The Housing and Mortgage Issues in Depth

Abstract

Over the course of period since the last financial crisis in 2008, housing in Los Angeles has dramatically raised its price due to the rapidly growing population. We are at 92.8% capacity in Los Angeles, so the limited housing supply is unable to meet the demand. With the increase competitiveness in the working industries and the increase unemployment rate, many people find it difficult to pay for their mortgages and property taxes. They need to spend almost half of their income for houses. The housing price bubble has made it even more challenging for homeowners to pay their monthly dues. This is how the risks of foreclosure and loan default have climbed up significantly, thus causing many people potentially lost their houses that they have been trying very hard to pay for many years already. Even though the government has provided financial aids through the Home Affordable Modification Program, it only serves as a temporary economic relief to the home borrowers on the interest rate of the mortgage loan. Therefore, the government must increase regulations on subprime loans so that it can effectively prevent the housing bubble and loan default issues.

Introduction and Overview

 This research paper examines the housing and mortgage issues in depth. It will first introduce the current housing phenomena in Los Angeles, including both homeowners and tenant. Then it will further argue for the causes of unaffordable housing. One primary reason is the wealth inequality across the entire population of Los Angeles. More importantly, the extreme high housing occupancy in the city leads to incredibly high housing price. Last but not least, the government policies, such as property taxes and rental vouchers, were not effective in resolving the mortgage crisis in the city. Finally, it will conclude with some suggestions to ease the current housing problems.

Main Thesis

        The first reason that leads to unaffordable housing for lower class household families in Los Angeles is the wide wealth inequality between the poor and the rich. As lectured by Professor Halle, the Gini factor of Los Angeles is 0.525. This means the inequality of the frequency distribution of all income levels is extremely broad. Since the rich own many properties and stores that they have the ability to earn a lot of money from the poor who depend on the rich for housing and daily necessities. The rich’s “ownership of assets” allows them to make high “rate of return on capital, such as rent, interest, dividends, and profits” (New York’s New Edge, 403). Thus, the poor have to struggle so much and work so hard just to earn a living to survive in the city, but the rich just need to maintain their well-established systems or businesses to generate hefty income without much efforts and time. Unfortunately, this is how a capitalist society works unless the government imposes more regulations on the rich and provides more aids to the poor, like in the European countries where the income distribution of the population is very narrow with very high Gini factor, but they still receive welfare in health, school, and all other daily necessity from the government. The major drawback of this type of measurement is that it can reduce its competitiveness to other nations, like the U.S. that encourages companies to continue to excel and compete with each other. Only the strong ones can stay, and thus, making a stronger nation as a whole. Therefore, this is a very challenging problem for the government to address, but in order to improve all the lives of the poor, the government must employ aggressive strategies.