The Latitude News Op-Ed column is a space where people from all walks of life can share their opinions on the links and parallels between the U.S. and the rest of the world.
My office in Champaign-Urbana, Ill. is a 40-minute commute from the place I now call home, Danville, Ill. – the former mining town that just six years ago got a lot of (unwanted) attention for having the lowest property values in the country.
But it’s the housing situation in affluent, high tech and “green” Champaign-Urbana that’s more interesting.
Here’s why: more families are now considered to be in poverty in Champaign county than ten years ago. That’s one in four households according to the 2010 Census. Over the same time, the number of low-income students in public school districts grew about 60 percent. In August, I received a fellowship from the Marguerite Casey Foundation to report on poverty in the aftermath of America’s Great Recession. Champaign-Urbana seemed like a good place to start.
Something in common with Germany
Champaign-Urbana and Goettingen, Germany are nearly 1,800 miles apart as the crow flies.
But they have a lot in common. Both are university towns with about 120,000 residents and a high renter-to-owner ratio. Renters across the U.S. make up nearly 35 percent of the population, while in the 27 countries of the European Union they make up just over 46 percent. In contrast, more than half the residents in Champaign-Urbana rent. And in Germany, as a whole, that proportion goes up to over 60 percent.
So when I wanted to look at how low-income families fare in the housing market across the ocean, Goettingen, Germany seemed to be a good comparison.
America’s Great Recession left a string of foreclosed properties and struggling home values in its wake. Yet during the same time in Germany, the property values remained stable and, as a result, drew investors into the rental market.
Now both countries are left with rising rental prices.
My guess was that since renting in Germany is the rule rather than the exception, low-income German families wouldn’t have the same housing worries as low-income American families.
Turns out I was wrong.
In both countries, for a growing number of renters, paying for housing costs is becoming increasingly difficult. How they deal with it, however, differs.
The utilities burden
Looking at the data from both countries, what struck me forcibly is how much utility costs have gone up over the past 10 years.
In Illinois, it now takes nearly 44 percent more money to cover household energy costs and nearly 30 percent more to buy food than 10 years ago, according to data from the U.S. Bureau of Labor Statistics
And in Champaign-Urbana, as on-campus housing is limited, most students seek shelter off-campus.
The demand for space by the student population has inflated rental prices. It’s easy for a group of four or five students to pay $2,000 for a house to share. That’s not the case for a low-income family with one or two minimum-wage jobs.
In German university towns like Goettingen students also push up the demand for housing.
“Things are much more severe as the number of students has risen dramatically in the past two years,” said Stephan Klasen, an economics professor at the University of Goettingen. “This is due to the fact that progressively all states are shortening secondary school from nine to eight years and then that change happens, two cohorts enter university at the same time.”
While Germany’s strong rent control legislation has eased the impact of rising rents for low-income families, they are definitely feeling the strong effects of rising utility costs, Klasen said.
The cost of heating rose by 52 percent and the price of electricity increased by 66 percent over the past decade, said Alexander Wiech, communications director of Hause and Grund, Deutschland in Berlin, a property owners association.
And as rents have risen 11.7 percent, consumer prices have risen 17.1 percent over the past 10 years, Wiech said. “For low-income families, it is becoming more and more difficult in the centers of seven or eight bigger cities to rent affordable houses or flats.”
Larger cities with their abundance of jobs, shorter commutes and better access to child care and schools have kept the middle and higher income families who used to seek out suburban living, experts said. Now affordable urban housing has become scarce.
This means that lower-income households are now sharing space.
Squeezing more into less
“People are going back to living more densely,” said Matthias Zeeb, an economist with the Eduard Pestel Institute in Hanover, Germany. “Essentially, people are forced to squeeze together due to higher rents in towns and higher commuting costs that make suburban living less attractive.”
The “squeeze” that has prompted low-income families to double-up in Germany translates differently to low-income families in Champaign-Urbana.
Here low-income families with limited income and poor credit scores have a hard time finding affordable shelter as landlords conduct background checks.
Sometimes housing conditions are so substandard, local city officials close down the property; other times owners with affordable properties have gone bankrupt.
Families then find themselves living with relatives as their options run out.
This is what Champaign homeowner and Mexican immigrant Leodegario Olea Ramirez and his family have had to do. The family of seven, including his grown children, split the $2,000 a month mortgage as Ramirez only receives about $900 a month in disability payments.
“To be honest, I have always had problems with bills even before having a family. A home is very expensive, I’m not gonna lie. You’ve got to pay gas, lights, food,” he said through a translator.
The family visits food pantries to help with food costs and have not yet found assistance with housing costs.
Local housing advocate, Esther Patt, said that most people assume that housing is always taken care of: either you are poor enough to get government help or rich enough to afford it.
But for most low-income families, this isn’t the case.
“They rent places they can’t afford, then get evicted when they can’t afford it,” Patt said of low-income residents. “People have huge credit card debts and they have bad credit. Everyone is not ‘just taken care of’.”
I too have been guilty of this assumption. But after reporting on this, I am no longer.
And, as it turns out, low-income renters in Germany face the same struggles as low-income renters in Illinois.
Namely, while government assistance is available to combat rising rent prices – subsidized households make up about 10 percent of households in Germany (as Klasan reported) as compared to an estimated 3 percent in the U.S. according to an analysis of U.S. Housing and Urban Development data – it’s rising utility costs that are a bigger problem.
And nobody is just taken care of.
Pam Dempsey is project coordinator for CU-CitizenAccess.org, a news and social network dedicated to enterprise and investigative coverage of social and economic issues in Central Illinois. This story was funded by the Marguerite Casey Foundation.