I’m busy and about to head off to a strategy session, but I had to share this with you all — especially with those who are in leadership positions in REALTOR Associations and local/regional MLSs. I may have thoughts on this in the future, but for now, let me just tell you that this might be the most important article in recent memory: The End of Aspiration.
The author is the well-known demographer and social scientist Joel Kotkin, whose work I have followed for years. His work at NewGeography and elsewhere has been enormously influential to many who wanted to see past the cliched tropes and pretty lies about American demographics, urban development, and politics.
In my post about Millennials, I called on the YPN to “change organized real estate to better address the issues of the consumer of the future.” I wrote that because some of the signs I found in researching the topic suggest that we are headed towards a divided future where the gap between the Elites and Non-Elites endanger our social fabric.
Well, Joel Kotkin has written a short, easily-digestible article that lays out the big picture of what’s going on. Read the whole thing.
From Middle-Class to Neo-Feudalism
Kotkin makes the case that since the end of WW2, the Western world has been defined by aspirations of upward mobility, which have largely been achieved. Those aspirations and the ability to achieve them defined the postwar era. But, he thinks that the average person across the developed world may no longer have (or no longer feel he has) the ability to achieve aspirations.
For example, he notes:
In the United States, about 90 percent of children born in 1940 grew up to experience higher incomes than their parents, according to researchers at the Equality of Opportunity Project. That figure dropped to only 50 percent of those born in the 1980s. The US Census Bureau estimates that, even when working full-time, people in their late twenties and early thirties earn $2000 less in real dollars than the same age cohort in 1980. More than 20 percent of people aged 18 to 34 live in poverty, up from 14 percent in 1980. Three-quarters of American adults today predict their child will not grow up to be better-off than they are, according to Pew. [Emphasis added]
That Millennials make less money than their parents’ generation in real dollars tracks with what I found when I was researching that group.
One of the key aspirations beyond the ability of most people to achieve is homeownership.
Kotkin on Homeownership
Like I said, read the whole thing, but here are the key grafs:
Few metrics demonstrate the end of aspiration better than the decline in home ownership. The parents and grandparents of the millennial generation (born between 1982 and 2002) witnessed a dramatic rise in homeownership; in contrast, by 2016, home ownership among older millennials (25-34) had dropped by 18 percent from 45.4 percent in 2000 to 37 percent in 2016. Without a home, these millennials will face a “formidable challenge” in boosting their net worth. Property remains central to financial security: Homes today account for roughly two-thirds of the wealth of middle-income Americans; home owners have a median net worth more than 40 times that of renters.
So why has home ownership fallen? Largely due to regulations that have placed new affordable housing beyond the reach of younger Australians, something we also see in major cities in Great Britain, the United States, and Canada. In all these places, the main culprit has been “smart growth,” a notion that encourages the reluctant to move closer to dense urban cores and give up the dream of owning a home.
These policies are widely supported among planners, academics, and the media; in virtually all countries, the cognitive elites congregate in elite urban centres.
Though he was writing about mostly about Australia, everything he writes can apply to most of the major urban areas in North America from New York to San Francisco to Toronto, and even to the secondary metro areas like Nashville and Austin where locals find that they can no longer afford to buy in neighborhoods they grew up in. That the cognitive elites in our society congregate in elite urban centers cannot be denied or disputed either.
Kotkin also points to the “green agenda” as a culprit in driving prices up and depressing homeownership. And he does not mince words when he condemns the Elites who embrace both the “smart growth” policies and the “green agenda”:
This view is widely shared by both the oligarchy and the upper echelons of the planning clerisy. Like their medieval counterparts, they wish to see a more “ordered” planet, but in ways that do not threaten their own power or quality of life. Those at the top of class pyramid can purchase “indulgences” for their consumption by investing in forests, driving electric cars, solarizing their homes, while their wealth allows them to purchase expensive inner-city flats.
The Ultimate Impact: Neo-Feudalism
In Kotkin’s view, the ultimate end of these changes — many of which surround homeownership — is a new feudalism with a new aristocracy: educated landowners who earn rents from the vast majority of a new class of peasants, while fighting off social unrest with a wide variety of public assistance programs and distracting entertainment: bread and circuses of ancient Rome dressed up with new technology. He writes:
The drive against bourgeois aspirations underpins an emerging neo-feudal system in which people remain renters for life, enjoying their video games or houseplants. This may end the dream of ownership that has defined the middle class for a half millennium, but it could assure a steady profit for the owner class, a rent that would seem appropriate to a medieval landlord.
In addition, that neo-feudalist world order of the rich landlords and struggling renter classes leads to profound and disturbing changes that could only be described as pre-revolutionary:
The erosion of upward mobility threatens a deepening conflict between the middle orders and the elites. It also threatens the future of liberal democracy. A strong landowning middle order has been essential in democracies from ancient Athens and the Roman and Dutch Republics to contemporary Europe, North America, and Australia. Now with fewer owning land, and many without even a reasonable expectation of acquiring it, we may be entering an era portrayed as progressive and multicultural but that will be ever more feudal in its economic and social form.
And the canary in the coal mine are the younger generation:
This receding horizon is generating an ever more feudalistic mentality among the young—those with wealthy parents are far luckier to own a house and enter what one writer calls “the funnel of privilege.” In America—like Australia, a country whose mythology disdains the power of inherited wealth—millennials are increasingly counting on inheritance for their retirement at a rate three times that of the boomers. Among the youngest cohort, those aged 18 to 22, over 60 percent see inheritance as their primary source of wealth as they age.
We know that across North America, Millennial buyers cannot buy homes without help from their parents or grandparents. Many Boomer parents have taken to thinking of that assistance to help their children buy their first homes as “early inheritance” already. But to hear that the Millennials themselves do not think about “making it” on their own, but inheritance as the path to wealth is… disturbing, to say the least.
So, Why Should You, a REALTOR Leader, Care?
At a big picture level, if Kotkin is correct that the entire upper echelon of our society, the Elites who control government, media, technology, academia and corporations, is in favor of policies that make land ownership more and more difficult for the average family, then who can stand against them?
Only two possibilities come to mind: REALTORS or populists.
We all recognize and often celebrate the political power of REALTORS. How REALTORS use that power, then, determines whether we can reverse and reform some of the anti-ownership policies advocated by the Elites or not. And that in turn determines whether we bring back aspirations to the middle class or we wait for a populist explosion of discontent to do so.
If REALTORS are content to be handmaidens to the Elites, the neo-feudal aristocrats who dominate policymaking, then not only will nothing change, but the end of aspiration accelerates. If REALTORS realize that they might be the only real counterweight to the “smart growth” policies and the “green agenda” that make homeownership more difficult and more expensive, then we have a chance to make intelligent reforms before stupid reforms are forced on us all by populist anger.
This issue, in my mind, cuts across all divisions in real estate. It doesn’t matter whether you’re a broker, the CEO of Zillow, or an MLS executive. It doesn’t matter whether you’re a Democratic Socialist or a hardcore Republican. It doesn’t matter whether you live in New York City or in Paris, Texas. This issue of whether REALTORS will fight for homeownership opportunities or fight for current homeowner privilege is the issue of organized real estate for the foreseeable future.
I know this issue is a bit theoretical, a bit highfalutin’, and a bit outside of the normal day to day concerns of Associations and REALTORs. But this is a topic you and your Board and your membership need to wrestle with and as soon as possible.
If you are a REALTOR Association in California (where Joel Kotkin is based) or the National Association of REALTORS, I’d like to recommend inviting him to address your leadership and your membership. But at the very least, read that article and bring it up for discussion.