Housing
Women’s homelessness
I’ve just published Chapter 8 of my open access textbook. This new chapter focuses on women’s homelessness.
An English summary of the new chapter can be found here: https://nickfalvo.ca/womens-homelessness/
A French summary of the new chapter is here: https://nickfalvo.ca/litinerance-chez-les-femmes/
All material related to the textbook can be found here: https://nickfalvo.ca/book/
Women’s homelessness
I’ve just published Chapter 8 of my open access textbook. This new chapter focuses on women’s homelessness.
An English summary of the new chapter can be found here: https://nickfalvo.ca/womens-homelessness/
A French summary of the new chapter is here: https://nickfalvo.ca/litinerance-chez-les-femmes/
All material related to the textbook can be found here: https://nickfalvo.ca/book/
The Heartbreaking Stories of Life in Britain for Victims of No-Fault Evictions – Five Years After They Were Meant to be Outlawed
Sulejman Kamara has been trapped in a hotel for two years. The builder, his wife and two autistic children lost their home of eight years in Kilburn, north-west London, after their landlord served them a no-fault eviction.
They never got back their deposit, and lost several possessions in the eventual bailiff-enforced eviction in 2022.
“It was shocking to have to leave like that with our two kids,” he told Byline Times. "Imagine having to leave so suddenly with a one year old."
They were also left homeless as local estate agents refused to show them family homes because they did not meet financial requirements, which Sulejman says included having an external guarantor and being able to pay several months rent upfront.
After asking Brent Council for help, the family were moved to a nearby hotel where they shared one mould-ridden room. That was supposed to last just a few weeks as it is unlawful for councils to accommodate families in temporary accommodation that is a privately-owned B&B for more than 6 weeks. But, two year later the family is still living in that same, single, room and things have got worse.
Campaigners from the charity Shelter line Parliament Square with boxes of household items while calling on the government to end 'no-fault' eviction in July 2023. Photo: Zuma Press / Alamy
The council stopped giving the family housing duty a year ago after they rejected a permanent property it offered that their doctor and school said was unsafe for their children. The council classed the family as making themselves ‘intentionally homeless’, a council-determined category that strips people of access to support. It means someone is homeless because of something they did, or failed to do.
Sulejman and his wife now pay £1,500 a month for a room, are unable to get a new home from the council and can't access the private rental market, despite both working. Brent Council told Byline Times it can't "reopen the housing duty" to the family.
The family is just one of almost 105,000 households living in temporary accommodation in the UK and struggling to get out of it, and one of thousands of victims of no-fault evictions. In March, The Guardian reported that some children are now spending their entire childhoods in temporary accommodation and that thousands of families had been housed in it for more than a decade. The publication said the homelessness crisis is "spiralling out of control".
Last week marks five years since the Conservative Government first pledged to outlaw the practice. On March 1, London Mayor Sadiq Khan demanded the Government finally act on its promise to protect renters as City Hall analysis found that more than 30,000 renting households in the capital have faced a Section 21 ‘no-fault eviction’ claim since 2019.
But despite a formal Renters (Reform) Bill finally entering Parliament in May 2023 pledging to end no-fault evictions, extensive lobbying by landlords and Conservative MPs has seen it heavily watered down, and the proposed ban on no-fault evictions at best being delayed, potentially indefinitely.
In the meantime, the number of no-fault eviction notices served in England increased by almost a third (28%) in 2023, the highest rate since 2016 - 30,230 landlords started court proceedings against their tenants.
Byline Times spoke to those forced out through the practice to gauge what the impact of the delay would have.
Nico had lived in the same Brighton flat for eight years before their landlord told them they had to move out. They planned to sell the building to a new owner, and last month Nico received a notice ordering them to leave.
"I'm disabled and don’t work so I'm reliant on benefits system, which obviously is difficult enough in itself. But almost impossible when it comes to trying to find somewhere to live,” they told Byline Times.
“And I've never actually been in this situation before when I haven't been working.”
Research in 2022 by the Bureau of Investigative Journalism of tens of thousands of rental properties, found 98% of those advertised over a single month were beyond the means of people received universal credit or housing benefit. Analysis by the Financial Times suggested that the last time house prices were this expensive relative to incomes was in the 1870s. The average house price in the 12 months to January 2024 in England was £299,000, according to Government figures. The average salary, across all industry sectors in the UK, was £34,900 pre-tax, according to figures published in March.
Nico’s landlord has been talking about the eviction for months, but has not given any firm timeline as to when they need to leave by, leaving them "in a constant state of stress and anxiety".
"To not know – it makes you feel insecure and vulnerable,” Nico said.
"The possibility of becoming homeless is very real, and it's terrifying one. I've been homeless before many years ago and it was horrible. My health right now is very different to what it used to be then and I wouldn’t be able to cope with it now.
“It feels like you’re in a bog and can’t quite get out. It’s suffocating, and it’s terrifying,” they add.
Journalist Ruby Lott-Lavigna has covered the housing crisis for the likes of openDemocracy and Vice, so stories like Nico's are all too familiar. But she's also has first-hand experience, having been served a no-fault eviction notice in February - her second in two years.
"It's bonkers when your own reporting suddenly becomes your life,” she told Byline Times.
“Being constantly evicted, or constantly at risk of eviction, leaves you in this permanent state of insecurity. It means I can’t put roots down wherever I live.
"It means I can’t build that relationship with the local cafe that I was going to, or no longer contribute to the community garden that I wanted to get involved in. It creates this permanent instability in a societal sense. It also is just emotionally very uprooting.
“You can’t think about trying out a new career, or even dating someone new. So many of those decisions are so tied to your housing that you're stuck in a way.”
What made Ruby's latest eviction all the worse is that it was done, she claims, in retaliation, after she pushed back against constant, often unaccounted visits from her landlord or people working for them.
Most tenants have a legal right to “quiet enjoyment” of their home which entitles them to be left alone by the landlord or those working for them unless necessary – and even then they should give a day’s warning before visiting.
But as the name suggests, a no-fault eviction means a landlord doesn’t have to give a reason to evict a tenant. It also means they can, and frequently do, use the power to evict tenants for making complaints about them failing to make repairs and breaking the law.
A report by Citizens Advice in 2018 found that renters in England who formally complain about issues such as damp and mould have an almost one-in-two (46%) chance of being issued an eviction notice within six months.
"It's infuriating that something as petty as this can result in a complete change of mine and my housemates’ lives,” Ruby said. “It's even more maddening that this was legislation that was promised to be banned five years ago.”
She continued: "The Conservatives for too long have played politics like it's a game, not peoples’ lives. And that is exactly what you see with the Renter's Reform Bill, because every day more people get made redundant, or like me are gonna get evicted."
There is no simple fix to residential aged care
Aged care staff are unhappy and many older people in residential aged care are unhappy. Certainly, the NSW Health Minister and the hospitals are unhappy because there are 600 people sitting in acute hospital beds who could be in aged care facilities. Unfortunately, there are no appropriate places for them as their problems and behaviours Continue reading »
‘Trapped’: Tenants Consider ‘Rent Strikes’ in Response to Sky-Rocketing Service Fees
A huge rise in service fees for leasehold and shared ownership properties – sometimes of tens of thousands of pounds – has led to a record rise in tenants choosing to withhold payment and go on ‘rent strike’, Byline Times can reveal.
The Social Housing Action Campaign told this newspaper that, in the first quarter of 2024, it had seen a fourfold increase in tenants – around 700 people – choosing to download a template letter that can be used to notify landlords of their intention to strike.
A report the group conducted late last year also found that a huge rise in the number of people choosing to withhold rent or service fees for the first time – over 90% of those it polled.
While some of those recorded by SHAC were unable or refusing to pay rent – rises in even social rents has outstripped wages for several years, leaving a growing number of tenants unable to pay.
But the vast majority were those withholding service fees. Usually amounting to a few thousand pounds a year at most to cover communal cleaning and upkeep costs, service fees for leasehold and shared ownership flats have skyrocketed in recent years.
The Last Resort
While freeholders and managing agents are supposed to be transparent about the things that money will be spent on, growing numbers of tenants have reported being unable to get copies of invoices or end of year accounts from their building owners.
Many of these buildings are run or owned by housing associations – after the government pushed them to move into building private housing stock – to help fund the cost of the formerly council-run social housing they manage across the country.
José Mellado’s South London shared ownership flat was supposed to be an affordable way onto the housing ladder. But just a year after moving in his service charges have started rising rapidly.
Now he has to pay £469 a month to cover ‘communal costs’ – in a building which doesn’t have the amenities like security or communal areas that normally lead to such costs.
“We’ve only been there for one year so we were shocked, and angry as well. We have no control over it,” he explains.
That cost has come on top of rising council taxes and mortgages that mean between the three costs he is now set to be spending just under £20,000 a year on the flat.
The rising fees (which weren’t disclosed when he bought the property) mean the flat is less attractive to sellers, leaving José feeling “trapped” in the building.
“We need to do something about all this. We can’t just sit there being polite,” he added.
“So we started to strike over the rise – we will pay the original amount but not the increase, and try to raise our voices in another way.”
But even then he knows there are some blocks much worse off than his. In one block in King’s Cross, tenants have been asked to pay £16,000 a year each to cover communal costs, almost triple what it was before.
“People are driven to withhold payment as a last resort. No one wants to be in this position,” said Suzanne Muna, secretary of the social housing action campaign.
"Undoubtedly the financial squeeze is having an impact, and households have to account for every penny. This, together with the unjustified and extortionate charges that we are seeing has left people without a choice.”
She went on: “The problem is also structural – access to justice through other means is closed off. Neither the Housing Ombudsman nor the Regulator of Social Housing addresses complaints relating to service charge levels.
“Taking your landlord to court can mean having to make a payment and landlords consistently threaten tenants and residents that they will seek to recover their own legal costs from you if you lose.”
She adds that the morning we spoke two tenants reached out in need of help after skyrocketing service fees that left them dreading letters from their landlord and feeling like they “can't see any light at the end of the tunnel”.
The National Housing Federation, the trade body for housing associations, declined to comment.
Housing affordability and equality: part 2
Yesterday, Part 1 of this article discussed the decline in housing affordability and the consequent increase in wealth inequality. Today, Part 2 will discuss possible policies to restore housing affordability in the interests of a more equal and cohesive society. Policies to improve housing affordability and thus increase home ownership have traditionally focussed on reducing Continue reading »
Strategic response to Australia’s housing problems long overdue
In just four years since the advent of COVID-19, Australia’s house prices have climbed by a dizzying 50%. Defying orthodox expectations that property inflation would be quelled by rising interest rates, that upward trend has continued even since the RBA’s monetary tightening phase began in mid-2022, with prices up by 12% in that period alone. Continue reading »
The Towns Outsmarting Airbnb
Late last year, New York City made headlines when it all but banned Airbnbs and other short-term rentals within city limits. Since the pandemic, Airbnb had overtaken an estimated 39,000 rental units, hollowing out neighborhoods and causing already-high rents to grow even higher.
“You would see tourists on the streets in neighborhoods where there weren’t any hotels,” recalls New York-based artist and activist Murray Cox. The sound of rolling suitcases could be heard at all hours. Once tight-knit communities began to feel lifeless. When Cox ran the numbers on his own neighborhood — Bed-Stuy in Brooklyn — he found about 1,000 listings. Cox also heard horror stories from other parts of the city. “People would move into a building and then find that the building was full of tourists day in and day out,” he says. “In some cases, they would be so uncomfortable they’d feel forced to leave.”
New York City’s crackdown on Airbnbs is part of a growing trend. Credit: Matthew Rutledge / Flickr
So, in September of 2023, New York City decided to do something about it. A series of bold requirements capped the total number of short-term rentals (STRs) and limited guests to just two at a time. They required STR operators to be primary homeowners — and to be present in the home while hosting. The city also promised to enforce those requirements, a move that would wipe out nearly 90 percent of active listings at the time.
Though it may sound revolutionary, New York’s crackdown isn’t the first of its kind. In fact, it’s part of a growing trend — one largely spearheaded by much smaller towns. Over the last decade, communities from Irvine, California, to Durango, Colorado, have implemented clever regulations, taxes and zoning policies to hobble the STR market — or, in some cases, eliminate it altogether. As the success stories pile up, a growing body of research points to the dramatic positive impacts of policies like these, including lower rents, more equitable housing markets and the promise of a sustainable tourism economy.
When Airbnb was founded more than a decade ago, it was heralded as the harbinger of a new sharing economy. In theory, home-sharing platforms — including Airbnb, Couchsurfing, VRBO, FlipKey and Homestay — would put underutilized bedrooms to use, matching budget-conscious travelers with locals in need of a little extra cash. The system would funnel tourism dollars into small towns in a more equitable way. It seemed like a win-win. But within a few years, one clear loser emerged: communities.
“It didn’t take very long for people to realize the sharing economy was basically a scam,” explains Cox, who later went on to found data-sharing platform Inside Airbnb. “People weren’t using that car that was sitting in the driveway to drive Uber. And people weren’t just renting out a sofa or a spare bedroom.” Instead, people saw an economic opportunity they could invest in. And they started buying whole homes to rent out on Airbnb.
In many cases, speculators and investment companies were buying multiple homes expressly for short-term rental use. According to Cox, about two-thirds of Airbnb rentals in the US are in a property portfolio, which means the host owns and rents more than one property. And the top one percent of operators have more than 300,000 Airbnb listings among them — a stat that points to huge conglomerates gobbling up the market.
In September of 2023, New York City enacted bold requirements that capped the total number of short-term rentals and limited guests to just two at a time. Credit: RightFramePhotoVideo / Shutterstock
These days, Airbnb isn’t just a way to share underutilized bedrooms; it’s big business.
Right now, about 90 percent of Airbnbs in Bozeman, Montana, and Nashville, Tennessee — both popular vacation spots — are whole homes. Both Bozeman and Nashville are also relatively small towns with exploding local populations and limited housing stock. That means that every home set aside for a year-round STR listing is a home unavailable to local residents struggling to find — and afford — housing. In extreme cases, the STR explosion has forced longtime locals to move away. The so-called “Airbnb Effect” can hollow out once-vibrant communities.
This effect is most visible in popular vacation hot spots. In Hawaii, for example, out-of-towners have bought up so many homes that few are left for Native Hawaiians.
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“On Maui alone, 52 percent of homes are sold to nonresidents, and 60 percent of condos and apartments have gone to investors and second homeowners,” writes Stanford researcher Noah Jordan Magbual in a recent report. “The once indigenous population of the Hawaiian archipelago are now outcasts in their own home.”
The Airbnb Effect also impacts bigger urban areas. In 2015, one study found that STRs had sucked at least 10 percent of New York’s available housing off the market. Another New York study showed that this reduction in supply led to rent increases of up to hundreds of dollars per year. In Barcelona, the effect is even more severe, with rents rising by seven percent and housing costs rising by up to 17 percent in popular neighborhoods.
For some cities, the proliferation of STRs has become more than just an economic issue; it’s existential. That’s especially true in New Orleans, the longtime home of Jeffrey Goodman, an urban planner and consultant who specializes in STRs.
Credit: Mr. Nixter
Tourists are drawn to New Orleans for culture: art, food, music and more. But the city is becoming less and less affordable for the people who make those things possible.
“We were one of the earlier cities to experience the growth in short-term rentals,” Goodman says. “And we’re in a unique place because so much of what we sell is culture. It’s art. It’s food. But the people who make the art and cook the food and play the trumpets have a hard time living here.” So, if the locals who make New Orleans special are forced to move away, what’s left?
“There are a lot of cities asking themselves this question,” says Goodman. “Are we a city anymore or are we just Disneyland?”
According to Goodman, the Airbnb Effect is stronger in small communities, like mountain towns or beach towns, which tend to have limited housing stock, high home prices and little flexibility to adapt to fluctuations in housing availability. That may be why small towns were among the first to fight back.
In 2014, Durango — a town of 20,000 in southwestern Colorado — passed a series of regulations to combat what one local newspaper called “The Airbnb Apocalypse.” The town, an adventure epicenter for mountain bikers, climbers, skiers and other outdoor sports enthusiasts, isn’t just a tourist magnet. It’s also home to Fort Lewis College, a premiere university for Native American students and Colorado locals. That was an experience Durango was anxious to protect.
Durango’s 2014 regulations banned STRs outright in student neighborhoods. They also limited STRs to two percent of the housing stock elsewhere.
Tourists ride the Durango & Silverton Narrow Gauge Railroad along the Animas River. Credit: Woody Hibbard / Flickr
“In doing this, the city made it clear that preserving student housing took precedence over any money they were going to get from tourism,” says Goodman.
Today, city planning officials say the program has been a huge success.
“Durango led the way in creating effective guardrails to protect the community from being overrun with STRs,” says Scott Shine, director of Durango’s Community Development Department. Today, he says, STRs make up just 1.4 percent of the city’s total housing stock. They just aren’t really an issue anymore.
A year later, Santa Monica — an affluent California beach town of 90,000 — passed its own ordinances, banning STRs offering stays of less than 30 days for an entire home. The city also extended its 14-percent hotel tax to STR operators and made it illegal to operate them without a valid business license. According to one estimate, the ordinance has since dropped the city’s number of Airbnb listings by 61 percent, potentially returning more than 1,000 homes to the long-term rental or purchasing markets.
Many of these novel STR policies look great on paper, but the truth is that they’re hard to enforce. Few cities have spent more time thinking about this issue than San Francisco.
San Francisco-based housing activist Dale Carlson first heard about the Airbnb Effect back in 2014, when the city was undergoing a major housing affordability crisis. When he learned that nearly five percent of the city’s limited housing stock was devoted to Airbnbs, he decided to get involved.
Carlson helped bring together a coalition of tenants, hotels and property rights groups. By 2015, they’d successfully lobbied for a city ordinance that required hosts to register their STRs, have a business license and pay hotel taxes. But it wasn’t enough.
Credit: Dale Cruse / Flickr
Cities across American watched as San Francisco enacted its platform-accountability policies. Now, some of those cities have enacted policies of their own.
“We still ended up with 15,000 or 16,000 listings,” Carlson says. So, his group asked voters to get behind an entirely new concept: the principle of platform accountability.
“The idea is that [the rental platform] can list and or rent anything it wants, but it can only collect a booking fee on the stuff that’s legal,” Carlson explains. If passed, the ballot measure would put the onus on Airbnb — not the city — to police unregistered and therefore illegal listings. Airbnb fought the initiative, and it fought hard.
“We were defeated in the ballot. Airbnb spent close to $10 million—they outspent us 20 to 1,” Carlson says. But despite the heavy spending, Airbnb barely eked out the win. “So many people had told us, ‘You’re never going to beat them because they’re too big and powerful,’” Carlson says. “But suddenly they didn’t look so powerful. And we didn’t seem so vulnerable.”
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Carlson’s coalition reworked the initiative and tried again. The next time, the ballot measure passed. Within a few months, Carlson says, Airbnb listings in the city had dropped by about 90 percent. Cities across America were watching. Others, like Boston and New York, ultimately adopted platform-accountability policies of their own.
Another important aspect of San Francisco’s policy is that hosts can only use their primary residences as STRs. According to Carlson, that’s dramatically limited speculative purchasing.
“All the folks who were buying up units or renting units and then subletting them on Airbnb — that’s all gone,” he says.
A few years later, Irvine, California, enacted an even more severe policy — with more dramatic results. In 2018, the city banned all short-term rentals under 30 days and hired a fintech firm to track down and report scofflaw hosts. This ban more than halved the number of Airbnb properties. Eight years on, rents in the city have dropped by up to three percent, according to a recent study. That saves tenants about $114 per month on average.
The city of Irvine banned all short-term rentals under 30 days, cutting the number of Airbnb properties down by more than half. Credit: Matt Gush / Shutterstock
Choosing the right STR regulations can be very location-dependent, says Goodman, the city planning consultant. Some towns might need a combination of ordinances, while complete bans might work better in others. But according to Michael Seiler, the College of William and Mary researcher who led the Irvine study, we now have strong evidence that limiting STRs can indeed reduce rents. And, he says, it’s likely that Irvine’s solution could be successfully applied in other towns.
“If I was another policy maker in a sister city, I would say let’s at least try it,” he says. “Because we’ve shown that it does work here.”
New York hasn’t been the only city to act in recent years. In 2023, Bozeman passed regulations forcing STR platforms to ask for operators’ permit numbers. The policy makes it difficult for bad actors to list their homes illegally, and makes it easy for the city to double-check that listings are appropriately registered and legally operating. Bozeman also mandated that STRs be primary residences — not second homes purchased as rental properties.
There may also be some market solutions around the corner. A cadre of startups are taking up Airbnb’s original mission and reworking it into a more holistic, community-friendly approach. New platforms like Trusted Housesitters and ReFlat are making it easier to find mutually beneficial housing swaps, while millennials are bringing time-shares back into vogue in Colorado ski towns.
In the future, these regulatory and entrepreneurial solutions could work together to give travelers affordable lodging options — without sacrificing the needs of local communities.
“A lot of people will say Airbnb is here to stay, but New York City shows you that’s not necessarily the case. When they decided to enforce their housing laws, it was really effective,” says Cox. “New York City’s approach is a good model to show that we can be as restrictive as we want. It’s up to us.”
The post The Towns Outsmarting Airbnb appeared first on Reasons to be Cheerful.
What Happens to U.S. Activity and Inflation if China’s Property Sector Leads to a Crisis?
A previous post explored the potential implications for U.S. growth and inflation of a manufacturing-led boom in China. This post considers spillovers to the U.S. from a downside scenario, one in which China’s ongoing property sector slump takes another leg down and precipitates an economic hard landing and financial crisis.
China’s Policy Space Is Becoming More Constrained
In this scenario, Chinese authorities’ policy space proves insufficient to forestall a deep and protracted downturn. Our view is that this scenario is less likely to materialize than the upside scenario described in our previous post. We share the consensus view that the Chinese authorities retain considerable scope for managing the economy and associated financial risks.
In earlier work, we examined the Chinese authorities’ policy space and its potential limits. To recap, China’s policy tools draw added power from unique features of the country’s political and financial system. China’s government maintains direct and indirect control of the country’s financial and nonfinancial sectors. Moreover, the domestic economy is shielded from external shocks by the country’s current account surplus, large stock of foreign exchange reserves, and system of capital controls. Overall, the authorities possess considerable scope for using monetary, credit, and central government fiscal policies to dampen economic fluctuations.
However, policy space is growing more constrained as debt continues to build. The ratio of nonfinancial sector debt to GDP surged again in 2023 and now tops 300 percent (chart below). International experience suggests that rapid debt accumulation is often a harbinger of financial crises or extended periods of sluggish economic growth. This conclusion is also backed by academic research, and explored elsewhere on Liberty Street Economics.
China’s Debt Levels Continue to Climb
Sources: CEIC; Bank for International Settlements.
The Potential for Another Leg Down in the Property Sector
The key driver for our downside scenario would be further stress in the property sector. Since late 2020, new property starts and sales have fallen by two-thirds and one-third, respectively (chart below). Lending to developers came to a nearly complete halt through the end of 2022 before modest net lending resumed when government policy on property sector lending was eased. But total active construction projects have fallen a much smaller 13 percent since peaking in 2021, with stronger state-owned or supported developers continuing work on uncompleted projects. Construction activity could fall further if stronger developers begin to face increased financial pressure.
Further stress in the property sector would amplify ongoing fiscal tightening at the local level. In this case, unique features of China’s political and economic system would work against it. Local governments have traditionally derived a large portion of their revenues from land sales, a source that dries up in a falling price environment. In turn, these fiscal pressures would undermine local governments’ ability to support developers and other local firms, including local manufacturing champions.
Could Property Sector Activity Fall Further?
Sources: CEIC; Authors’ calculations.
Note: Figures are calculated from official published levels.
The key role of the property sector in the Chinese economy makes troubles there a plausible trigger for an economic hard landing and financial crisis. Property-related activity accounted for roughly one-quarter of Chinese GDP before the recent slump and still represents an outsized share of activity by international standards. Property-related credit continues to account for roughly one-quarter of total debt outstanding. And property accounts for roughly two-thirds of household assets. Given this backdrop, it’s no surprise that the property slump has coincided with a severe erosion in household and business confidence.
A Downside Scenario for China and Its Implications for the U.S.
Under our property crash scenario, GDP growth in China falls to zero in 2024. This is followed by a tepid recovery to about 2 percent over the next year. This level represents dramatic underperformance relative to the International Monetary fund (IMF) baseline, which calls for growth of 4.6 percent in 2024 and 4.0 percent the following year. Credit growth (total social financing) also falls below the IMF baseline, albeit less dramatically.
To quantify the impact of this downside scenario on the U.S. economy, we rely on the Bayesian VAR model introduced in our previous post. This model is designed to capture the historical joint dynamics of the U.S. and Chinese economies. We use the estimated model relationships to construct counterfactual paths for U.S. macroeconomic aggregates while constraining Chinese output and credit growth to follow the paths in our crash scenario. As in our previous exercise, we measure scenario impacts against a baseline in which the Chinese economy evolves according to the IMF projections.
The top two panels in the chart below show the behavior of GDP and credit growth—our key conditioning variables—under the crash and baseline scenarios, reported as year-over-year percent changes. As already noted, the crash scenario involves dramatic GDP-growth underperformance relative to the baseline. The remaining panels show the implications of the crash scenario for U.S. and selected Chinese and global macro variables, measured as percentage deviations from the baseline, with the blue shading showing estimated confidence intervals.
This exercise shows that a Chinese hard landing could result in materially weaker U.S. growth and trade performance and lower U.S. inflation, with the largest impacts occurring over the first four quarters following a crash. Real GDP growth falls as much as 2 percentage points (ppt) below baseline before beginning to recover, while export volumes fall as much as 10 ppt below baseline. The PCE price index, for its part, falls some 3 ppt below baseline before crisis impacts begin to fade.
Projected Path for Key Macro Variables in a Hard Landing Scenario
Source: Authors’ calculations based on data from the Federal Reserve Bank of St. Louis FRED database and CEIC.
The magnitude of these impacts is larger than in our earlier post premised on a manufacturing-led boom in China, consistent with the larger deviation of GDP growth from baseline. The underlying mechanisms are however the same, albeit now working in the opposite direction.
The sudden plunge in Chinese domestic demand growth leads to sharp falls in global commodity prices and Chinese exports. These impacts reflect the key role China plays in global trade and production networks. Weaker Chinese demand translates into weaker demand for China’s worldwide value chain partners, with this impact amplified by the knock-on tightening of those firms’ financing constraints. The deterioration in global trade, of course, feeds into the similar deterioration in U.S. trade volumes.
The U.S. dollar, meanwhile, sees significant appreciation, in line with its longstanding negative correlation with global commodity prices. In the context of our property crash scenario, this strength can be understood as reflecting risk-off behavior among global investors, who seek refuge in U.S. financial markets and U.S. dollar assets. The stronger dollar, in turn, contributes to a tightening in global financial conditions. In fact, the main impact of weaker Chinese demand on global financial conditions is via this indirect channel.
In short, the materialization the property crash scenario in China would tilt the balance of risks for U.S. growth and inflation to the downside. As we’ve discussed, however, the Chinese authorities appear to have adequate tools to contain new downward pressures on the country’s economy. At present, we regard the materialization of this scenario as less likely than the upside manufacturing boom scenario.
The two scenarios, of course, would carry different policy implications. A deep Chinese slowdown would contribute to lower U.S. and global inflation, likely bringing forward investor expectations for policy easing. In contrast, materially faster growth in China might add to the challenges of bringing inflation back to central bank targets, likely pushing out investor expectations for easing.
Ozge Akinci is head of International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.
Hunter L. Clark is an international policy advisor in International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.
Jeffrey B. Dawson is an international policy advisor in International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.
Matthew Higgins is an economic research advisor in International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.
Silvia Miranda-Agrippino is a research economist in International Studies in the Federal Reserve Bank of New York’s Research and Statistics Group.
Ethan Nourbash is a research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.
Ramya Nallamotu is a senior research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.
How to cite this post:
Ozge Akinci, Hunter Clark, Jeff Dawson, Matthew Higgins, Silvia Miranda-Agrippino, Ethan Nourbash, and Ramya Nallamotu, “What Happens to U.S. Activity and Inflation if China’s Property Sector Leads to a Crisis?,” Federal Reserve Bank of New York Liberty Street Economics, March 26, 2024, https://libertystreeteconomics.newyorkfed.org/2024/03/what-happens-to-u-....
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‘They Can’t Complain or They will Be on the Street’: Delay in Renters Reform Bill Puts Tenants in Peril of Mould, Damp and Dangerous Disrepair
The scale of mould, damp and other illegal conditions in the private rented sector is being heavily underestimated by councils and government and chances to enforce better standards are being missed, a new report on licensing has found.
The research, by charity Safer Renting and The University of York, investigated five local authorities in London that had instituted selective licensing schemes – similar to a driver’s licence for landlords that applies to a certain number of landlords or types of homes in the borough.
They found that, because their housing inspection regime was proactive (i.e. done beforehand in order for the landlord to get a licence) rather than reactive (i.e. done only when concerns are raised by tenants themselves), they identified much higher rates of disrepair than they would otherwise.
One housing officer told the researchers that logged council complaints about standards “nine times out of ten” came from homes in the borough that were inspected under the selective licensing scheme.
Safer Renting highlighted one case of a home they recently inspected – with 13 adults being forced to share a three-bedroom rented house – with one bathroom between them, no fire safety and a collapsed ceiling. Their landlord was making an estimated £62,400 a year in rent from the property.
Housing campaigners have long raised concerns that the ability for landlords to evict tenants without cause – known as a ‘no fault’ eviction – means tenants are scared to complain about illegal, unaddressed disrepair in their homes as they could be evicted by their landlord as a result.
While the government has pledged to abolish the practice since the last election, its promised ‘Renters Reform Bill’ has been repeatedly delayed.
It was finally announced last year, but in October plans for a ban on ‘no fault’ evictions were delayed indefinitely until they were able to complete unspecified reforms to the justice system.
While Levelling Up, Housing and Communities Secretary Michael Gove vowed the ban would come into force by the next election, in recent weeks a group of Tory MPs, many of whom are landlords themselves, have been heavily lobbying the government to water down the Renters Reform Bill.
The situation has reignited concerns that a proposed landlord portal in the Bill, which would see all private landlords forced to add their names to a government licensing register, may not come with the necessary enforcement and standards to ensure those registered on it are actually providing safe homes.
In fact, last month the Charted Institute of Environmental Health (a membership group for housing safety specialists) raised concerns that the proposed ‘Property Portal’ – even if it comes without proper inspections or enforcement – could lead to the government watering down or outlawing separate enforced selective listening schemes.
Report author and Safer Renting head of service Roz Spencer told Byline Times: “This study tells us strongly that selective licensing needs strengthening with enhanced programmes of inspection and enforcement.
“This report adds to the government’s own data showing that even where licensing is in place, landlord non-compliance is the norm.
She added: “Yesterday we inspected an overcrowded, unlicensed house in multiple occupation which illustrates one of the most serious shortcomings in the Government's Renters Reform plans - that renters in houses like this, where they have no room of their own and pitifully poor amenities and conditions, have no security of tenure now and won't have under new 'security of tenure' proposals.
“They can't complain or they will be on the street; only councils with robust licensing and enforcement programmes are going to be able to find and penalise the property owner.
“Yet the Government seem to be indulging backbench attempts to hijack their proposed reforms to argue for abolishing selective licensing. This is a real moment of peril for the renters most in need of protection, as an amended Bill could be worse than doing nothing."
Concerns about rampant disrepair in UK homes have been growing since the mould-related death in 2020 of toddler Awaab Ishak. In January, the Royal College of Physicians warned of a growing number of deaths caused by damp and mould if the problem goes unaddressed by the government.
Previous reporting from The Observer found that local councils are inspecting just half of all reports of damp and mould they receive about the private rented sector.
It also found that in the vast majority (87%) of cases where illegal and dangerous levels of damp and mould were identified, councils opted to follow an informal resolution.
A spokesperson for the Department for Levelling Up Housing and Communities would not confirm if the government would commit to a full licensing scheme as part of the Renters Reform Bill.
They told Byline Times the “landmark” Bill would “deliver a fairer private rented sector for both responsible tenants and good faith landlords” and that a new Decent Homes standard for private rented homes would "ensure landlords are held to account for their performance”.