At Zillow Research, our days are fully consumed with bringing you the best, most interesting and most actionable real estate research around.
But to that end, we also find time to read a variety of reports, news stories and investigations, on any number of issues, from social justice, to economics, to real estate and sports. We read them for education, for entertainment and out of pure curiosity – and each one helps us discover new questions we want to answer and helps identify new trends worth following.
Zillow Reading List is a regular roundup of these interesting pieces we come across, with some thoughts about each and how it ties into our existing research and/or has spurred new questions. We’ll post these roundups regularly, and of course will continue to strive to publish research that is as enriching, thought-provoking and useful as these pieces have been to us.
Enjoy!
Cultures Clash as Gentrification Engulfs Capitol Hill
Tricia Romano in The Seattle Times
We’ve reported on rental affordability and the gentrification of “gayborhoods” in major U.S. metro areas (in Zillow Talk). This piece takes a more intimate look by focusing on the transformation of a single Seattle neighborhood: Capitol Hill. Once a haven for artists and members of the LGBT community, this neighborhood has become one of the hottest night spots in Seattle. As rents have risen and high-income newcomers have moved in, long-standing residents have become frustrated with deteriorating affordability and the changing culture and feel of the neighborhood. Rampant construction and the influx of young partyers each weekend are more of a curse than a blessing – often, partyers bring a spike in crime, including hate crimes against LGBT members. The Capitol Hill area is just a 25-minute walk from Zillow headquarters, and many Zillow Researchers live there, making the changes in this community an issue of special significance to many of us.
Peter Orzag in Bloomberg
Economists have long liked the idea of taxing land. Normally, taxing something means less of it gets produced and used, creating distortions in the economy. But land isn’t going anywhere, which makes it a good candidate for taxation. But along with its advantages as a remedy for inequality, taxing land has some drawbacks. There is certainly inequality in housing wealth, but the value of land is likely a more important component of total wealth for middle class families who own their home than for the ultra-wealthy. Moreover, a tax on land looks very similar to a tax on cities. With affordability already challenged in urban areas, do we want to make it more difficult to find affordable housing in those areas – especially for folks who may be flocking there for better job prospects? An idea worth considering, but cautiously.
Goldman Sachs Infographic
Millennials are the largest generation in U.S. history, and they are poised to make their mark on the housing market. So we got a lot out of this excellent interactive infographic from Goldman Sachs. We already knew that most millennials see owning a home as a crucial part of The American Dream. But we had no idea that the share of millennials that say owning a car is “very important” (15 percent) is similar to the share that says the same about owning a luxury handbag (10 percent). Surveys that show millennials are more price-conscious than other generations help us understand the doubling up trends we have been documenting. And who knew that millennials tend to be more disapproving of smokers and drinkers than their parents and older siblings at the same age? Fascinating!
Giovanni Favara and Jean Imbs in the American Economic Review
Now that the lingering effects of the housing recession are slowly starting to fade, and with the benefits of hindsight (and additional data), more academic attention is turning towards understanding what exactly caused that housing boom and bust. One potential culprit is excessive credit. But detangling whether the expansion of credit was a cause or an effect of the bubble is a tall task. This paper looks at episodes of deregulation to conclude that increased credit did indeed cause at least part of the bubble, but mostly in states where building new homes was more difficult. Which means we still don’t have a story for what went on in places like Las Vegas and Phoenix, though we are certainly closer to a full understanding of the boom and bust. A timely reminder that while we can all celebrate the recent expansion of credit access, we will need to ensure the pendulum doesn’t swing too far back.
Airbnb: A Symptom or a Cause for SoCal’s Affordable Housing Crisis?
Tim Logan, Emily Alpert and Ben Poston in the Los Angeles Times
Southern California already has a burgeoning home affordability crisis, both for renters and potential home buyers. The crisis is driven largely by limited supply, high demand and stagnant wages. At the same time, short-term rentals, like those offered on peer-to-peer travel accommodation website Airbnb, have been exploding in popularity in the area. This is particularly prevalent in some of LA’s most desirable neighborhoods, including Venice and Santa Monica, which are seeking to capitalize on the area’s popularity for travelers and short-term residents alike. As a result, very often those apartments that might otherwise get leased long-term to local residents are instead rented out one or two nights at a time, turning a profit for their owners but exacerbating already tight inventory. But is this surplus of Airbnb listings a cause or a symptom of the area’s affordability crisis? Many Airbnb “landlords” use the proceeds from their rental units to help pay their own increasingly expensive rent or mortgage. Finding a way to incorporate these rentals into existing regulatory framework, ensuring both tenants and landlords are adequately protected and communities are well-served, will be a hot topic of discussion in coming months and years.
Other Than Demographics, What’s Driving Household Formation?
Mei Dong, Ling Sun and Randall Wright; Federal Reserve Bank of Minneapolis
Most discussions on the household formation rate focus on demographics and social preferences. But economists at the Federal Reserve Bank of Minneapolis argue that fiscal and monetary policy can also influence household formation, because inflation and consumption taxes have different effects on single-person versus multiple-person households, particularly when it comes to the cost of services that can either be purchased or produced in the home (e.g., meals, cleaning, childcare). Our own research shows that the homeownership rate of married or cohabitating young adults who are employed full-time is more than three times higher than the homeownership rate of full-time employed, but single, young adults. Still, the idea that individuals are sensitive to inflation or consumption taxes (as opposed to more mundane concerns such as love or convenience) when deciding whether or not to “shack up” is intuitively hard to grapple with.
