The 4-Horseman: Affordability (Possible Solution)

[Joseph Medina]

Hello All, 

So, in the 4-horsemen discussion I discuss that if left unchecked, then the affordability crisis will be part of the reason, out of 4, for the collapse of the US economy if not the world economy. Now, what are some solutions? 

Well, lets hash it out. In the US Hawaii is known as being the most expensive market in the US RE market. Why? Its an island plain and simple (not including its democratic policies, not meaning to be a political jab). You can only build out so far before you're eating cake by the ocean. 

So, what has the HI government done in response to its unique problem of its state having 700 Sq. Ft. studios for $1M+ it has provided leniency in its ADU laws. Providing its citizens the easier ability to add Additional Dwelling Units on properties to provide "affordable" housing.

So, can this model work everywhere? I am not sure, and if you're reading this and have an opinion either way share. 

Another one (and my least favorite)... A UBI!! A universal base income. Everything in my being hates every bit of this thought! But lets touch on it. The US spends 1/2 a TRILLION on social welfare programs. If the US decides a UBI then it would need to cut out all of the Social Programs  like welfare, social security, and more. I like it in a way that it would force those whom abuse the system to find work, but those that really need the programs would severely be hindered. its a win lose situation and so not so good... even though this is the system we are moving to. 

Probably my favorite... If anyone here has any experience in healthcare at all you are well versed with CMS. Centers for Medicare and Medicare Services. Now, I bring this up because I I think... again just me and may opinions. is that if the US government were to, instead of stimulating citizens, stimulate business by encourage (force) them to pay employees more and make them report how they are spending the money, and some regulating entity inspect and survey the locations, one you would be creating tons of federal jobs and force income wages in a indirect way up. Now, how does this work without causing massive amounts of inflation, well the company still hires out their positions as same rate, then the US government steps in and supplements the income VIA stimulus for an employee that makes under a certain amount, because lets face it a CEO making 500K does not need a pay increase. The people must work for this stimulus, so no more sitting at home not producing. So, therefore the more the company is able to produce more, so they should be taxed more. 

Theoretically it sounds good to me LOL. it truly stimulates the economy, because some if not most of that money that was printed and divided out went into savings account. But, if a consumer minded employee earned it, then it truly goes back into the economy as CapGain tax from the business and Earned Income Tax on the employee. 

I know this sounds like a robbing Peter to pay Paul situation, but we are in a very interesting situation where the stimulus thing is NOT working, people are not wanting to go back to work, and inflation is on the tipping point of spiraling out of control. because the problem with this raising the minimum wage bit, is that that money is coming out of the bottom line of the business, and the only person who absorbs more cost is the consumer. But, if the employer already budgeted for 10/hour and the government adds an extra 5/ hr then the business' bottom line is not affected, so therefore the price should not have to raise unless to do so due to "natural" occurring inflation. 

So, the consumer can go out and spend their hard "earned" dollars on more housing or rent. I think in this model it could potentially close the gap A LITTLE between the lower and middle class and the middle and upper class. lower income housing will be back where it should for those that really need it, lower income wage earners now can afford to move out of the slums if they wanted to by being able to afford better housing. And we could potently see less of this civil unrest, because facing facts as facts are, It is no secret that the minority population is the majority stake holder in the lower class. And I'm not talking about the special onesies and twosies that are the exception. I am talking about the vast majority;

Because, whether its legitimately a racial thing or not, which expands further than this post is intended, but like it or not this "racial divide and protest" that has been created is unrest. Civil Unrest is a symptom of a failing government, because going back in history looking at failing governments Civil Unrest was ALWAYS in the mix because the "Gestalt Principle" no longer applies and the whole is no longer greater than the sum of its parts. Supplementing the income I think can get people into better housing and spread the crime out a little, where we don't have as much crime because there wouldn't be such (not eliminated) a divide in the wealth which could lower the need to commit "survival crimes" 

Again this is one person's idea and theory of how to slow down a major problem. I am open to hear other peoples great suggestions and or criticisms. 

If you like the read or wanting to read the original post that spurred this discussion follow the link...https://www.biggerpockets.com/...

Inflation is next week's Horseman.