Homeless Encampments And Luxury Apartments: Our Long Strange Boom

The cold truth is homelessness and soaring rents are the only possible outputs of central bank policies that inflate asset bubbles.

It's been a long, strange economic boom since the nadir of the Global Financial Meltdown in 2009. A 10-year long boom that saw the S&P 500 rise from 666 in early 2009 to 2,780 and GDP rise by 43% has been slightly more uneven for most participants.

First and most importantly, household income hasn't risen by the same percentages as assets, GDP or costs of big-ticket expenses such as rent, healthcare, and college tuition. The broadest measure of income, median household income, has registered a 23% increase in the past decade, roughly half of GDP gains and a mere fraction of stock market and housing gains.

It's well-known income gains have skewed to the top, as revealed by Census Bureau data: Historical Income Tables: Household (US Census Bureau).

The bottom quintile (20%) registered income gains of 20% from 2009 to 2017, while the middle quintile (roughly speaking, the middle class) gained 25.5% and the top 5% enjoyed a 31.6% gain.

The raw numbers tell the story in a slightly more visceral fashion:

Upper limit of bottom quintile: $24,638 up 20% since 2009

Upper limit of middle quintile: $77,552 up 25.5% since 2009

Lower limit of top 5%: $237,034 up 31.6% since 2009
(the median household income is much higher--around $350,000 according to Household Income Quintiles the Tax Policy Center.)

So the top 5% earn at a minimum 10 times the lowest quintile income and around 4 or 5 times the middle quintile income.

Here in Northern California, this has manifested in rapidly expanding homeless encampments a stone's throw away from new luxury rental apartments charging $3,000 and up for one-bedroom flats and $4,000 and up for two-bedroom flats.

Meanwhile, the streets are filled with potholes and cracks. Maintaining streets--presumably one of the core missions of local government--is simply not being done in a timely manner. Major streets are in such disrepair that local businesses have taken to raising banners demanding "pave our street now."

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Disclosures: None.

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