Housing is in Short Supply & The Care Economy Is Broken — This is the Only Way to Solve Both
Housing is a fundamental problem. When the people expected to participate in the economy don’t have a place to call home it’s hard to run things efficiently much less grow.
The thing with housing is that it doesn’t have to be a problem. It is a problem because we don’t have enough homes. According to recent estimates, there’s a shortage of approximately 3.8 million homes, both for rent and to own.
Builders could build more houses. Developers could plan affordable communities. Investors could invest in new housing projects. They choose not to. There just isn’t an economic incentive for them to do so. “Affordable” housing — however you define it — just isn’t profitable for the people who could make more houses magically appear.
The thing about housing is that it isn’t just a way for middle-class families to build wealth. Access to housing also determines the pool of human capital available to work in your local economy. Low-wage and hourly workers need access to housing too.
When there aren’t enough homes in high cost of living areas workers have to look for housing elsewhere. At some point, the commute zeroes out any wage benefits of working in the city itself. Why work a job making $15 per hour in downtown Washington, DC when you could just as easily work at a similar home store closer to home in the Maryland or Virginia suburbs instead?
Housing isn’t just unaffordable, it’s uneconomical. It’s arguably the single greatest factor stymieing local economic growth. A lack of housing transforms how labor in the market is distributed. And it explains why some areas are experiencing acute shortages of workers.
This is especially true in the care economy. Nursing home assistants and childcare providers are some of the most needed jobs in the economy right now. And this sector is a big piece of the economic pie. Some estimates put the care economy — both paid and unpaid labor — at $6 trillion. For context, that is just under the global tech industry which is estimated to be worth around $8.51 trillion.
The availability of housing — especially housing that all participants in the economy can afford — and the supply of labor that can take roles in all levels of the economy are directly related. When there isn’t sufficient housing employers will struggle to attract the talent they need.
This essay is going to present a novel solution to solve both the housing crisis and critical problems in the care economy. It will propose providing an indirect exchange of economic value to the labor force through free or subsidized housing.
This proposal isn’t a nicety but a requirement. We have to start looking beyond capitalism as a model of economic governance if we want our economy to stay afloat.
The care economy isn’t profitable which means it isn’t economically viable under the current paradigm.
Child care and eldercare are two of the primary needs represented by the care economy. Working parents need someone to look after their kids while they’re at work. Aging adults need help performing a range of routine functions like going to the grocery store or getting ready to go to bed.
The wealthy solve this problem by directly employing the help they need. Nannies provide child care while private nurses and aides assist aging loved ones.
Most people aren’t wealthy which means most people can’t afford that kind of care. The solution for working people is to pool care together. If you have the means you might send your kiddos to a daycare center or aging parents to a nursing home. If you can’t afford that, you leverage a patchwork of formal and informal care providers in your community: your in-laws, the neighbor’s unsanctioned daycare that she runs out of her living room, public agencies, members of your church congregation, etc.
The problem is that more and more people can’t afford the most affordable formal care providers. Facilities that provide these services are too expensive for most Americans, especially those earning decent six-figure salaries. Here’s just one example: childcare in our nation’s capital will run you $419 per week while assisted living costs around $6,000 per month. And if you think most Washingtonians are making cushy salaries to afford that kind of care, think again.
This isn’t just a problem for the people seeking out these services. It’s a bad deal for the workers employed in the care economy too. In a pre-COVID study, UC Berkeley found that the median wage for the majority of daycare workers in the country was less than $11 per hour. Workers in assisted living facilities fare slightly better making around $16 per hour according to the Bureau of Labor Statistics data.
If you have a choice between working in a daycare or shuffling packages around an Amazon warehouse, you’re better off choosing the latter. This is why there’s been a nationwide conversation about labor shortages in certain industries. Millions of workers simply can’t afford to work the jobs that need them the most.
The math doesn’t math for the care economy. Workers can’t afford to work for the pittance they’re currently getting. But we can’t magically raise their wages either. The moment that happens care services will become too unaffordable for just about everyone who needs them.
Not all sectors of the economy are supposed to generate sustained profits or growth. Care is one of them. We need to start having this conversation and how wages directly correspond to the cost of living — especially when it comes to housing.
Housing is the #1 expense workers are concerned about. They can’t afford to work in industries that don’t allow them to put a roof over their head.
To solve for labor shortages and low wages in the care economy, you also have to solve for housing. Regardless of where you work or how good your job is, housing is probably the largest expense in your monthly budget. And it’s growing: millions of Americans are now burdened by housing costs with more than 30% of their income going to rent or their mortgage each month.
That isn’t going to change anytime soon. According to data compiled by CNBC, there isn’t a single state in the country where you could afford to rent a simple 2-bedroom apartment working for $15 per hour or less. On average, workers across the country need to earn at least $29 per hour to afford rent. (That’s approximately a $58,000 annual salary).
There are only two ways to make the math work on housing. One option is to raise wages. Politically this is the most popular option. Economically, this option isn’t feasible.
While child care providers and nursing home assistants should make more than $15 per hour it doesn’t mean they can. At least, not in our current profit growth-at-all-costs economy. For a worker to earn $29 per hour costs would have to increase for the product or service they provide. Child care is already too expensive, doubling the cost of it would make it even more so. Working parents — especially mothers — would forgo childcare altogether and leave their jobs instead of paying more for child care. (This is already starting to happen by the way).
The other option is to cut costs. The problem is that most corporate executives look at cost-cutting the wrong way. They look at it from within the confines of their company’s balance sheet. They don’t look at cost-cutting as something that can be done across the entire economy.
Given that housing is the largest expense on the household’s budget an employer could pay lower wages if it also found a way to offset or outright eliminate this cost burden. Now, to be very clear, I’m not advocating for worker exploitation. I’m simply recognizing that not all jobs, especially hourly jobs, can be compensated the way the current culture would like them to be compensated. Many skilled jobs don’t pay $29 per hour. It’s unreasonable to expect someone flipping burgers at McDonald’s to be paid at that rate too.
Eliminating the cost of housing could provide a non-tangible economic benefit that would make employment in certain industries, like the care economy, more palatable. While this might not seem like the best option, it is nonetheless an option worth considering. And believe it or not, it’s something that’s already being done.
Labor-Exchange Housing is a paradigmatic shift that could solve both wages and housing.
To eliminate housing expenses you first have to consider it as a non-tangible compensation equivalent. Given the state of labor shortages, we know many Americans won’t work for less than $15 per hour. But if you offered housing as part of the compensation package, some workers could be persuaded to take a less-than-ideal wage.
Let’s look at housesitting as a novel way to illustrate this point. Trusted House Sitters is a platform that connects people who need housesitting services with individuals providing that service. Housesitters booked through the platform aren’t paid. The value proposition of the platform is free housing. Users can take housesitting gigs anywhere in the world and effectively live rent-free. Many travel hackers know this trick and score awesome vacations because of it.
There are other platforms, however, where housesitters are paid. Rover is a gig platform where users can offer a variety of petsitting services including overnight housesits. Just like Trusted House Sitters, you can stay in someone else’s home for free. The difference: Rover users will pay you to do so. (In fact, I am currently typing these words from the kitchen island of a paid housesitting gig).
Both Rover and Trusted House Sitters solve the same problem — pet care when you’re away from home. They differ in terms of compensation. One facilitates a non-financial exchange — free housing for a service — while the other offers a compensated version of the same exchange. Both models work, it all depends on what the parties using each respective platform are looking for.
Housesitting demonstrates that participating in the economy doesn’t always have to entail an exchange of financial value. Other types of exchange — such as housing — are also possible. Housing and labor more broadly could be looked at from the same lens. If you need a service like childcare and have a spare room or finished basement in your home, you could trade housing for free or low-cost child care. Likewise, if you’re in need of housing, you could trade a few hours each week to babysit or provide eldercare in exchange for free or reduced housing.
Just like not everyone is willing to trade housesitting for free travel accommodations, this isn’t going to be a perfect solution for everyone either. Labor-Exchange Housing will likely appeal more to students, recent college graduates, or the elderly who have a need for low-cost housing options.
Additionally, not all duties can or should be provided through labor exchanges. When it comes to eldercare, for example, there’s a difference between providing companionship and providing nursing care. Before a labor exchange is agreed upon parameters of the exchange should be well-defined with both parties in agreement.
While this is a novel idea for Americans it isn’t original. Multigenerational co-housing is already being piloted in Sweden. It not only solves economic problems around housing, but it also solves social problems too. Having a roommate that can get groceries or cook dinner saves money while staving off isolation too.
Final takeaway.
Capitalism has worked for several centuries but it doesn’t necessarily work for all sectors of the economy. The care economy continues to be elusive for capitalists to profit off of. As a result, costs for care services are high while compensation for service providers is remarkably low.
Instead of looking at the care economy solely from the perspective of dollars and cents, we need to reframe it around the exchange of non-financial value such as housing.
The child care issue isn’t just something that affects working parents. It’s impacting all of us. When parents are distracted by child care needs they aren’t able to give 100% of their time and attention to their job. One study estimates this costs the economy $122 billion per year.
We’ve long looked at real estate as an asset. It’s one of the reasons housing has become so unaffordable. Maybe it’s time we look at human capital in the same light too.
An economy is built around things of value that can be exchanged. Money is the most common intermediary of exchange but it doesn’t have to be the only way we trade value with one another. Some people have housing they can offer. Other people have their labor. Connecting those with labor to those with housing could solve critical pain points in the economy.
Capitalism had a good run but we’ve reached the point where the financialization of human labor is no longer tenable. Workers can’t continue selling their time for pennies on the hour and still expect to participate as active consumers in the economy.
If companies want to generate profit they have to start thinking beyond profit. Labor-Exchange Housing is one way to do that. It’s a solution that could make life easier for millions of Americans who need access to housing and/or care services.
Alleviating that burden could make workers more productive. And all of us would benefit because of it.