Clear and Present

It’s a housing crisis…let's act like it

Photo by Javier Allegue Barros on Unsplash

Many years ago — so long ago that it feels like it was someone else’s life — I helped save the job of a Fortune 50 CEO.

It was one of America’s oldest companies, a research/science/manufacturing outfit, and was under fire by investors at a time when the dotcom craze was upending traditional companies in favor of the “new new thing.” The CEO was fairly new in his position; his honeymoon was nasty, brutish and short.

By most metrics, the company was doing well. The business was growing, earnings were solid (it actually had net income, versus the dotcoms which rarely even had revenues) and dividends were growing. In the late 90’s until the bubble burst, traditional value and income stocks had fallen out of favor as investors chased hot money. Many companies who were not start-ups or tech were at a loss to navigate this new world, and sought to recast themselves in the mold of the bright and shiny objects of investors’ eyes.

After analyzing the company’s strategy and performance versus published market research, commentary and its valuation, we concluded that there was a perception gap. The company’s presentations to and communication with Wall Street were obscuring the real progress being made in its core operations; it was too future focused. As a result, the company’s shareholder base and investment analysts were worried that management was endangering the safety and stability of its core business and, by association, its dividend.

What we had was a classic failure to communicate. And management was punished for that.

Fast forward: the company acted like it was in a crisis. It quickly simplified its investment thesis, recast its financial communications approach and did the hard work of getting out in front of the problem. As the WWW-craze cratered, it was well-positioned to take advantage of the flight back to value and income investing. Which it did.

How does this tale relate to our current housing crisis?

For starters, it’s time to get back to basics. We have acknowledged that we have a crisis, but just calling it one is not sufficient. In a crisis you speed relief to alleviate dislocation and suffering. We are not doing that with housing. Why not?

The rhetoric needs to be supported by quick, decisive action: Use the powers of government to create short term housing relief programs now, while also working on longer-term structural solutions.

In too many instances, we are trying to solve today’s problem tomorrow. Not in real time, and not with the urgency that the people actually experiencing the crisis need.

Even in the best of circumstances and with the best of intentions, government solutions often take too long to implement, are wrapped in complexity and bureaucracy, and fail to gain support among those who are the intended beneficiaries.

“History Doesn't Repeat Itself, but It Often Rhymes” – Mark Twain

Too many proposed solutions also look backwards — what did we do wrong? — to posit a future solution. There's an inherent problem in that way of thinking: the past was shaped, in many cases, by forces that have evolved, or no longer exist. We cannot go back to the future.

It’s better to get small, think local and act with “house on fire” urgency. Here are some ideas for forging better outcomes…today, in the present.

• Declare a housing crisis. Locally, state-wide, nationally. Focus emergency powers on immediate, tangible actions. Create more options for communities that want to allow more housing.

• Focus on driving and funding local solutions. Provide more community-focused funding for municipal/NGO collaboration. Innovations bubble up, they don’t trickle down. Encourage more of that. 

• Provide more funding for subsidized mortgage programs. Without access to mortgages, homeownership programs cannot scale. There should be an affordable mortgage program specifically designed to fund the finance of efficient starter homes. 

• Incentivize communities to reform exclusionary zoning. Incentivize “light density” that scales to rural community centers. 4-8 unit clusters should be prioritized. NY’s Pro-Housing Community program is a good start.

• Create more incentives for homeownership at the 40-60% of AMI level. This demographic has been greatly impacted by rising costs and taxes.

• Create specific, targeted grants for small developers who build in small clusters. Funding could be provided to communities to disburse and administer, rather than direct to recipient. This would incentivize action at the local level.

Have more, and hopefully better, ideas? Leave them in the comments.

#letsbuild.