Low Vacancy Rates Should Demand the Same Urgency as High Unemployment

Here's the thing about unemployment: It sucks for two different but related reasons. The first and most obvious is that when people want jobs but can't get them, life is really tough. The second is more subtle but its impact is much more broadly felt: When there's a surplus of potential employees looking for work, businesses have no incentive to pay people well or give them raises over time. There's always another person desperate to do your job for less money, after all. This is basically the story of the U.S. economy since the Great Recession.

For both of the above reasons, when unemployment rises above about 5 percent we tend to collectively freak out about the need to do something. In our culture, high unemployment is just not an acceptable steady state. Though we tend to focus on the people who are actually jobless, high unemployment affects nearly everyone. It demands action.

Vacancy rates versus rent increases in Seattle. One goes up, the other goes down.

If we look at residential vacancy rates through this same lens, we can see that vacancy is actually the mirror image of unemployment. When vacancy rates are low, rents go up and some may be forced from their homes. Some of those displaced households will be unable to find new housing at an affordable rate and end up homeless, at least temporarily. As with the unemployed in a tough economy, these are the most visible and hardest-hit victims of low vacancy rates.

Just like with unemployment there is a second, broader impact associated with low vacancy rates: The demand for housing exceeds the supply of available units, and renters lose their bargaining power. Again, owners know that there's always someone else who would love your downtown loft, your inner-suburb craftsman, even your crappy 1970s dingbat (sorry LetsGoLA)—and they're willing to pay more for the privilege. Millions of renters end up shoveling a larger and larger share of their incomes toward housing, enriching a relatively small number of property owners while degrading the quality of their own lives.

Above-average unemployment may cost the average person a few percentage points in wage growth in a given year. Low vacancy rates can result in double-digit rent growth year after year after year. Both may result in homelessness. And yet, only one of these crises seems to demand our attention. Only one is considered a crisis at all, really. We demand jobs programs when unemployment is unacceptably high, but only a small chorus of individuals, organizations, and developers demands housing programs when vacancy falls too low. And even among those in support of more housing, their ambitions are often limited to providing a small number of subsidized homes for the hardest-hit, most vulnerable residents.

Multifamily vacancy in LA County has been below 5 percent—often considered the inflection point in the balance of power between landlords and renters—since 2011. And unlike unemployment, which has continued to improve, vacancy rates are only getting worse: vacancy has fallen from 6.1 percent in 2009 to 3.3 percent in 2014, and is forecasted to continue falling for at least the next two years.

Will any of our current plans be enough to turn the ship around, or are we just hoping that the next recession is enough to push more residents out to Dallas, Phoenix, and Las Vegas? As things stand today, it doesn't seem like we're on a path to a long-term solution. Where is the urgency?