A real estate CEO appraises the home ownership inequality problem in the US - and how to fix it

• Paul Constant is a writer at Civic Ventures and cohost of the "Pitchfork Economics" podcast with Nick Hanauer and David Goldstein.
• Recently, they spoke about housing inequality with Glenn Kelman, CEO of real estate brokerage Redfin.
• Kelman says the best way businesses can support affordable housing is by supporting higher taxes.

It's impossible to discuss the size and scope of income inequality in America without including housing in the conversation. In the same way that corporate profiteers line their pockets while their workers fall below the poverty line, wealthy homeowners have rigged the system so their properties surge in wealth at the expense of millions of renters who have been frozen out of the system. In January 2021, CNN's Anna Bahney noted that while American home prices soared by almost 15% in 2020, that wealth is not distributed equally by income.

"People who already owned high-end property before the pandemic are seeing their wealth grow as the luxury end of the market booms," Bahney wrote. "Meanwhile, being able to afford a new home is getting further out of reach for those looking to buy in the low- and middle-tiers of the market."

Housing has almost become a luxury

As property values climb, so do rents. And as housing behaves more and more like a luxury good in America, it is becoming increasingly difficult for working people to obtain housing.

The solution to this problem seems pretty clear: Build enough housing so that anyone can afford to rent, or even buy, a home of their own. But despite the obvious solution, America's fight for housing equality doesn't follow the same contours as your typical income inequality debate.

In the latest episode of "Pitchfork Economics," Glenn Kelman, the CEO of Seattle-based online real estate brokerage firm Redfin, lays out the battle lines. On one side, he said, "there are people who obviously advocate for affordable housing, but there are other people who worry about their property values."

The civic discourse surrounding housing is an asymmetrical war. Kelman pointed out that homeowners are "very good at organizing into neighborhood associations and limiting construction and preventing the government from really acting in the way that it needs to, to solve this crisis."

So when affordable housing advocates fight for denser neighborhoods and more construction, they are struggling against a well-oiled machine. In these fights, Kelman said, "the winners are the people who already own homes, who have control of most political processes. They've essentially formed a cartel to keep housing prices high."

Middle and lower-income homeownership is stifled

By transforming their housing into an increasingly valuable rarity, homeowners are basically choking the entry-point to the market. And as prices increase, it's becoming harder and harder for prospective homebuyers in the middle and bottom of the income scale to get approved for mortgages.

When the housing market functioned as it should, every time a landlord raised the rent, tenants would weigh their higher rent against the price of a mortgage. "But right now, when the rent goes up, those renters can't qualify for a mortgage. And the landlord knows it," Kelman said.

The higher bar for entry creates even more inequalities

"If you are one of the people who can qualify for a mortgage and own a home," Kelman said, "you can rent it out to someone who can't qualify for a mortgage." The renters then pay off the landlord's mortgage, adding even more to their wealth and allowing them the opportunity to buy even more property.

As our housing crisis has grown and as more Americans are losing their homes, we've started to see more and more corporations step in to finance affordable housing in cities around the country. Kelman says it's a nice gesture, but it doesn't solve the greater housing problem.

"I'm skeptical about corporate philanthropy," Kelman said. "When you look at the amount of money that we need to deploy toward housing, there's only one entity that's capable of that, and that is the government. So the number one thing that businesses can do (to support affordable housing) is support higher taxes."

One of the first things we have to do to combat housing inequality is to address the systemic advantages that homeowners have in the zoning and approval process. Until everyone has a voice, homeowners will continue to stack the deck in their own favor and housing will continue to fall out of reach for many Americans.

As Kelman put it, "I should not have a disproportionate say about housing in Seattle." It's an uncharacteristically blunt statement for a CEO to make - and it's 100% correct.