There tends to be this notion that politics and housing are fully separate realms. Never do the two meet. Yet there is a large connection between politics and housing. Even during the bailouts the propaganda was that too big to fail banks needed to remain to provide loans for middle class families. The underlying assumption was about keeping affordability alive. Instead housing once again has become unaffordable for many and prices are out of reach for many middle class Americans living in large cities. As it turns out, it appears that cities that tend to vote liberal actually have some of the worst housing affordability. San Francisco is the worst offender. Ironically the politics are largely one of strong protections but what unfolds is massive constraints on land usage and NIMBY policies that constrain inventory. Even things like Proposition 13 simply inflate prices for the locked in low tax rate while the big pitch here was to keep grandma from being booted out in the street and eating Kibbles ‘n Bits. They forgot to mention grandma was actually holding onto a lottery ticket. Now grandma lives in a million dollar shack in San Francisco but still shops at the dollar store. Places like the South, including Texas have conservative policies and some of the most affordable real estate in the United States. It would appear that liberal cities are no place for the middle class but of course there is more to it.

Unaffordable markets driven by politics?

The Atlantic made this interesting observation in a recent post:

“(The Atlantic) But there’s a second reason why San Francisco’s problem is emblematic of a national story. Liberal cities seem to have the worst affordability crises, according to Trulia chief economist Jed Kolko. In a recent article, Kolko divided the largest cities into 32 “red” metros where Romney got more votes than Obama in 2012 (e.g. Houston), 40 “light-blue” markets where Obama won by fewer than 20 points (e.g. Austin), and 28 “dark-blue” metros where Obama won by more than 20 points (e.g. L.A., SF, NYC). Although all three housing groups faced similar declines in the recession and similar bounce-backs in the recovery, affordability remains a bigger problem in the bluest cities.”

Here are the numbers:

Now this doesn’t apply everywhere of course. Orange County tends to vote more conservatively and is the most expensive county in Southern California. However the data above does show a clear pattern. Areas that tend to vote “blue” tend to have affordability issues when it comes to housing.

Both political parties are in a deep capture to big money. Even in this recent election we are basically taking off the same stinky shirt and reversing it. Thinking otherwise is simply being naïve. The chatter on the boob tube is always about emotionally divisive topics. Rarely do we hear about the Fed, middle class income, or inflation. It is simply ignored so it is no surprise that people are all the willing to dive into deep debt to purchase a home.

Here is another look at the data based on local area incomes:

There are other factors at play here as well beyond politics. Some areas may be more conducive to investor funding because of established networks or higher income households simply prefer to live near higher paying jobs. Many tech workers need to be around the Bay Area. That makes sense for the Bay Area but as we noted, the LA/OC area is the most unaffordable housing market based on what people actually earn.

SoCal sales continue to be weak and price gains are stalling out:

The only affordable counties for the middle class in SoCal are in the Inland Empire. How much can you read into this? I tend to believe this has more to do with policies and land constraints. California has favored real estate via Prop 13 low tax rates. You also put in restrictions on building higher density properties and it is no surprise we get the current market. Then again, you have New York with very high density and look at housing values. No simple answer here. Texas with high property taxes but low to nonexistent taxes in other areas has lax building restrictions and look at what housing values are there. Someone e-mailed me a few years ago that both the husband and wife worked at CVS and as a waitress and found the same jobs in Texas and bought a 4 bedroom house in a good city. In California good luck finding a rental in a safe area with that income. Yet that is what most people are doing. Los Angeles is a renting majority county.

Of course if values are driven by politics, things can change on a whim versus allowing market forces to unfold. Nothing can change more quickly than a politicians view and we are seeing many more people become renters especially in high priced areas.

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