By Sarah Snell Cooke, Cooke Consulting Solutions

Google “big pharma” and you get 8.8 million results. Input “military industrial complex” and see how many results you get (3.9 million). And you can scroll to see the first several pages are exactly what you’d think they’d be about.

Now search “big housing.”

326,000 results, and none of them address the parallel topics to the above. It’s all about big housing projects or, well, big houses.

And “housing industrial complex.”

5,210 results.

With something as basic on Maslow’s hierarchy as shelter and just as ‘big’ as these other issues and the cause of the 08-09 housing crisis, you’d think more people would be digging into this. Shining a light on and labeling the problem with an equally concise and recognizable name that has cost so many their jobs, their homes, their family wealth, and so much more. No, we as a people just persist in whining about the lack of affordable housing.

The Economics of Housing in the US

According to the Bureau of Labor Statistics, “Between January 2008 and February 2010, employment fell by 8.8 million—the largest absolute decline in the series’ history. The previous record was 4.3 million net jobs lost from November 1944 to September 1945.”

The housing crisis was worse on jobs than World War II.

No worries because these people couldn’t afford a home anyway. The US median home price increased approximately $6,000-$7,000 per year in the earliest 00s, as reported by GoBankingRates.com. Between ‘04 and ’05, the media cost of a home skyrocketed just shy of $20K or nearly 10%. It then leveled off a bit and ultimately came crashing down as we all – at least most of us – witnessed. From $247,900 at its peak in 2007 to $216,700 in 2010.

And it started skyrocketing again. Apparently, none of us learned our lessons.

I posit that this occurred as the developers and investors tried to make up for lost income during the lean times.

Lean times that they caused, as they quit building truly affordable homes because there wasn’t enough money in it. In fact, in 2007, the top builders earned $124 billion gross total revenue, BuildersOnline.com reported, only to top that record by another $9 billion in 2017.

Lean times short-sighted investors caused because they’re chasing that quarterly return.

Lean times caused by appraisers who fudged the numbers under pressure from the builders, investors, hell even actual families looking to buy and borrow, who just needed to get that loan-to-value ratio.

Lenders who had their side of the loan-to-value equation to hit, too. Because lenders weren’t exactly making bank on the historically low interest rates, so they had to mitigate their risks in other ways.

Or not. No-doc, lo-doc, no problem. Especially for the most unscrupulous of subprime lenders.

Are we really building wealth?

In our rush to homeownership as a wealth-building tool, and it is, we were not as concerned about their ability to repay.

Now explain to me how giving someone a mortgage they can’t afford – or at least can’t afford given the total cost of homeownership, is building anyone’s wealth, other than Big Housing. Instead, we’re perpetuating poverty and debt. A lot of the government programs intended to create affordable housing, only mask the issue as families throw thousands of dollars at rent without building any wealth – except for the investors who buy or build these buildings and leave them in squalor, because they want the biggest return for their dollar. Never mind they choose to leave humans often living in mold-infested apartments (hello, increased health care costs) with broken appliances. They should just be grateful to have a roof over their heads; that probably leaks, too. (And I’m not going to get on my soapbox right now about how public schools are funded by property taxes!!)

And some big banks vow to invest billions in homeownership assistance but wash their hands of the subsequent problems after they cut the check to great fanfare and national PR. CU Strategic Planning’s Shirley Senn makes several great points in her article, Big Banks Taking Big Swings – and Misses – in Minority, Underserved Markets.

But back to home pricing for a minute. COVID jacked up home prices even more – more than $50K between 2021 and 2022! But this time, low rates aren’t adding fuel to the fire. Good thing, too, because a mortgage on the median-priced home ($454,900 as of yearend 2022) is nearly $50,000 a year!

Given the median household income is $80,440, per Seeking Alpha – pre-tax – the median home mortgage would gobble up the entirety of the median family’s income. At the same time, the lack of affordable homes to buy has driven up rents to more than $2,000 – or only more than half the median family’s pre-tax income. And these people are stuck renting, because the more affordable homes are snatched up by investors who are playing the game Big Housing has dealt them. And so, the cycle continues. Until another bubble bursts, only to make the investors who can hang on that much wealthier and housing even less affordable.

What some credit unions currently have in the works

Programs like Eden Village, which The SECU Foundation of North Carolina recently contributed half-a-million dollars to is a good start to attempt fixing the local homeless issue. How about credit unions work to prevent homelessness from the start? Certainly, other issues contribute to homelessness than just 1) availability and 2) affordability, but we have to start somewhere.

And from there, how do we help these people into jobs, into mortgages and into wealth building? It’s getting harder for the average family to buy or rent the average home. What are we going to do for those who can’t afford it at all? Contributing to affordable housing programs is another way to contribute, which can have bigger impacts when you partner with other organizations, as Horizon Credit Union has done with NeighborWorks Boise and the Federal Home Loan Bank of Des Moines. Same with UMassFive Credit Union and MassHousing. And many, many more credit unions – individually.  

I had the privilege of speaking to the CEO of a $30 million credit union recently that had made its very first mortgage loan. They leveraged a CDFI grant to promote, train and add to their team, as well as partner with an organization; together they prep members for homeownership over months at a time. That first mortgage was $65,000. As an increasing number of small credit unions are merged out of existence with each passing year, who will be left to serve these communities?

Yes, credit unions, we are part of the problem. Now, what can we do collectively?