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The economic collapse of 2007 left many Americans with mortgages they couldn’t pay, as a result of predatory lending practices, the packaging of high risk home loans into salable securities, housing speculation by opportunistic homeowners, and finally due to people living beyond their means in order to keep up with the Joneses. When it became clear that mortgage-backed securities were junk assets based on housing debt that people couldn’t pay, the market collapsed, leaving many people either underwater in their homes, or foreclosed on. Those who lost their homes went into the rental market where landlords responded by increasing already high rents.

 

Generally speaking, most Baby Boomers did not lose their homes in the collapse and continued to speculate in the stock market as a source of income; fortunately for them, in spite of mass unemployment, the stock market boomed, largely and counterintuitively because it had been decoupled from value creation. In other words, fewer people were working to produce something or provide a service, yet companies were somehow worth more. Generation X, many who were still paying on mortgages and who had large housing debt on properties that were devalued, when they lost their jobs, they often lost their homes. As for Millennials, they never got a chance at home ownership because just as they were coming of age in the job market, there were no jobs. So what we have post-collapse is a situation where wealthy homeowners live off the stock market, and those who are landlords also live off of rents, while renters are faced with the double challenge of paying whatever the “market” dictates in an economy with few jobs and wages that have been stagnant since approximately 1970.

 

For those with property and capital, economic collapse represents a market opportunity. This is especially the case with landlords. After 2007, through sites such as Craigslist, local landlords across California saw that rents were increasing for competing properties. Some may have been surprised by this, given that they were already charging high prices for their generally substandard units, but all were pleased and responded by increasing their rents accordingly, causing a harmful, rent-seeking feedback loop. As a result, all properties of similar typology with some adjustments for location and regardless of quality, began to be listed at the top of the price range. These prices were and remain unaffordable to the vast majority of renters, and have steadily increased to consume a third to half or more of their monthly income in the years following the collapse and up to the present day.

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