(Joel Kotkin’s new report, “Geographies of Inequality,” is the latest in a series of ahead-of-the-curve, groundbreaking pieces published through Third Way’sNEXT initiative. NEXT is made up of in-depth, commissioned academic research papers that look at trends that will shape policy over the coming decades. In particular, we are aiming to unpack some of the prevailing assumptions that routinely define, and often constrain, Democratic and progressive economic and social policy debates.)
There’s little argument that inequality, and the depressed prospects for the middle class, will be a dominant issue in this year’s election, and beyond. Yet the class divide is not monolithic in its nature, causes, or geography. To paraphrase George Orwell’s Animal Farm, some places are more unequal than others.
Housing represents a central, if not dominant, factor in the rise of inequality. Although the cost of food, fuel, electricity, and tax burdens vary, the largest variation tends to be in terms of housing prices. Even adjusted for income, the price differentials for houses in places like the San Francisco Bay Area or Los Angeles are commonly two to three times as much as in most of the country, including the prosperous cities of Texas, the mid-south and the Intermountain West.
These housing differences also apply to rents, which follow the trajectory of home prices. In many markets, particularly along the coast, upwards of 40% of renters and new buyers spend close to half their income on housing. This has a particularly powerful impact on the poor, the working class, younger people, and middle class families, all of whom find their upward trajectory blocked by steadily rising housing costs.
In response to higher prices, many Americans, now including educated Millennials, are heading to parts of the country where housing is more affordable. Jobs too have been moving to such places, particularly in Texas, the southeast and the Intermountain West. As middle income people head for more affordable places, the high-priced coastal areas are becoming ever more sharply bifurcated, between a well-educated, older, and affluent population and a growing rank of people with little chance to ever buy a house or move solidly into the middle class.
Ironically, these divergences are taking place precisely in those places where political rhetoric over inequality is often most heated and strident. Progressive attempts, such as raising minimum wages, attempt to address the problem, but often other policies, notably strict land-use regulation, exacerbate inequality.
The other major divide is not so much between regions but within them. Even in expensive regions, middle class families tend to cluster in suburban and exurban areas, which are once again growing faster than areas closer to the core. Progressive policies in some states, such as Oregon and California, have been calculated to slow suburban growth and force density onto often unwilling communities. By shutting down the production of family-friendly housing, these areas are driving prices up and, to some extent, driving middle and working class people out of whole regions.
To address the rise of ever more bifurcated regions, we may need to return to policies reminiscent of President Franklin Roosevelt, but supported by both parties, to encourage dispersion and home ownership. Without allowing for greater options for the middle class and ways to accumulate assets, the country could be headed not toward some imagined social democratic paradise but to something that more accurately prefigures a new feudalism.