No one knows how many residents, if any, along the Northeast U.S. coast are struggling this week to decide if last weekend’s unexpected deluge of rain was their “final straw.”
Tens of thousands of low- and moderate-income residents of the New Jersey coastline, New York City’s waterlogged boroughs, and/or Long Island are once again cleaning up flooded basements and first-floor units, coping with flooded cars that they parked along crowded streets, and filing for unemployment if their places of work were inundated.
It's during disasters that people learn the hard way that rental markets and real estate prices sometimes work well. That nice basement apartment that was unexpectedly cheap, or that nice-looking rental or house-for-sale closer to the water than you though you could afford, turn out to be cheap for a reason.
Everyone faces some risk of an unexpected natural disaster, the kind that used to be known as a 100-year event. But climate change is recalculating the odds. And although the insurance industry is keeping track of the changing roulette wheel of natural disasters, most low- and moderate-income people only learn about it when they discover a major increase in their annual insurance premiums, or when they file a major claim and discover that the small print of what’s covered changed over the last several years without them noticing. And then they discover they can’t renew their policies.
Different people have different levels of resilience, regardless of their income. But most research demonstrates that low- and moderate- income people are the first to start reacting with their feet (or a rented U-Haul) when a building, a neighborhood, a city, or a region becomes too unpredictable and/or too expensive.
We have no reliable data on domestic U.S. climate migration. The U.S. Census Bureau does publish annual estimates of domestic migration. In addition, the Census Bureau does use surveys to ask people why they move. But “climate change” is not one of the choices on the survey. And even if it was, many climate migrants would likely cite expenses, job opportunities, or other reasons as their primary motivation, even though their personal experiences are driven by underlying climate change.
Despite the challenge of quantifying domestic climate migration, a good deal of research has already begun to identify specific initiatives that Federal, state, and local governments can undertake to prepare for the growing movement of people.[i] Even though the willingness to act on these suggestions has become caught up in the dysfunctional gears of our domestic political divisions, many initiatives are already in the early stages of planning and implementation in cities and regions that are likely to receive climate migrants. Yet each faces many barriers.
One important example is affordable housing. Almost every city in the U.S. faces its own shortage of affordable housing. Yet many cities that will likely receive climate migrants are older so-called Legacy Cities in the Northeast and Midwest. These cities face unique challenges in constructing and/or rehabilitating affordable housing because current forecasts of future demand, using widely accepted analytical methods, typically assume that overall population decline, and neighborhood abandonment will continue along the negative paths that have characterized the last 4-5 decades.
Because of assumed continued decline, the case for new units of affordable housing in Legacy Cities is typically made by demonstrating the benefits for residents of better housing within an overall process of managed community decline. Subsidies for construction, renovation, and for maintaining long-term below-market rental rates typically leverage that type of logic. Providing affordable housing is presented as a form of subsidized social service on behalf of vulnerable, low-income people.
Yet that logic model for affordable housing in Legacy Cities is guaranteed to fail to build needed housing if rates of domestic climate migration increase over the next few decades. Indeed, that logic model itself may be an artifact of artificially constructed business strategies created over many years by powerful local interests in some Legacy Cities.
The residential market dynamics of too many Legacy Cities have evolved into tightly controlled local oligopolies where a handful of private housing developers exert undue influence by pitting local governments against each other to extract public subsidies from tax-starved municipal governments and school districts.
Once the subsidies are extracted, they are used to subsidize construction of luxury housing rather than affordable housing, even as the demand for affordable housing continues to grow. At the same time, and usually using different corporate names, the same local market oligopolists buy up available affordable housing and constrict new affordable housing construction because whatever subsidies local governments can afford have already been diverted to the construction of new luxury units.
Oligopolistic control at both ends of local residential housing markets can create substantial barriers to entry for out-of-town developers who may want to enter. In the end, the construction of new affordable housing tends to fall into the hands of nonprofit neighborhood development groups who can make their case to city leaders and local philanthropies on the base of social benefit. They pose little threat to the region’s larger developers because they are unable to deliver the number of new units that would be needed to upset the city or region’s overall oligopolistic market dynamics. Indeed, oligopolistic local developers sometimes shore up their public image by providing modest levels of help to the nonprofits.
The overall rate of construction of affordable housing units in the U.S is the result of many issues. But this type of local market structure and competitive dynamics in Legacy Cities poses an additional barrier to preparing those places to receive future domestic climate migrants.
By exerting concentrated control over local and regional real estate development markets, oligopolies encourage higher levels of profitability for themselves in luxury housing markets and simultaneously earn higher levels of profitability in less-and-less affordable housing at the other end of the local market.
So how can the market dynamics of Legacy Cities change to encourage the construction and/or renovation of more affordable housing? This topic needs to be explored in depth by experts in many fields. But here is a good place to start.
The competitive dynamics of local and regional housing markets would be a good place for a new era of anti-trust enforcement. Both sides of our political divide these days seem unified on the idea of expanding anti-trust enforcement at the highest levels of national and global market concentration in advanced technologies. After all, most Americans from all political points of view embrace the value of fair competition.
Google, for example, is currently on trial. Last week included the glamorous public spectacle of having the current CEO of Microsoft testifying about the negative social and economic consequences of Google’s oligopolistic and monopolistic powers. Lawyers from the U.S. Department of Justice are making the case on behalf of the American people that Google should be busted into pieces the same way that Teddy Roosevelt inspired busting up industrial giants more than one hundred years ago.
Local real estate markets are not as glamorous as the global tech industry. But the negative social and economic consequences of monopolies and oligopolies do not disappear just because the size of a market is smaller. Rigorous analysis of the costs of too little competition in local and regional housing markets in the U.S. could reveal social and economic costs that exceed tens of billions, if not hundreds of billions of dollars per year. And those costs are likely to escalate as the scale and scope of domestic climate migration expands into an historic new wave of domestic migration over the next two decades.
Creating more competitive local and regional markets for affordable housing in the U.S. alone won’t make recipient cities more hospitable for the arrival of domestic climate migrants. But it would make a great start. More specific topics will be discussed in future posts!
[i] An excellent example is Marandi, A. and Main, K. L. “Vulnerable City, recipient city, or climate destination? Toward a typology of domestic climate migration impacts on U.S. cities.” Journal of Environmental Studies and Sciences (2021) 11:465-480.