A housing boom does not have to be followed by a painful bust. The boom of the previous decade was driven by speculative foam and the subscription of lax mortgages, and ended foreseeably badly. The increase in home sales today, with large employers continuing to raise minimum wages, creates a new framework for housing expansion in a more sustainable way.

Much has been said and written about the reasons for the collapse of the last real estate boom, but one simple way to explain it is that many homeowners had mortgages that they could not pay, either because they had taken on too much debt, the interest rates on mortgages are restored at a bad time, or they suffered job losses when the economy declined. And then, a wave of foreclosures led to forced sales, downward pressures on house prices and all kinds of negative consequences on the economy and the financial system.

The basis on which a new type of increase in home ownership is based has been constructed for years in the labor market. Labor activists have been struggling for minimum wage increases for years, whether mandated by law in cities and states, or adopted by large employers in response to public pressure and a tight labor market.

The policies that were applied were minimum wage laws of $ 15 per hour in progressive and high-cost cities such as Seattle.

To begin with, the policies that were applied were minimum wage laws of $ 15 per hour in progressive and high-cost cities such as Seattle. This is producing changes and that is that large employers are increasing their minimum wages, with the goal of reaching $ 15 per hour or more in some cases.

The minimum wage is already being raised to $ 15 per hour on a pro-forma basis in some companies. Others are raising it little by little, starting with increases that approach a minimum wage of $ 13 per hour, with the goal of reaching $ 15 for next year. Many large banks raised their minimum wage to $ 15 in response to the Tax and Employment Cutting Act, but Bank of America is taking it one step further, going to $ 17 and $ 20 per hour by 2021.

In high-cost cities, $ 15 or $ 20 per hour may not help too much, given the cost of living, but when those minimum wages are applied throughout the country, it provides benefits and financial opportunities for employees in areas whose cost of living is lower. You should only imagine a two-income home in 2021 in which one person earns $ 20 per hour and the other earns $ 15 per hour. If both people work full time, it is a home with an income of $ 70,000 per year. A family at that level of income can pay the mortgage on a house in the range of $ 250,000 to $ 300,000 with a loan from the Federal Housing Administration with a down payment of 3.5 percent. In areas of lower cost of life opens many possibilities to countless houses.

Aged neighborhoo

It also offers those who are renting the opportunity to own a home, creating interesting opportunities for metropolitan areas with older neighborhoods that need investment and revitalization. One of the problems to keep in mind is that in some older working class neighborhoods have a more aged demography, the houses are not well maintained and begin to wear out, so when the houses are evicted they are in poor condition. Many properties are abandoned or become cheap rental units, with the neighborhood being able to enter a downward spiral in quality of life, as buyers look for new, more attractive neighborhoods. The fall in property values has as a final consequence a decrease in tax revenues for local governments.

With these higher minimum wages from large employers, you can already see how they are creating a new class of workers with the financial ability to pay mortgages on affordable housing. And, precisely, the type of aging communities we are talking about is a great opportunity for cities to find a new demand for neighborhoods with investments and younger residents, using a combination of tax benefits and down payment assistance in such a way that It attracts buyers.

Once these properties are sold, the renovation of cheap old homes would create jobs and economic activity for the cities, while increasing the value of the homes and returning them to the tax lists of governments. For future working-class owners, who lack university degrees, it is an opportunity to move from rent to home ownership.

An increase in the sale of housing, as it is happening, would not only be more sustainable, backed by workers with real income, and a better mortgage subscription, but would also offer a public benefit by revitalizing old communities that could actually use the aid.