WASHINGTON — Lori Shelton can’t fathom ever having the money to buy a home — and that’s a major reason why so many voters feel down on the economy ahead of this year’s presidential election.
Shelton, 67, drives an Uber to help pay rent in Aurora, Colorado. An advance on her pay covered her apartment’s security deposit. But it also cut into her next paycheck, leaving her bank account dangerously low when the rent was due — a cycle that never seems to end.
“I’m always one step behind,” said Shelton, her voice choking up. “It’s a nightmare, it’s a freaking nightmare right now.”
The United States is slogging through a housing affordability crisis that was decades in the making. At the root of this problem: America failed to build enough homes for its growing population. The shortage strikes at the heart of the American dream of homeownership — dampening President Joe Biden’s assurances that the U.S. economy is strong and underscoring the degree to which Republican Donald Trump, the former president and presumptive GOP nominee for 2024, has largely overlooked the shortage.
The lack of housing has caused a record number of renters to devote an excessive amount of income to housing, according to a Harvard University analysis. Not enough homes are for sale or being built, keeping prices elevated. Average mortgage rates have more than doubled and further worsened affordability.
In fact, the Census Bureau reported that homeownership fell slightly at the end of last year in an otherwise solid economy. If it wasn’t for shelter costs, inflation — Biden’s most pronounced economic problem — would be running at a healthy and stable 1.8%. Instead, it’s hovering around 3.2%.
Administration officials are confident that shelter inflation will soon cool, but the damage across several years is apparent to advocates and economists.
“I’ve been doing housing work for 30 years — the housing affordability challenge is the worst I’ve ever seen in my career,” said Shaun Donovan, a former secretary of Housing and Urban Development in the Obama years who now leads the nonprofit Enterprise Community Partners.
Donovan noted that this is an increasingly bipartisan challenge that could bring the political parties together. Expensive housing was once the domain of Democratic areas such as New York City and San Francisco. It’s now moved into Republican states as places such as Boise, Idaho, grapple with higher prices.
“It is a first-tier issue almost everywhere,” he said. “And that is changing the national politics around it in a way that I think is quite different than I’ve ever seen.”
Mark Zandi, chief economist at Moody’s Analytics, said that the outcome of the November election could ultimately depend on the path of 30-year mortgage rates.
Rates currently average about 6.74%. If they dropped closer to 6%, the odds of a Biden victory would increase. But rates moving near 8% might enable Trump to prevail, Zandi said.
“Given the current housing affordability crisis, higher rates will make owning a home completely out of reach for nearly all potential first-time homebuyers,” he said. “Since homeownership is a key part of the American dream, if it appears unattainable, this will deeply impact voters’ sense of the economy.”
Biden, a Democrat, acknowledged the pain many are feeling in his State of the Union address earlier this month and in his budget proposal released on Monday.
The president wants to fund the building and preservation of 2 million housing units — a meaningful sum, but not enough to solve the shortage. He also proposed a tax credit worth up to $10,000 to homebuyers. Over the past three years, he has increased rental assistance to 100,000 households.
“The bottom line is we have to build, build, build,” Biden said Monday in a speech to the National League of Cities. “That’s how we bring down housing costs for good.”
Rapidly climbing home prices were also a festering problem under Trump, who first achieved celebrity status as a real estate developer. While president, Trump called for limiting construction in the suburbs. He claimed during the 2020 election that Biden’s policies to spur building and affordability would “destroy your neighborhood.”
During the 2018 to 2020 years of Trump’s presidency, the country’s housing shortage surged 52% to 3.8 million units, according to the mortgage company Freddie Mac.
The Associated Press contacted Trump’s campaign for his policy plans but did not get a response. The America First Policy Institute, a think tank promoting Trump’s vision, said the key is to cut government borrowing to reduce mortgage rates. The former president has pledged to reduce deficits, but an analysis by the Committee for a Responsible Federal Budget shows that his policies in office will have likely added more than $8 trillion to the national debt.
“The best way for us to improve access to homeownership for young people is to get interest rates back down, not to provide subsidies that cause housing unaffordability to worsen,” said Mike Faulkender, chief economist at the institute.
Lower rates might play well with voters, but most economists say they would at best offer temporary financial relief. Purchase prices would likely adjust upward in response to greater demand from falling rates.
Construction, the more enduring solution, would take years to achieve and require new rules by states and cities. The administration is trying to incentivize zoning changes, but the major choices are outside the White House’s control.
“Even as incomes are going up and the economy is doing well and inflation is coming down, people can’t buy homes,” said Daryl Fairweather, chief economist at the brokerage Redfin. “That’s like the biggest problem for Biden because it’s not one that he can solve.”
The general rule of thumb is that people should pay no more than 30% of their income on rent or a mortgage. A typical household looking to buy a home would have to devote 41% of its income to mortgage payments, according to Redfin.
There are far-reaching economic risks because of this. High housing costs can lead people to cut back spending elsewhere. Advocates said it enables landlords to neglect their properties since there is always a ready tenant.
Evictions can worsen health and educational outcomes for children and exact an even wider cost on society, said Zach Neumann, a Denver-based lawyer who provides more than $30 million annually in rental assistance through the nonprofit Community Economic Defense Project.
The cumulative costs of evicting poorer renters are “$20,000 to $30,000 a year when you include shelter nights and emergency room visits,” Neumann said. “It’s really overwhelming when you think about the total numbers and these folks are fighting to have a roof over their heads.”
While there is bipartisan agreement on the need for more housing, there has yet to be a significant plan that has passed the House and Senate. Biden has proposed housing aid throughout his administration that never materialized.
“Had Congress passed some of the investments that the president has called for since the beginning of the administration, had they done that three years ago, as he was advocating, we’d have affordable units coming online right now,” said Daniel Hornung, deputy director of the White House National Economic Council.
But Mark Calabria, who was director of the Federal Housing Finance Agency during the Trump administration, said that many of the federal tools to increase housing such as the Low-Income Housing Tax Credit could further push up demand without adding enough construction.
“My worry would be we’ve done a number of things that increased demand when the problem is supply,” said Calabria, now an adviser with the libertarian Cato Institute.
But for renters such as Lori Shelton in Colorado, the debate about how to add housing supply is cold comfort when she owes rent now. She’s previously dealt with the threat of eviction and late fees. She gets some rent money from her son, but she has also relied at times on her church to cover the $2,399 a month.
“I don’t think the majority of us have that savings account,” she said. “If you spend that much on your rent and your groceries and your car and your bills, you don’t have much for a fallback.”
WASHINGTON — The House on Wednesday passed a bill that would lead to a nationwide ban of the popular video app TikTok if its China-based owner doesn’t sell its stake, as lawmakers acted on concerns that the company’s current ownership structure is a national security threat.
The bill, passed by a vote of 352-65, now goes to the Senate, where its prospects are unclear.
TikTok, which has more than 170 million American users, is a wholly-owned subsidiary of Chinese technology firm ByteDance Ltd.
The lawmakers contend that ByteDance is beholden to the Chinese government, which could demand access to the data of TikTok’s consumers in the U.S. whenever it wants. The worry stems from a set of Chinese national security laws that compel organizations to assist with intelligence gathering.
“We have given TikTok a clear choice,” said Rep. Cathy McMorris Rodgers, R-Wash. “Separate from your parent company ByteDance, which is beholden to the CCP (the Chinese Communist Party), and remain operational in the United States, or side with the CCP and face the consequences. The choice is TikTok’s.”
House passage of the bill is only the first step. The Senate would also need to pass the measure for it to become law, and lawmakers in that chamber indicated it would undergo a thorough review. Senate Majority Leader Chuck Schumer, D-N.Y., said he’ll have to consult with relevant committee chairs to determine the bill’s path.
President Joe Biden has said if Congress passes the measure, he will sign it.
The House vote is the latest example of increased tensions between China and the U.S. By targeting TikTok, lawmakers are tackling what they see as a grave threat to America’s national security — but also singling out a platform popular with millions of people, many of whom skew younger, just months before an election.
In a video posted on Wednesday evening, TikTok CEO Shou Zi Chew said that the company has invested to keep user data safe and the TikTok platform free from outside manipulation. If passed, he said the bill would give more power to a handful of other social companies.
“We will not stop fighting and advocating for you. We will continue to do all we can, including exercising our legal rights, to protect this amazing platform that we have built with you,” Chew said in his message to the app’s users.
In anticipation of the vote, a Chinese foreign ministry spokesman, Wang Wenbin, accused Washington of resorting to political tools when U.S. businesses fail to compete. He said the effort would disrupt normal business operations and undermine investor confidence “and will eventually backfire on the U.S. itself.”
Overall, 197 Republican lawmakers voted for the measure and 15 against. On the Democratic side, 155 voted for the bill and 50 against.
Some Republican opponents of the bill said the U.S. should warn consumers if there are data privacy and propaganda concerns, but the final choice should be left with consumers.
“The answer to authoritarianism is not more authoritarianism,” said Rep. Tom McClintock, R-Calif. “The answer to CCP-style propaganda is not CCP-style oppression. Let us slow down before we blunder down this very steep and slippery slope.”
Democrats also warned of the impact a ban would have on users in the U.S., including entrepreneurs and business owners. One of the no votes came from Rep. Jim Himes, the ranking Democratic member of the House Intelligence Committee.
“One of the key differences between us and those adversaries is the fact that they shut down newspapers, broadcast stations, and social media platforms. We do not,” Himes said. “We trust our citizens to be worthy of their democracy. We do not trust our government to decide what information they may or may not see.”
The day before the House vote, top national security officials in the Biden administration held a closed-door briefing with lawmakers to discuss TikTok and the national security implications. Lawmakers are balancing those security concerns against a desire not to limit free speech online.
“What we’ve tried to do here is be very thoughtful and deliberate about the need to force a divestiture of TikTok without granting any authority to the executive branch to regulate content or go after any American company,” said Rep. Mike Gallagher, the bill’s author, as he emerged from the briefing.
TikTok has long denied that it could be used as a tool of the Chinese government. The company has said it has never shared U.S. user data with Chinese authorities and won’t do so if it is asked. To date, the U.S. government also has not provided evidence that shows TikTok shared such information with Chinese authorities.
Republican leaders moved quickly to bring up the bill after its introduction last week by Gallagher and Rep. Raja Krishnamoorthi, D-Ill. A House committee approved the legislation unanimously, on a 50-0 vote, even after their offices were inundated with calls from TikTok users demanding they drop the effort. Some offices even shut off their phones because of the onslaught. Supporters of the bill said the effort backfired.
“(It) provided members a preview of how the platform could be weaponized to inject disinformation into our system,” Gallagher said.
Lawmakers in both parties are anxious to confront China on a range of issues. The House formed a special committee to focus on China-related issues. And Schumer directed committee chairs to begin working with Republicans on a bipartisan China competition bill.
Schumer is likely to feel some pressure from within his own party to move on the TikTok legislation. Senate Intelligence Committee Chairman Mark Warner announced after the House vote that he would work to “get this bill passed through the Senate and signed into law.”
In a joint statement with Sen. Marco Rubio of Florida, the top Republican on the intelligence panel, Warner said that “we are united in our concern about the national security threat posed by TikTok — a platform with enormous power to influence and divide Americans whose parent company ByteDance remains legally required to do the bidding of the Chinese Communist Party.”
Democratic Sen. Maria Cantwell, who chairs another panel with jurisdiction on the issue, said she would “try to find a path forward that is constitutional and protects civil liberties.”
Roughly 30 TikTok influencers and others who traveled with them spoke out against the bill on Capitol Hill on Wednesday. They chanted phrases like “Keep TikTok” ahead of the vote. They also held signs that read “TikTok changed my life for the better” and “TikTok helped me grow my business.”
Dan Salinger, a Sacramento, California-based TikTok creator in attendance, said he started creating content on the app during the COVID-19 pandemic purely out of boredom. But since then his account, which features videos about his life and his father, who suffers from dementia, has grown in popularity. Today, he has 2 million followers on the app.
“I’m actually appalled for many reasons,” Salinger said. “The speed with which they’re pushing this bill through does not give enough time for Americans to voice their concerns and opinions.”
Former President Donald Trump has spoken out against the House effort, but his vice president, Mike Pence, is urging Schumer to bring the House bill to a vote.
“There can be no doubt that this app is Chinese spyware and that a sale to a non-foreign adversary company is in the best interests of the American people,” Pence said in a letter to Schumer.
___
Associated Press staff writer Didi Tang contributed to this report.
Excluding volatile food and energy costs, though, so-called core prices rose just 0.3 percent month over month, unchanged from November’s increase. Core prices were up 3.9 percent from a year earlier, down a tick from November’s 4 percent year-over year gain. Economists pay particular attention to core prices because, by excluding costs that typically jump around from month to month, they are seen as a better guide to the likely path of inflation.
Overall inflation has cooled more or less steadily since hitting a four-decade high of 9.1 percent in mid-2022. Still, the persistence of still-elevated inflation helps explain why, despite steady economic growth, low unemployment and healthy hiring, polls show many Americans are dissatisfied with the economy — a likely key issue in the 2024 elections.
The Federal Reserve, which began aggressively raising interest rates in March 2022 to try to slow the pace of price increases, wants to reduce year-over-year inflation to its 2 percent target level.
Overall, the progress against inflation has been significant. A year ago, the 12-month rise in the consumer price index was 6.5 percent — way down from a four-decade high of 9.1 percent in June 2022 but still painfully high. And wage gains have outpaced inflation in recent months, meaning that Americans’ average after-inflation take-home pay is up.
There are solid reasons for optimism that inflationary pressure will continue to recede in the coming months.
The Federal Reserve Bank of New York reported this week, for example, that consumers now expect inflation to come in at just 3 percent over the next year, the lowest one-year forecast since January 2021. That’s important because consumer expectations are themselves considered a telltale sign of future inflation: When Americans fear that prices will keep accelerating, they will typically rush to buy things sooner rather than later. That surge of spending tends to fuel more inflation.
But that nasty cycle does not appear to be happening.
And when Fed officials discussed the inflation outlook at their most recent meeting last month, they noted some hopeful signs: An end to the supply chain backlogs that had caused parts shortages and inflation pressures and a drop in rent costs, which is beginning to spread through the economy.
Many economists have suggested that slowing inflation from 9 percent to around 3 percent was easier to achieve than reaching the Fed’s 2 percent target could prove to be.
The December US jobs report that was issued last week contained some cautionary news for the Fed: Average hourly wages rose 4.1 percent from a year earlier, up slightly from 4 percent in November. And 676,000 people left the workforce, reducing the proportion of adults who either have a job or are looking for one to 62.5 percent, the lowest level since February.
That is potentially concerning because when fewer people look for work, employers usually find it harder to fill jobs. As a result, they may feel compelled to sharply raise pay to attract job-seekers — and then pass on their higher labor costs to their customers through higher prices. That’s a cycle that can perpetuate inflation.