Richard Florida Explains the Housing Crisis

The dispersal of people from major cities during the pandemic could have reduced pressure on housing markets and lowered housing costs. In fact, writes Richard Florida in Bloomberg CityLab, “As knowledge and tech workers spread out in search of more space, housing prices and rents surged in once-affordable communities across the country” while mostly remaining unrelentingly high in big cities.

“Between December 2020 and December 2021, the median US home grew in value by $52,667, out-earning the median worker, who pocketed $50,000.” On the rental side, “Between May 2021 and May 2022, rents rose by more than 15% to an average of more than $2,000 across the nation as a whole.” Meanwhile, institutional investors are buying an increasingly larger share of housing units.

Paradoxically, “At the very time when technology promises to free us from the constraints of geography and open up more choices of places for people to live, real estate has become an even bigger constraint, with housing prices and rents rising across the board and especially in once-affordable parts of the country.”

To explain this, Florida uses Henry George’s theory on economics, which adds a third class of property owners or landlords to Marx’s classic analysis of capitalists and workers. Rather than capital taking surplus value from labor, George argues that “it is landlords who walk away with the surplus generated by both capital and labor.” Building on that theory, Florida argues that “Instead of driving more innovation and growth, the bounty from today’s knowledge economy is instead diverted into rising land costs, real estate prices and housing values,” keeping the fortunes of workers in an untethered, digital economy very much tied to the physical realm.