Unemployment and Housing Goes Boom

In the midst of a forum on the state of the construction and real estate industry a group of us were treated to a 'state of the economy' luncheon. During the conflicting views of optimism and pessimism the good news is most felt we were through the roughest quarters and the bottom was almost over. Stabilized was the key word used. However for the construction industry it usually takes a few quarters and the rebound will hopefully be jump started by a reinvestment in housing stock, with a focus on affordability and sustainability. There was a small fact in the presentation that seem to go unquestioned. The issue of the post college re-nesters.

Two Generations - One Problem
The drop in the US housing market is being partly compounded by a tri-effect created by the baby boomers and the echo boomers, those born between 1989 and 1993.

1. The millions of graduating echo boomers who enter the workforce annually are, like many Americans, finding it extremely difficult to find employment. Instead of going solo, getting apartments or committing to first homes, they are returning back to their parents and taking refuge.

2. At the same time their new boomer landlords are not retiring because of recently depleted retirement funds, the drop in equity in their home and battered stocks. Coupled with a recession where many eliminated jobs will not return there was talk of 10-11% unemployment before we reach the light at the end of this economic tunnel.

3. Currently and for the foreseeable future we are not building or retrofitting the typical number of affordable entry level rentals. When the economy strengthens (lets say 2011) we may face a huge shortage, triggering a spike in rental prices.

Could these two generations could end up stifling US recovery? Is this the ultimate catch 22 or just a red herring?

The Green Retrofit Army
Taking a 40,000 ft. view for a second, perhaps it is the later. The fear driven stagnation of the housing market seems light years away from China who are building the equivalent of 31 Manhattans this year. (noted by Andrew Winston at todays' Sustainable brands conference). China is pumping $58 Billion (10% of its stimulus) into low-income and affordable housing. China sees the re-prioritization of its housing stock in partnership with pushing a green/sustainable agenda as key to recovery. Perhaps we should follow suit and instead of lamenting this echo boomer return, engage this army of passionate socially minded individuals in the retrofitting of their home towns and cities. In exchange for rent they could green their parents' homes. A lead that has already taken place in places like Babylon, NY and Toronto, Canada.

image: Long Island Green Homes

Retool government involvement
Now we've empowered a new generation of home builders, let's go one step further. Let's announce that the federal government will not build one new affordable house in 2009 and instead let's retool the system.

1. Use all building funds set aside to retrofit foreclosed properties with green materials and technologies. Match with green funds and utilize groups like Habitat for Humanity and Rebuilding Together.

2. Create a more efficient mechanism of getting low-income families into existing vacant properties

3. Engage in public/private partnerships that invest in R&D for compact first starter homes - with a focus on US focused job creation and reusing the idle GM plants for regional pre-fab solutions.

If you have any other ideas -- post below.

Follow Cameron Sinclair on Twitter: www.twitter.com/casinclair

Comments

[Lorianne]

The "housing problem" and the economic meltdown are a direct result of unsustainable ways of living. But housing is not the impetus of this, it's the result. We have for over 50 years promoted a way of life that is unsustainable, including the notion of endless economic "growth" and people feeling entitled to live beyond their means facilitated by unlimited consumer credit ... which, as it turns out is only another form of unsustainability.

Until the concept of 'sustainability' is expanded to personal responsibility to live sustainability (ie within one's means), I don't think solar panels and insulation and other "greening" of our built environment is going to make an impact. It's just masking the real underlying unsustainablity of our culture.

[JScott]

Some how make it more attactive for homeowners to fully insulate their exterior walls (a real expensive undertaking) and ceilings (hard to difficult task) and foundations (where applicable)
Retrofit with more efficient HVAC systems and water conserving appliances (and if possible convert more residential tracts to undeground utilities). Build prefab homes in the vacated auto plants, think outta the box (for new design variations on the 16x66 ft box.) Fleetwood and Silvercrest and Clayton RU reading this? Make more modest sized homes-no more McMansions (and one could bet the 3 car garage will be a rarity).

[getsmart85]

Long term prospects look very bleak. The combination of unfavorable demographics, declining purchasing power, higher unemployment and tighter credit will dampen a real estate recovery for some time.

[EinChicago]

Your article hits the nail on the haed. we're trapped between two parastical groups: the Boomers and the Y-ners. The candle is being burnt at both ends by tow groups competing to see who can be the least productive and most self-entitled in history.

[steppenwolfsayshi]

EinChigaco, it takes real courage to stand up for Generation X, but someones got to do it.

The absolute selfishness of people aged 15-25 is obvoiusly to blame for destroying this country! What do they do all day but go to highschool and college and fight in that pointless war. And then they graduate or come home and don't do jack all day because there aren't any jobs for them because the economy was being screwed up by politicians and the public that elected them long before they were born. Lazy, self-entitled bastards. And have you heard some of them complain? They expect that just because they went to Yale, they should make more then $7 dollars/hr. They should just be happy to have a job, even if they can't pay their student loans of $600 a month and eat.

[KillTheMessenger]

Lovely reply.

Although... that they are fighting the war does not really speak in favor of the intelligence of Gen-Y. I keep seeing these clueless kids at the airport surrounded by helpless looking families. It's a heartbreak. I wish I could say "I am so sorry... we really messed this one up, kid!". But I am not sure they would even understand. They look like they are caught between the harsh reality of the war and their wish to serve the country they love. Or maybe just the economic reality that there is nowhere for them to go but the army and they need the dream that it's for a higher cause than the funneling of taxpayer dollars into the military industrial sector...

I don't know. All I know is that there are an awful lot of very young faces staring into the reality that while they are going to Iraq and Afghanistan, some kid with better socioeconomic background goes on spring break to Mexico.

[ImmanuelGoldstein]

With the GDP at or near historic heights I'd be hard pressed to argue that the present generation is 'unproductive'.
Honestly Ein, do you have anything on tap but these silly, fact-free canned screeds?

[ellievanhoutte]

Very interesting piece that connects many issues together.....so impressed by the fact that other countries seem light years ahead of us in retrofitting homes with green technology/affordable housing measures.