The rapidly increasing housing prices and spiraling rents are happening so quickly we’ve all been caught off guard. Why didn’t we see this coming, and get our defenses in place?

A good starting point toward an answer is to look at who is winning and who is losing at this game. Those who own benefit when prices rise. This has always been the case, duh, but it is more acute here in Seattle and more acute now in this economy. Homeowners and the already wealthy are getting richer just watching the value of their assets grow.

For many of us who own a home, it is our only secure investment. Yes, Seattle has more than a few multi-millionaires with multiple assets in their diversified investment portfolios, but many homeowners have just the house. We are counting on cashing out our homes to fund retirement, and probably don’t have any other choice but to quietly, uncomfortably cheer for increasing property values. For some of our NIMBYs, this is their predicament. In our neoliberal economy, most of us don’t have pensions, don’t have anywhere near enough in our 401Ks, and don’t make enough money to set aside any retirement savings. Middle class homeowners at least have one asset that offers enough economic security to let them sleep at night.

The New Economics Foundation offers an excellent explanation of this collective shift in view: “The expectation of future price rises has also changed how we think about property. Houses are no longer regarded as simply somewhere to live, but an investment that offers long-term financial security in the face of stagnating ages, dwindling pensions, and reduced welfare provision.”

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This rapid spiral in home prices we are experiencing cannot be attributed to the commonsense law of local supply and local demand. Other economic laws have sent these values into another dimension. And it is these other laws, laws determined by the financial world—the world of surplus global cash, capital flight, bonds, yield-hungry money managers, rating agencies and “exciting new asset classes” —that we are not recognizing or factoring into our picture of our current housing crisis.

Back to the question from part one; is the growth of our tech sector to blame? If our only challenge were to provide new housing for all the well-paid workers that tech is hiring, and our housing market still worked as a simply local exchange like it used to, it seems like we could absorb that influx. Remember former Mayor Paul Schell’s hopeful plans for Seattle to “grow with grace” in the late '90s? That felt possible at the time, like a challenge we could understand and meet with existing tools of land use policy, zoning codes, and preservation protections. If the housing market still worked like it did then, we’d be marveling at the nice apartments and condos young tech professionals could afford, and otherwise go on with our lives.

This escalating dynamic we have instead is infuriating for those of us who aren’t wealthy. It is causing a crisis for those of us who work here and cannot afford a place to live. Banks, landowners, developers, and financial speculators all benefit when prices rise and rise and rise. Renters, newcomers, hopeful first-time home-buyers, working class people and young people all fall further and further behind. The more our rental industry, which used to be small mom and pop local players, is captured by Wall Street and big corporate investors, the more this rental revenue will likely be extracted from our local economy and sent elsewhere, reducing money in local circulation. The more indebted we Seattleites become, and the bigger share of our paychecks goes toward housing, more and more of us will likely live on the edge, unable to manage unexpected expenses.

Everyone here, whether quietly grateful for the rising equity in your home or having a panic attack because your landlord just raised your rent, is distressed at the unconscionable number of people this is pushing into homelessness. The shelters are overflowing and the number of unsheltered people rose 19% in the past year alone, to about 3000 in Seattle. According to this report, every $100 increase in median rent increases the number of homeless people 15%. That is pretty irrefutable cause and effect.