If a homeowner's neighborhood is dying, then their home value is practically zero. And even if their house had some market value, the potential number of buyers is so small that the home could sit on the market for years, all the while incurring maintenance costs.
And as the neighborhood dies, the pool of available work shrinks. Wages shrink and job opportunities dry up. Economic diversity plummets, leaving the region more exposed to sudden shocks. Towns become increasingly reliant on parasitic industries -- payday loans, gambling, furniture leasing, etc -- that further depress wealth and prey disproportionately on the structurally impoverished.
Even a relatively well-off resident of a dying suburb -- someone with savings, a paid-off house, and no attachments to the area -- would be hard-pressed to finance a move to a healthier locale.
And most residents of these areas -- for obvious reasons -- don't fit this profile. Most don't leave because they can't afford to leave. They don't have savings. They live paycheck to paycheck. They're underwater on their house. They're on a tiny fixed income and can't afford the cost of living elsewhere. They're a public employee two years away from a pension and, if they move now, they forfeit a liveable retirement. They're the sole caregiver for disabled family members. Their skills aren't valuable in another market.
Et cetera.
Too often, we assume that poor people make poor choices, without considering that they might actually be making the best of the shitty slate of options available to them.
I think most reasonable people are in agreement that the suburbs -- especially industrial suburbs -- were and are an unsustainable model for development. They will need to be abandoned. But the process of that abandonment matters.
If we go about it the wrong way, as we are in the Rust Belt, then we condemn the people stuck in those areas to a lifetime of poverty. And those people don't just go away when we turn out backs on them. Their problems will become our problems. So, for economic and humanitarian reasons, we need to find a responsible way to decommission post-industrial towns and relocate their residents.
My mom pays 200-300 a WEEK for her car. Many people on here would say that's a terrible idea and she should just buy a cheaper used car for 1000-2000 dollars, but they don't realize she needed the car NOW or she'd lose her job and she doesn't have that cash laying around. No one would give her a normal loan and none of us could afford to help her at the time. It really seems the only people in the world willing to help her are the people that need 200-300 a week to sell her a car. And that's just the car. Housing, food, clothes, and nearly everything else can be explained with the same rationale.
Your line here is key: "Too often, we assume that poor people make poor choices, without considering that they might actually be making the best of the shitty slate of options available to them."
I suspect that the reason it doesn't work is that the theory is off. Lack of the initial capital (to bootstrap the virtuous cycle) is not the real bottleneck; it's the ability to commit to a plan where there is a big long-term benefit. Such a charity would run into the same problems as for-profit lenders and CCs -- not enough people paying back the money.
On the other hand, the $200-300 being charged might represent a risk level of the whole class of rentals being made... it's hard to know without on the ground information.
Of course, using Amazon requires Internet access, which can also be a problem.
One thing I both do understand and lament is how the more impoverished communities are culturally tuned to turn on each other than work together. If your household is too poor to afford a lot of the things that are taken for granted - a working kitchen, for example - having four neighbors work together to have one working kitchen they could all share and set up time slots to use would go a long way to getting out of poverty.
But you really just cannot rely on other people in those situations. Its a prisoners dilemma where the prison is poverty. It takes one person taking advantage of cooperation to ruin it.
There's also the fact that if you can't afford to bulk buy a few extra rolls of TP, you sure as hell can't afford a quarter of a kitchen.
People seem to forget when they talk of the poor: "If only they invested in X, Y, or Z". The whole point of someone struggling financially is that they CANNOT invest, because they have zero, and often negative "extra" money. "Paycheck to paycheck" is not a euphemism, it's a literal situation. Even one missed hour of pay is devastating to these people.
Poor people who have close enough personal relationships to justify trust share resources all the time (source: spent several years in my late childhood in a family on welfare in public housing.)
Now, lots of poor people don't have close relationships with people with resources to share, and arms-length contracts with resort to the courts for enforcement don't work for them when personal trust isn't enough, because they can't afford the cost and delays of enforcement.
Again, it's expensive to be poor.
I'm guessing that at the prices the parent listed, the person isn't buying a $70k luxury car for $1000+ a month, but has bad credit and can't put any money down on the car so they're going to radically overspend. I'm really hoping that it's a late model Honda or Toyota that will go 300,000 miles and not something that was salvaged.
I just bought a home. Even with excellent credit I still had to put down roughly 10k on the house (which was only 3%!) -- that includes the down payment, option and earnest money, fees for stuff like appraisal, inspection, and more.
10k is a lot of money for a lot of people. Granted they can get some of that back if they sell an old house, but as you said if the house value is low to zero they can only get the land value for it, if there is any. Now they're starting over from square one, paying off a new house.
And that 10k isn't even covering other expenses, like repairs I need to do, furniture (pretty much buying everything new now), moving supplies/expenses, first utilities, and more. Homeowning is not cheap, especially not upfront (though it does get a little easier beyond the initial investment).
[1] Keep an eye on home values 6-12 months from now; once you think you might have 20% equity, attempt to refi into a conventional. Should save you $150-200/month on the FHA monthly premium.
It's increasing common to see non-FHA loans in the 3% ballpark (among anecdotal evidence from my friends and coworkers who've recently purchased). My gut keeps telling me something is wrong, but no other indicators seem to agree.
Spending public funds on these endeavors ends up being something of a middle class bailout. Are folks who were fortunate enough to be able to purchase homes in the first place. 70% of those in the bottom 20% of the income distribution do not own their homes.
I'd love to see either state or federal buyback programs. Using the same appraisal rates used to calculate a property value when setting property taxes most states could offer to buyback properties at 80% of their assessed market value and then have redevelopment programs to reinvigorate dying neighborhoods like in the OP.
It lets the poor escape dying neighborhoods much easier, and it also creates a pathway to save these dying cities for relatively low investment by creating job opportunities to fix the state possessed properties or put them to auction so they can be competitively worth fixing. Either way the state should not be out the money for very long - you have a depressed area that has terribly low property values because its an impoverished slum, let the residents sell the land off as a means to get out of that hell, and then make a deal with a redevelopment firm or use the civil engineers corps and then sell the resulting revitalized properties, hopefully after some mixed used development.
That last point is probably the strongest reason why the US in particular has these widespreading "dying neighborhood" problems. Zoning for the most part has been an abject failure. It was conceived to segregate the rich from the poor and has failed to recognize that a thriving community needs work and play to intermix and develop organically. It also exists to constrain development to prevent cities from growing up and increasing density to meet population demands, all to prop up the real estate investment bubble making the semi-rich filthy rich.
I keep hearing stories about this, but I thought that any such pension this absurd was illegal or retroactively corrected. Is it really possible to lose an entire pension for quitting some trivial amount of time before some cutoff?
I would think that it would, at most, mean that you would delay the pension[1], or lose a few percentage points off of it, or be required to make some "down payment" before it starts.
Where are these pensions where a huge value can evaporate over such a small thing?
[1] e.g. under an "age + years of service" rule, each year worked gets you two units closer to retirement, and if you quit, that just means you become eligible at half speed (age goes up but years of service doesn't).
As an anecdote, a relative -- who had 25 years of public service when he was 57 years of age -- would have only received 35% of his pension if he had taken early retirement (or jumped ship to private industry) at that time.
Keep in mind, also, that most public employees are ineligible for Social Security. And most of these economically distressed towns tend to be concentrated in counties and states with severe debt issues, where raiding pension funds is not uncommon. And sadly, benefit reduction continues to be an option in public debt discussions.
I would not expect it to be fun to loose $100k in home value moving away from an area that's dying. But that is part of being an adult and being adult enough to be allowed to make such an investment. Sometimes the investments go well. Sometimes they go poorly. And avoiding that risk is extremely easy; lots of people rent. I don't think we should bail our people's bad home investments just because they're poor. If they need to go bankrupt, there's already a process for that. And if that process is bad, we should just improve that process.
You're making a raft of assumptions -- they have the means to ride out a period of unemployment, or can afford the extra travel required to reach a new job in a healthy area; they can afford to rent in a healthy market; their skills transfer; they don't have a family member in long-term care in the area; they are not on a fixed income; et cetera -- because, as you say, you don't remember very well what it's like to be poor.
And that's OK.
I understand why you make those assumptions, and I'm happy so many people have the privilege to do so. The shitty things poor people have to put up with are all but invisible unless you're poor. Poverty has a stigma in the US that prevents us from talking openly about these issues. But once you see them, it's frustrating to hear someone say, "But [leaving] is part of being an adult," as if staying in a shitty, crime-ridden, failing municipality is a personal choice.
I want to emphasize this point: If you see people living in a one of these places -- drinking lead-infused water, sending their kids to skeletal schools, miles from an operating hospital, with intermittent emergency services, with no trash pickup, etc -- remind yourself that it's extremely unlikely they're there by choice.
My question though is--what suggestions do you have for solving this? We shouldn't prop up dying suburbs. We don't have universal basic income yet (not that that would solve for all such cases), and there don't really seem to be a whole lot of options.
If I imagine myself in such a desperate situation, I feel like my only options would be to stay there while things stagnate, watching things get worse and worse while trying to scrimp and save my way to something that would let me take a gamble and move, or just pack up a few things, yard sale anything I could, buy a bus ticket, and gamble on being homeless somewhere with better opportunities. And that's if I wasn't elderly/disabled/otherwise incapable of doing this.
The only larger solutions I potentially see are policy changes for social safety nets with these situations, which frankly, are going to be damn near impossible to get passed given the current government, and also the fact that a huge chunk of these places are in red states that would never do anything at the state level for these folks.
Again, not disagreeing with anything you say, but is there actually a potential solution beyond "let these people and places fade away" like so many people have in humanity's past?
1) Force neighboring jurisdictions to take control of blighted areas, increasing the effective tax base, as advocated by TFA. There are NIMBY and fiscal reasons why this is hard, so counties and states might need to step in.
2) Offer free housing swaps to residents of dying suburbs, increasing density in a few targeted areas. This would reduce the cost of delivering services substantially -- fewer customers in a smaller target area -- while slowing the spread of blight.
3) Use state or federal funds to buy back foreclosed and abandoned properties in blighted areas, then employ out-of-work locals to help with remediation. A combination of this and #2 would even make full ecological restoration a possibility, converting large blighted areas into public parks and other amenities. This would have a long-term positive impact on property values and could even reverse the cycle of abandonment.
Hell, even straight-up paying people a year's rent just to move out, then leveling the abandoned homes, would be cheaper than the long-term costs of ignoring the problem altogether.
A possible problem might be that a failing area is likely to be undesirable and therefore have low property prices and concomitant taxes. Moving to a more desirable area might be unaffordable. Many people have a strong emotional connection to their home, and would find it difficult to sell it (perhaps at a considerably lower price than they think it is worth) and move somewhere smaller.
Further, there may be people who are "post-economy" in the sense that they have retired. From their point of view, they've paid their dues and have no need to follow the jobs any more. They may have built up local social ties that they don't want to sever by moving.
My point isn't that failing places need to be propped up indefinitely, but that there's a middle ground between "successful, valuable" things and "failing, worthless" things. And there are infrastructure projects (e.g: rural broadband) which can help retain jobs and communities in "failing" places relatively cheaply.
As to taking a loss on their home. That's already happened, staying there vs renting somewhere else has significant direct costs. If a community can survive on it's own then awesome, but subsidies are simply a terrible idea.
True, but right now we are erring so far on the side of preserving the status quo that it's almost a moral axiom that the character of neighborhoods should be preserved forever and people should never be forced to move for financial reasons.
The debates over gentrification are rife with this philosophy. Ultimately it does much more harm than good for all except a lucky grandfathered-in few.
I think the author lead with East Cleveland for a reason. According to Wikipedia [1], East Cleveland contains the nation's first industrial park, historical millionaires' homes, and part of one of the main arteries into the city of Cleveland. Poking around on Google Maps shows that it also contains parts of two large and attractive parks (one attached to a historical cemetery where a US President is buried).
It would be hard to write this area off entirely.
'What about the people there?' you might say. They're not literally rooted to the spot. If there is no way to be productive there (aka jobs) they can and should move. If we were all cavemen hunting the local game and it moved we wouldn't say "but the game was always here, it should stay here forever". It didn't stay there forever. It moved. If you want to catch some of that game, you move.
That's emotionally difficult in a world where we all think we're post-economies. But we aren't and it's a simple concept; things that aren't working need to fail and be abandoned.