UNF professor: No magical solutions to Jacksonville affordable housing crisis
Jacksonville, like many other communities across the country, is experiencing an affordable housing crisis. Over the past year, according to Redfin, the average rent in Duval County has increased by 31%. However, close to 50% of all Jacksonville renters are cost-burdened (spending at least one-third of their income on rent).
Jacksonville ranks consistently in the top 10 among major metropolitan areas on almost every measure of rising housing costs. When “60 Minutes” decided to devote a segment of its weekly program to this issue, they chose Jacksonville as the city to profile.
The conventional wisdom is that the crisis is nothing more than the inevitable result of excess demand and insufficient supply. A seemingly natural market response generating rising housing costs.
In Jacksonville, specifically, the claim is that many people are moving to Florida and communities like Jacksonville for various quality-of-life considerations; the increasing demand for housing is putting a strain on the existing housing stock. So, it all comes down to a simple matter of supply and demand and the mechanical laws of the market.
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A recent Times-Union piece on the housing crisis summed it up this way: “Low inventory, a flourishing housing market and exponential population growth have caused rental prices in the Sunshine State to explode.”
While this narrative may be consistent with the free-market fantasy learned in Economics 101, it conveniently omits one of the most significant factors responsible for both rising demand and the rising prices — the role of institutional investors and private equity firms.
There is nothing mysterious about large private corporate entities buying swaths of single-family homes (SFH) and multifamily apartments, bundling them into their investment portfolios. The SFHs are converted into rental properties and the multifamily apartments are managed as cash cows.
Once this factor is included in the analysis, the simple free-market, supply-and-demand explanation offered in the mainstream media requires major revision.
For starters, one need only consider the fact that over the past two years the percentage of SFHs purchased by institutional investors in Jacksonville went from 12.04 in 2020 to 29.56 in 2022. In some communities (in ZIP codes 32206, 32208 and 32209, for example) the measure is more than 40%.
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The consequences of this land grab should be clear. As real estate agents have informed me, first-time homebuyers are unable to compete with corporate firms offering above the asking price, financed with cash. As these potential homebuyers see their repeated offers refused alongside an increasingly dwindling supply, many must settle for renting the SFH they had originally hoped to buy. Thus, they are now paying rent to the very institutional investors that have indirectly thwarted their dreams of homeownership.
So, yes, supply-and-demand factors are at work, but not in the way typically described. Corporate investment firms are demanding and securing SFH properties at record rates, converting them to rental properties, thus constricting the available supply of SFHs for individual buyers.
But the question is not the total supply of housing but rather who owns and controls the housing stock, for what purpose and its affordability.
Further, the escalating rents in Jacksonville are not the product of some automatic market mechanism, as many assume. Rental rates are set, often arbitrarily, by corporate landlords who exploit the opportunity to maximize cash flow and provide the return on investment expected by their shareholder clients.
The rental housing market bears no resemblance to the abstract fictional market portrayed in economics textbooks. Housing is not a discretionary commodity that buyers can take or leave depending on price. Physical shelter is a human need, some would say a human right, that people depend on for their physical, material and emotional security.
This distinctive feature of the housing “market” has not gone unnoticed by institutional investors in their pitches to wealthy clients. Human dependence on physical shelter is a business opportunity to be exploited, as described here by a leading multifamily investment firm:
The flawed market explanations for the affordable housing crisis will also generate equally flawed policy proposals. If you assume that the affordable housing problem is simply due to an insufficient supply of housing in relationship to demand, the solution is to increase supply.
Once again, this assumption of a magical market solution is fallacious — that by simply increasing supply in relation to demand, housing costs will automatically decline. But the housing market is not a competitive market. The concentrated property ownership and pricing power fueled by the corporate landlord invasion nullifies any impact of increased supply.
This brings me to the main and final point. There is no market solution to the affordable housing crisis. The market, as it operates in the real world, has created this crisis. Therefore, policy solutions must be aimed at insulating and protecting housing from market forces.
David Jaffee is a professor of sociology at the University of North Florida. He is currently directing the JAX Rental Housing Project in the Northeast Florida Center for Community Initiatives at UNF. For more information, go to https://bit.ly/3RqiSGZ or contact him at djaffee@unf.edu
This guest column is the opinion of the author and does not necessarily represent the views of the Times-Union. We welcome a diversity of opinions.
This article originally appeared on Florida Times-Union: UNF professor: No magical solutions to Jacksonville housing crisis
