view of what it was meant to achieve: enrich the banks. The banks run the government”.

“They talk about Adam Smith and free markets, and mean something completely different. They mean the enrichment of a new rentier class, something that is contrary to all the economic philosophy of the enlightenment era….”

“It’s goodbye to British manufacturing. No-one can pay the wages that will be necessary to cover the housing costs…”

Not just a "rentership society", it's a "rentier economy"

It's not just a "rentership society", it's a "rentier economy".

The issue of economic land rent was far better understood 100 years ago. Even non-specialists such as social reformers, architects, politicians, and Henry Ford, understood it better than famous economists today seem to. The English Architect Raymond Unwin in a 1905 booklet entitled "Nothing Gained by Overcrowding", is a far more useful read than anything you will get from the USA's top economics advisers today. Presumably they are bought and paid for by the rentier racket that is re-imposing itself via Agenda 21.

Henry Ford, for example, understood the relationship between urban land rent, housing costs, transport and mobility, and low cost cars for the masses. He knew he was onto a good thing while doing humanity a massive favour at the same time. He despised Karl Marx and his "nationalisation" solution; the Henry Ford solution to the same problem - economic land rent - was the Model T Ford. Levittowns and competitive automobile based development completed the utter defeat of economic land rent.

But now the rentier class is back with a vengeance via the Trojan Horse of Agenda 21 and "saving the planet". The UK started "containing urban growth" in 1947, and in a study of 1984 data, Cheshire et al of the LSE found that the price of land per square foot in UK cities was 200 to 325 times higher than in comparable cities in the USA that lacked urban growth containment policies. Hmmmmm, nothing to see here, move along please......

The "AudaCity" people in the UK are some of the clearest writers on this in the UK context; someone needs to do the same for the USA, naming names of those responsible and their vested interests.

Gary Allen in a 1974 article on the nascent "land preservation" movement in California, mentions certain Rockefellers who were in it up to their eyeballs.....

I have never regarded theories of "the Illuminati" etc as having any credibility, but I can quite easily believe a devil's alliance between "big property" interests and "save the planet" useful idiots. My recommended fix would be to mandate that all "save the planet" central urban plans were to include the compulsory acquisition of all land zoned for special redevelopment at higher intensities etc. Watch the "support" for "smart growth" evaporate like the morning mist if that ever happened.

Without compulsory acquisition, what happens is exactly what Anthony Downs pointed out in “A Growth Strategy for the Greater Vancouver Region”, 2007:

"......The cost of land poses a key dilemma for urban planners everywhere who want to concentrate jobs together so they can be best served by public transit. Such concentration raises the costs of land near centers; in fact, it would confer a monopoly advantage on landowners who owned such land and could exploit firms trying to locate there. Now firms want to locate elsewhere to cut their land costs.

Planned concentration of jobs in a few centers is not consistent with private ownership and control of land. Some type of collective control over that land would be necessary to prevent monopolistic exploitation of land values. In theory, this could be done with high land taxes in such areas and special zoning rules. But adopting those devices is politically difficult in a free enterprise economy.......

"......A similar but less intensive dilemma concerns land near transit stops, where it would be most efficient to concentrate high-density housing and jobs. That also creates ownership monopolies over such land unless it is specially controlled or taxed. Yet focusing development near transit stops is a key to using more transit....."

We are NOT getting poorer

Joel is absolutely right to be disquieted by the poverty pundits. These people think smaller houses, worse food, less mobility, etc., are good things. For these reasons, I strongly disagree with Tyler Cowen's book, Average is Over. I posted a review here:
I have a comment on New York City, which also generally supports Joel's points.