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Safe as Houses

In Hartford this past February, at the headquarters of Aquiline Drones, Connecticut Governor Ned Lamont spoke of the state’s buoyant economic mood. Businesses like Aquiline were starting to reverse the drift of the last decade, where companies threatened to leave the state whenever the legislature proposed new taxes, and then did so anyway, regardless of whether the bills passed or died in committee. Then, like everyone everywhere, he talked about the real estate market. For years, Connecticut’s population had been flowing out, and now, finally, it was beginning to flow in. New Yorkers and Bostonians were converting to the exurbs, spurred by COVID-19’s indefinite pause on cosmopolitanism. More people, by choice or circumstance, were, in his words, “rediscovering the Connecticut lifestyle.” 

If in parts of Connecticut home prices were already astronomical, in recent months they’ve become solar: dialed in “hot,” “red-hot,” “white hot,” and “hot hot” in the breathless language of real estate. According to the Connecticut Housing Finance Authority (CHFA), the median sales price of a home in Greenwich went from $935,000 to $1,371,250 in 2020. Westport values hit $1,267,500. New Canaan: $1,377,000. Prices in New Haven went up 18.9 percent. Redding: 76.9 percent. Sharon: 141.6 percent. Sprague: 930.8 percent. 

For twenty years, the CHFA has meticulously recorded each peak, valley, boom, and bust of the state’s home sales prices. The graph trends like a manic EKG: line sharply up, sharply down, flat, and repeat. The ride up has been good before, but the market has never sustained this much bounce. Between February 2020 and February 2021, the average home sale price in the state was up 38.7 percent, by far a single-year record. An April article from the real estate site Rocket Homes asks the Hamletian question that these trends beg: “Rosy or Bleak?” How far can this kind of growth go before the market snaps? 

“These markets are driven by narratives,” Robert Shiller, Nobel Prize-winning economist, Sterling Professor of Economics at Yale, and the author, most recently, of Narrative Economics: How Stories Go Viral and Drive Major Economic Events, told me. One narrative says that the current housing market––Connecticut’s and the country’s, both up double-digit percentages in valuation since last March––is importantly unlike the bubble that burst in 2008-9, that the panic over home prices and scarcity will eventually soothe itself: Urbanites simply realized Connecticut had a trove of houses, and they had the money to spend on them. The market’s bullishness has gotten many people in the state hooked on the hope of a renaissance. “The Great Recession…was really driven by the real estate market,” said Tammy Felestein, the president-elect of the Connecticut Association of Realtors. But, she told me, “In this case, I think real estate is going to be a big part of what’s going to pull us out of the COVID devastation.” 

Housing supply in the state is caught in a net of interlocking market forces, tangled further by the bull market. Judging by Zillow’s monthly data on metro area housing inventories, the scramble for Connecticut real estate really began in late September of last year. September was when the New Haven, Hartford, and Stamford metro areas went on a selling tear and, over the next six months, lost over 37 percent of their inventories. The shortage in supply juiced the base prices of whatever homes happened to be left on the market. 

To cope, buyers are marketing themselves to sellers like high school seniors before college admissions tribunals: writing personal letters to sellers to prove their worth, paying sums far above the asking price, and waiving inspections. At open houses, some prospective buyers don hospital scrubs at the seller’s request, and the cars pile into the twenties and thirties. Seeing a dozen offers in a day on a single house—all cash, no questions—is commonplace now.    

Also commonplace is an appetite for room, which has dramatically changed the number and kind of building permits being issued by the state. In September, the state issued 649 residential building permits, according to Connecticut’s Department of Economic and Community Development, and from there the number has steadily declined each month. In February, the last month of reported data, there were only 240. In 2020, just under 60 percent of those permits had been issued for building multifamily units, the format that tends to be most affordable in the state. Between September 30 and February 28, that figure dipped below 43 percent. In January and February of this year, close to 70 percent of permits issued were for single-family homes––the big ones endemic to the area. Buyers want to buy large and builders want to build large.

Big single-family homes are profitable for builders––more than enough to compensate for super-charged lumber and steel prices––and have never been more in demand. New economics also means sacrificing chic: Fewer homes have been built to the buyer’s specifications this past year than the norm, according to Jim Perras, CEO of the Home Builders & Remodelers Association of Connecticut. People aren’t sculpting dream houses; they’re just buying. Even more at odds with prior expectation, Perras told me, has been the “increased interest in single-family built for rent, which has historically been a very small subset of the market.” Demand for buying and demand for rentals have almost always been inversely related: When one gets more intense, the other stagnates or shrinks. Not now. 

So there’s more high-end rental and single-family construction, less construction overall, more buying, lower inventory, higher prices, fewer sellers, more bids, less paperwork, more cash, fewer questions. Marcus Smith, Director of Research, Marketing and Outreach at the Connecticut Housing Finance Authority, a public-private mortgage lender in the state prioritizing low-income borrowers, said the organization has been closely monitoring “the use of cash to buy homes” that’s been squeezing out first-time buyers. Applying and being approved for a mortgage eats up months, and in that time, you’re liable to being scooped by someone who can pay up-front. Low-income buyers don’t stand a chance. The state’s now polarized, more than ever before, between a class that owns and a class that can’t even entertain the idea.   

That polarity happens to coincide with a balanced budget in Hartford: The state is enjoying a 245 million dollar surplus, sustained by new income tax revenue and federal aid. But the State Assembly’s legislative docket gives some indication of how unevenly that balance is being felt, especially at the local level where funding deficits are either desperate or nonexistent, nowhere in between. Five bills have been introduced since January to address the state’s byzantine revenue collection and allocation methods. One, SB 742, fully funds the state’s municipal revenue sharing account, which pools sales taxes and distributes them as grants to municipalities; in the last six years, the system has failed to deliver the hundreds of millions of dollars it pledged upon inception and let cities buckle under untenable debts. Another, SB 821, creates a child tax credit, removes the current fifteen million dollar cap on estate taxes, and raises the property tax credit to four hundred dollars––policies meant to redistribute wealth without injecting liquidity into a market with persistent inflation fears. 

Money is sitting in the state’s accounts. Now it’s a matter of moving and raising more steady streams of it. At the day-long public hearing on SB 821 back in mid-March, New Haven Mayor Justin Elicker took aim at one of the state’s more adamantine problems: “Our overemphasis on hyper-local property tax funding desperately needs reform, if we want to move our state forward and make it more equitable and a more just place.” Connecticut is now the only state besides Rhode Island that has no formal county government, and, therefore, no way to tax real estate collectively across towns. Since the county system was abolished by the Democratic majority in 1960––what Republicans predictably called an attempt at “dictatorial rule”––only the wealthiest of the state’s 169 towns have been able to adequately provide basic services, like housing, education, and infrastructure. The state ended up not with a tyranny of the legislature, but a dictatorship of the towns. Towns without a large property tax base, like New Haven, simply have not been able to raise the funds others have in spades. 

Now state Democrats are trying to restore a collective mode of taxation, and Republicans are calling that dictatorship, too. Debates on new taxes can range in tone from bedtime meditation to Civil War march, and lately both have been playing in the state. Two proposals in particular have had people waxing wroth: SB 171 and SB 172, drafted by the President Pro Tempore of the State Senate, New Haven’s Martin Looney (D-11), which would impose a state-wide property assessment and tax. The response from thousands across the state was acrid, and broke party lines: petitions sprung up in defense of “home rule,” against “big government dictating” and “usurping the power of ‘We the People.’” The debate is no longer strictly factional; it’s the old collision of court, country, and city, the sectional interests that divert attention from the source of social pain: greed. 

“In Connecticut, we have 169 jealously self-protective municipal fiefdoms,” Looney told me, using the feudal analogy he often deploys when talking about the state. “There’s this strong tradition of local control here that’s politically toxic to disturb.” 

SB 1024, the “DesegregateCT” bill, named after the activist group that’s been pushing for zoning reform in the state, disturbed that same tradition. The bill proposes loosening local zoning restrictions to increase housing stock, naturally deflating the cost of buying and renting throughout the state, and alleviating both its affordability crisis and its glaring racial inequities. “We’ve been focused on transit-oriented development. That’s a strategy that was just adopted in Massachusetts, nearly unanimously by the state legislature,” said Sara Bronin, the organization’s founder. “Those reforms passed on a bipartisan basis. You look at the discourse here, and it’s just completely bizarre and totally puzzling.” 

DesegregateCT’s plans for transit-oriented development, which, in the first iteration of the bill, gave developers license to build multifamily housing within half a mile of a city’s main transport hub without “minimum parking requirements,” were stricken entirely in the revision that got out of committee, undercutting the bill’s intent. The “minimum parking requirements” that local zoning authorities now impose up and down the Gold Coast have made building affordable housing mathematically crazy: If developers are compelled by law to carve out three parking spots for every studio apartment they build, the apartment’s base price is bound to shoot up. The unspoken upshots of requirements like these are less diverse communities and more exclusive prosperity. 

Beyond parking, towns have a varied arsenal of caveats and conditions to pull from: deliberate limitations on the extent of sewage systems, minimum acreages for construction, excessive rounds of land-use applications and appeals. These have persisted even with legislative updates to decades-old affordable housing mandates. “The only thing that’ll work,” said Anika Singh Lemar, a clinical professor at Yale Law School who specializes in affordable housing, “is a much firmer stance from the state that the kinds of misbehavior and lack of action that we see at the local level are unacceptable and are undermining not just the lives of low-income people but the state’s economy.”

Opponents of even a watered-down version of the DesegregateCT bill have called it an affront to a way of life. “The global trend for three thousand years is increased density,” said Greenwich State Representative Harry Arora (R-151), who’s become the face of the opposition. “We all come together. We build cities. The good news is Connecticut is not that. If you think about Connecticut, we are different from many other states in our country. We do not have two big cities which have all the people and everything. Our large cities are about 5 percent of our population. We have a really good model, which has evolved over centuries, and there is no need to do a drastic surgery.” 

The Connecticut model has always been good at concealing the quiet desperation below its surface with loud politics. Not only its towns, but the state’s whole economy is now segregated: between those in a recession and those not. Rent, and the inability to pay it, is a good measure of a dire economy, since people choose to pay rent before anything else––food included––when a choice is exacted upon them. At least 19 percent of renters in the state (over 226,000 people) were behind on rent in March of this year compared to 15 percent nationally, Daniel Threet, a research analyst at the National Low-Income Housing Coalition (NLIHC), told me. Since September, when the state loosened its moratorium, the number of eviction lawsuits has risen rapidly: from 198 in September 2020 to 882 in March 2021, according to data from the Connecticut Fair Housing Center. “These evictions do so much more down-stream damage than just losing the housing,” said Darren Pruslow, a supervising attorney at Connecticut Veteran Legal Services. They tear at a person’s ability to live. 

In response, on top of the porous moratorium, the state has implemented a rental assistance program called UniteCT: an exclusively online portal where tenants and landlords can apply for a piece of $235 million in federal aid. The program amounts to callousness on a grand scale: a quarter of low-income people in the state don’t own a computer, according to Dalio Education’s 2020 year-end report. UniteCT’s remedy has been to send a bus full of computers on a 6-days-a-week tour of the state. Of course, to get to the bus, you need know it exists, you need to look online to find out where it will be on a specific day, you need to travel to it, most likely to another town or a far off part of the state, have all your paperwork in hand, have your taxes filed, and have time off from work to spare. The program has gotten 2,200 applications, as of April 7––1 percent of people who are already behind on rent. All the funds from the program have to be committed by September 30 of this year and paid out by December 30. The leftovers go back to the Treasury. 

When I asked George Cooper, the prominent economist and best-selling author of The Origin of Financial Crises, what he made of this M.C. Escher-like economy and its seemingly endless imagination for new obscenities, he told me that our territory was uncharted and the endgame unknown: “The COVID lockdown has been the most bizarre period economically in human history.” Bizarre, yes. And cruel.  

—Zachary Groz is a sophomore in Jonathan Edwards College and Co-Editor-in-Chief of The New Journal.

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