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    For Tens of Millions of Americans, the Good Times Are Right Now

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    Their houses are piggy banks, their retirement accounts are up and their bosses are eager to please. When the boom ends, everything will change.This is an era of great political division and dramatic cultural upheaval. Much more quietly, it has been a time of great financial reward for a large number of Americans.For the 158 million who are employed, prospects haven’t been this bright since men landed on the moon. As many as half of those workers have retirement accounts that were fattened by a prolonged bull market in stocks. There are 83 million owner-occupied homes in the United States. At the rate they have been increasing in value, a lot of them are in effect a giant piggy bank that families live inside.This boom does not get celebrated much. It was a slow-build phenomenon in a country where news is stale within hours. It has happened during a time of fascination with the schemes of the truly wealthy (see: Musk, Elon) and against a backdrop of increased inequality. If you were unable to buy a house because of spiraling prices, the soaring amount of homeowners’ equity is not a comfort.The queasy stock market might be signaling that the boom is ending. A slowing economy, renewed inflation, high gas prices and rising interest rates could all undermine the gains achieved over the years. But for the moment, this flood of wealth is quietly redefining retirement, helping fuel Silicon Valley and stoking a boom in leisure and entertainment. It is boosting corporate profits by unprecedented amounts while also giving just about everyone the notion that a better job might be within reach.More than 4.5 million workers voluntarily quit in March, the highest number since the government started keeping this statistic in 2000, the Bureau of Labor Statistics reported last week. A few years ago, the monthly total was between three million and 3.5 million.“Maybe it’s easier to focus on the negative, but a huge number of people, maybe 40 million households, have been doing pretty well,” said Dean Baker, an economist who was a co-founder of the liberal-leaning Center for Economic and Policy Research. “You’d have to go back to the late 1990s to find a similar era. Before that, the 1960s.”This widespread wealth throws light on why the number of workers who say they expect to be working past their early 60s has fallen below 50 percent for the first time. It accounts for the abundance of $1 billion start-ups known as unicorns — more than 1,000 now, up from about 200 in 2015. It offers a reason for the rise in interest in unionizing companies from Amazon to Apple to Starbucks, as hourly workers seek to claim their share.And it helps explain why Dwight and Denise Makinson just returned from a 12-day cruise through Germany.“Our net worth has reached the millionaire level due to our investments, which was unfathomable when we were married 40 years ago,” said Mr. Makinson, 76, who is retired from the U.S. Forest Service.The couple, who live in Coeur d’Alene, Idaho, have company. There are 22 million U.S. millionaires, Credit Suisse estimates, up from fewer than 15 million in 2014.The State of Jobs in the United StatesThe U.S. economy has regained more than 90 percent of the 22 million jobs lost at the height of pandemic in the spring of 2020.April Jobs Report: U.S. employers added 428,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the fourth month of 2022.Trends: New government data showed record numbers of job openings and “quits” — a measurement of the amount of workers voluntarily leaving jobs — in March.Job Market and Stocks: This year’s decline in stock prices follows a historical pattern: Hot labor markets and stocks often don’t mix well.Unionization Efforts: Since the Great Recession, the college-educated have taken more frontline jobs at companies like Starbucks and Amazon. Now, they’re helping to unionize them.“I used coupons to buy things. One of my daughters would say, ‘Mom, that’s so embarrassing,’” said Ms. Makinson, 66, a registered nurse. “But we believed in saving. Now she uses coupons, too.”Denise and Dwight Makinson in their backyard in Coeur d’Alene, Idaho. Their net worth has reached the millionaire level.Margaret Albaugh for The New York TimesEvery economic transaction has several sides. No one thought home prices in 2000 were particularly cheap. But in the last six years, prices have risen by the total value of all housing in 2000, according to the Case-Schiller index. In many areas of the country, it has become practically impossible for renters to buy a house.This is fracturing society. Even as the overall homeownership rate in 2020 rose to 65.5 percent, the rate for Black Americans has severely lagged. At 43.4 percent, it is lower than the 44.2 percent in 2010. The rate for Hispanics is only marginally better.That disparity might account for the muted sense of achievement.“It’s a time of prosperity, a time of abundance, and yet it doesn’t seem that way,” said Andy Walden, vice president of enterprise research at Black Knight, which analyzes financial data.Shawn and Stephanie McCauley said the value of their house 20 miles north of Seattle had shot up 50 percent since they bought it a few years ago, a jump that was typical of the market.“We are very fortunate right now given the situation for many others during the pandemic,” said Mr. McCauley, 36, who works for a data orchestration company. “Somehow we are doing even better financially, and it feels a bit awkward.”Even for those doing well, the economy feels precarious. The University of Michigan’s venerable Index of Consumer Sentiment fell in March to the same levels as 1979, when the inflation rate was a painful 11 percent, before rising in April.Politicians are mostly quiet about the boom.“Republicans are not anxious to give President Biden credit for anything,” said Mr. Baker, the economist. “The Democrats could boast about how many people have gotten jobs, and the strong wage growth at the bottom, but they seem reluctant to do this, knowing that many people are being hit by inflation.”The initial coronavirus outbreak ended the longest U.S. economic expansion in modern history after 128 months. A dramatic downturn began. The federal government stepped in, generously spreading cash around. Spending habits shifted as people stayed home. The recession ended after two months, and the boom resumed.Jerome H. Powell, the Federal Reserve chair, recently warned that there were too many employers chasing too few workers, saying the labor market was “tight to an unhealthy level.” But for workers, it’s gratifying to have the upper hand in looking for a new position or career.“Both my husband and I have been able to make job changes that have doubled our income from five years ago,” said Lindsay Bernhagen, 39, who lives in Stevens Point, Wis., and works for a start-up. “It feels like it has mostly been dumb luck.”A decade ago, the housing market was in chaos. Between 2007 and 2015, more than seven million homes were lost to foreclosure, according to Black Knight. Some of these were speculative purchases or second homes, but many were primary residences. Egged on by lenders, people lived in houses they could not easily afford.Now the reverse is true. People own much more of their homes than they used to, while the banks own less. That acts as a shield against foreclosures, which in 2019 were only 144,000, according to Black Knight. (During the pandemic, foreclosures mostly ceased due to moratoriums.)The equity available to homeowners reached nearly $10 trillion at the end of 2021, double what it was at the height of the 2006 bubble, according to Black Knight. For the average American mortgage holder, that amounts to $185,000 before hitting loan-to-value tripwires. The figure is up $48,000 in a year — about what the average American family earns annually, according to some estimates.Even very new homeowners feel an economic boost.“We never had enough for a down payment, but then in summer of 2020, we got a good tax return, a stimulus check and had a little money in the bank,” said Magaly Pena, 41, an architect for the federal government. She and her husband bought a townhouse in the Miami suburb of Homestead.Ms. Pena, a first-generation immigrant from Nicaragua, likes to check out the estimated value of her house and her neighbors on the real estate website Redfin. “Sometimes I’ll check it every day for three days,” she said. “It’s been crazy — everything has skyrocketed.”In 2006, homeowners cashed in their equity. Sometimes they used the money to double down on another house or two. In 2022, there’s little sense of excess. One reason is that lenders and the culture in general are no longer so encouraging about that sort of refinancing. But owners are also more cautious.Brian Carter, an epidemiologist in Atlanta, said he and his wife, Desiree, had about $250,000 in equity in their home but didn’t plan to draw on it.“I was 27 in 2007 and watched a lot of people lose their houses because they couldn’t leave their equity alone,” he said. “That included my next-door neighbor and the family across the street. I don’t want to worry.”Those who take a boom for granted often get upstaged by reality. In May 2000, the entrepreneur Kurt Andersen said raising money for a media start-up called Inside was as easy “as getting laid in 1969.” That was a few weeks after the stock market peaked. Seventeen months and one merger later, Inside shut down. (Mr. Andersen clarified in an email that he did not actually have sex until the 1970s.)In 2000, the start-up downturn was the first sign of wider economic trouble. This time it may be simply that people are doing too well. “U.S. households in best shape in 30 years … but does it matter?” Deutsche Bank asked in a research note last month.Its logic: Households have more cash than debt for the first time in decades, which is theoretically good. But all that money is encouraging spending, which is propelling inflation, which is forcing the Fed to push up interest rates. The result: a recession late next year.Ashley Humphries, 31, feels prepared for most any scenario. Six years ago, she was a graduate teaching assistant making $12,000 a year. Now she earns a low six figures as a senior product manager for a parking app developer in Atlanta.“I’ve lived out some childhood dreams like dyeing my hair vibrant colors and seeing ‘Phantom of the Opera’ from the front row,” Ms. Humphries said. She got a dog named Kylo, put a bit of her income in the stock market and bought a Tesla. She just left on a Caribbean cruise. Two of them, in fact, one after the other.Ashley Humphries and Kylo. “I’ve lived out some childhood dreams,” she said.Kendrick Brinson for The New York Times More

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    How Rising Mortgage Rates Are Affecting the Housing Market

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    Mortgage costs have jumped as the Federal Reserve has raised rates. With higher rates come fewer offers.Luis Solis, a real estate agent in Portland, Ore., marked a milestone weekend late last month. It was the first time in two years that one of his listings made it to Monday without any offers.This particular house was listed at $500,000, and after a Saturday open house there were promises of at least three bids, including one for $40,000 over the asking price. Then Monday came, and there were none. Then Tuesday, and Wednesday. An offer finally came in, but instead of being 10 to 15 percent higher than the listing — something that became almost standard at the height of the coronavirus pandemic’s housing market — it was right at $500,000. And it was the only one. And the buyer took it.“We didn’t have the competing offers that would drive up the price,” Mr. Solis said. “It’s not crazy like it was.”Taking some air out of the crazed market — and the hot economy in general — is precisely what the Federal Reserve wanted to do when it raised its key interest rate in March and signaled more increases to come. Mortgage rates have surged in response, jumping to 5 percent from slightly more than 3 percent since the start of the year.That rise means the monthly payment on a $500,000 house like the one Mr. Solis just sold would be about $500 more a month than it was at the end of last year, assuming a fixed-rate mortgage and 20 percent down payment. And the higher cost comes on top of a more than 30 percent rise in home prices over the past two years, according to Zillow.Now early data and interviews across the industry suggest that many buyers have finally been exhausted by declining affordability and cutthroat competition, causing the gravity-defying pandemic housing market to start easing up.Open houses have thinned. Online searches for homes have dropped. Homebuilders, many of whom have accrued backlogs of eager buyers, say rising mortgage rates have forced them to go deeper into those waiting lists to sell each house. In a recent survey of builders, Zelman & Associates, a housing research firm, found that while builders were still seeing strong demand, cancellations had inched up, though still well below historically low levels. Builders have also grown increasingly concerned about rising mortgage rates and surging home prices.“There is a lot more concern than there had been,” said Ivy Zelman, chief executive of Zelman & Associates.By any standard that prevailed before 2020, this would be a hot real estate market. Home prices remain high, and not only is there little sign they will fall anytime soon, but many economists predict a continued rise through the year. Still, after two years of torrid demand, agents had become accustomed to fielding multiple offers for each listing and setting price records each weekend. That frenzy, brought on by pandemic migrations and the growing centrality of the home as a space where people both live and work, is now subsiding.“We’re seeing some early indications that a growing share of home buyers, especially in expensive coastal markets, are getting priced out,” said Daryl Fairweather, chief economist at Redfin.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.For buyers, however, the market will still feel plenty competitive. Even if prices aren’t rising at the pace of the past two years, homes are selling within a week of being listed and posting no significant price declines.Construction in Missoula, Mont. Among homebuilders, “there is a lot more concern than there had been,” said Ivy Zelman of Zelman & Associates.Tailyr Irvine for The New York TimesThat rising mortgage rates have not had more of an effect shows how difficult it is to tamp down prices and bring demand into balance in an economy where a lack of supply — marked by half-empty car lots, furniture order backlogs and a paucity of homes for sale — is playing a guiding role.In the prepandemic world of bustling offices and smoothly functioning supply chains, such a steep rise in mortgage rates, on top of years of double-digit price appreciation, would have economists predicting a severe drop in demand and maybe even falling prices. Those trends would have echoed through the broader economy, with fewer people spending on moving vans and new couches, and as existing homeowners felt on less solid financial footing and potentially curbed their own spending. Instead, economists are predicting that prices will continue to rise — by double digits in some forecasts — through the year.“I don’t think it’s going to stop the housing market,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.The problem is there are so few homes for sale that even a slower market is unlikely to create enough inventory to satisfy demand anytime soon. For years the United States has suffered from a chronically undersupplied housing market. Home building plunged after the Great Recession and remained at a recessionary pace long after the economy and job market had recovered. Even today, the pace of home building remains below the heights of the mid-2000s, before the 2008 financial crisis and housing market crash.This makes it a good time to be a seller — assuming you don’t need to buy. Christopher J. Waller, a governor at the Fed, is living this out.“I sold my house yesterday in St. Louis to an all-cash buyer, no inspection,” Mr. Waller said in panel discussion on Monday. “But I’m trying to buy a house in D.C., and now I’m on the other side, going: ‘This is insane.’”He noted that the sharp rise in mortgage rates over recent months should have an effect on what happens with housing.The recent lack of new building was not for lack of interest. Members of the millennial generation, now in their late 20s to early 40s, are in their prime home buying years. Their desire to buy houses and start families has collided with scant supply, leading to an increase in prices.Shutdowns in the early months of the pandemic slowed home building, but housing starts have been on an upswing lately. New home completions remain low, however, because the tight labor market and supply chain disruptions have homebuilders scrambling to find wood, dishwashers, garage doors — and workers.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Treasury Shifts Cash Among States as Pandemic Housing Aid Dries Up

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    The Biden administration pulled back the aid from states and counties with unspent funds and diverted it to four states pressing for more: California, New York, New Jersey and Illinois.WASHINGTON — The Biden administration has clawed back $377 million in federal emergency housing aid from states and counties, most of them controlled by Republicans, and redirected the cash to states that have been clamoring for more help, including New York, California and New Jersey.The $46 billion Emergency Rental Assistance Program, first enacted by Congress in 2020, succeeded in preventing a wave of evictions stemming from the downturn caused by the pandemic. But Treasury Department officials, increasingly concerned that evictions might rise after the program winds down, have tried to ensure that none of the remaining funding goes unspent while pushing states to find other funding sources to assist poor tenants.In recent months, White House officials have pressured governors in states with unspent funds to turn over the money to local governments within their states. Now they are going one step further, pulling back cash from states with relatively few tenants — like Montana, Nebraska, South Dakota and Wyoming — or localities that failed to efficiently distribute the aid, including Alabama, Arkansas and several counties in Texas.The money, in turn, is being diverted to four states that burned through their allotted amounts — with $136 million in additional aid headed to California, $119 million to New York, $47 million to New Jersey and $15 million to Illinois, according to a spreadsheet provided by a senior administration official. North Carolina, Washington and other localities will be receiving smaller amounts.New York officials were happy with their windfall but said it fell far short of the $1.6 billion in additional aid requested by the state.“This is better,” said Representative Ritchie Torres, a Democrat whose district includes the South Bronx, which has some of the highest eviction and poverty rates in the country. “But it’s a pitiful drop in the bucket compared to what we need.”The four states, home to roughly a third of the nation’s low-income renters, have already spent billions in emergency aid paying back rent for tenants at risk of eviction, and they have requested more funding, citing affordable housing shortages and rising rents. In January, their governors — Gavin Newsom of California, Kathy Hochul of New York, Philip D. Murphy of New Jersey and J.B. Pritzker of Illinois, all Democrats — called on Treasury Secretary Janet L. Yellen to shift cash from low-spending states into their accounts, saying that tenants were “facing an immediate need now.”Treasury officials responded with the reallocation — but made it clear the well was running dry, and states would soon have to make hard choices by using their own revenues, or other federal pandemic relief funding, to bankroll anti-eviction initiatives that might have been buoyed by President Biden’s stalled social spending bill.“The emergency rental program has helped keep millions of families in their homes, reducing the economic costs of the pandemic, and built a nationwide system for eviction prevention that didn’t exist before,” the deputy Treasury secretary, Wally Adeyemo, who has overseen the implementation of the program, said in an interview.“As these funds run out, Treasury is encouraging state and local governments to invest in long-term strategies to prevent evictions and build affordable housing, using other resources,” he added.The program, initiated under the Trump administration and ramped up by Mr. Biden’s team, got off to a sluggish start, as state governments struggled to create new systems to process applications, determine eligibility and distribute the cash.But by late 2021, most local systems were up and running, thanks in part to White House guidelines relaxing verification requirements.The enormous infusion of cash, coupled with federal and local eviction bans, helped prevent or delay about 1.35 million evictions in 2021, according to an analysis published last week by Princeton’s Eviction Lab. Evictions have risen in recent months in some cities but remain below the levels predicted when the pandemic first struck.Most of the aid that the Treasury Department is clawing back comes from states in the West, Midwest and New England with relatively high per capita incomes and low percentages of renters per capita. But part of the money is being pulled out of some of the country’s poorest states, where local officials were unable, for various political and logistical reasons, to disburse the funds.Alabama, for instance, is losing $42 million from a total allocation of about $263 million. A spokesman for the state’s housing agency provided a memo from state housing officials claiming that the Treasury Department “did not consider that Alabama has a lower proportion of renters to homeowners” in making its aid decisions, and that an overall lack of need put “downward pressure” on applications.But applicants and housing groups have complained that the state has made accessing the money difficult, and that a company hired to run the program rejected a large percentage of low-income tenants.West Virginia, which has been slow to distribute a range of federal food, housing and anti-poverty aid during the pandemic, was forced to return $39 million despite recent efforts by state officials to encourage more renters to apply. A spokesman for Gov. Jim Justice of West Virginia, a Republican, said the state was “simply not a renter state,” adding that the program “was clearly designed with Manhattan in mind — not rural America.”And Arkansas, which took months to organize its effort, is giving back $9 million, according to the tally provided by the senior administration official.The Biden administration had hoped to avoid shifting funding across state lines, opting instead to negotiate with governors to send unspent aid to counties and cities in their own states. Late last year, the White House persuaded Arizona, Georgia, Louisiana, Wisconsin and other states to voluntarily shift about $875 million to the cities and counties in their states that needed the money most.Yet administration officials are less concerned about offending state officials that have lost funding than tamping down the expectations of Democratic governors who want them to claw back even more.Gene Sperling, who oversees the Biden administration’s pandemic relief programs, said that the program was on track to help around five million renters, and that the largest complaint now was that “the funds are moving out so swiftly that there is very little left to be reallocated.” More

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    The Next Affordable City Is Already Too Expensive

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    Maybe it was the date night when he and his wife spent two hours driving 19 miles to dinner, or the homeless encampment down the street, or the fact that homes were so expensive that his children could never afford to live near him.Whatever the reasons, and there were many, Steve MacDonald decided he was done with Los Angeles. He wanted a city that was smaller and cheaper, big enough that he could find a decent restaurant but not so much that its problems felt unsolvable and every little task like an odyssey. After the pandemic hit and he and his wife went through a grand reprioritizing, they centered on Spokane, where their son went to college. They had always liked visiting and decided it would be a nice place to move.Eastern Washington was of course much colder. Until this winter, Mr. MacDonald, a native Southern Californian, had never shoveled snow. But their new house is twice as big as their Los Angeles home, cost less than half as much and is a five-minute commute from City Hall, where Mr. MacDonald works as Spokane’s director of community and economic development.He arrives each day to tackle a familiar conundrum: how to prevent Spokane from developing the same kinds of problems that people like him are moving there to escape.“I’m realizing more and more how important the future prosperity of this city is about getting housing right,” he said. “If we don’t, it’s going to track more closely with what happened in Los Angeles.”Mr. MacDonald knows the pattern, and so does everyone else who has been following the frenetic U.S. housing market for the past decade. The story plays out locally but is national in scope. It is the story of people leaving high-cost cities because they’ve been priced out or become fed up with how impossible the housing problem seems. Then it becomes the story of a city trying to tame prices by building more housing, followed by the story of neighbors fighting to prevent it, followed by the story of less expensive cities being deluged with buyers from more expensive cities, followed by the less expensive cities descending into the same problems and struggling with the same solutions.It’s easier to change where we live than it is to change how we live.Whether it’s Boise or Reno or Portland or Austin, the American housing market is caught in a vicious cycle of broken expectations that operates like a food chain: The sharks flee New York and Los Angeles and gobble up the housing in Austin and Portland, whose priced-out home buyers swim to the cheaper feeding grounds of places like Spokane. The cycle brings bitterness and “Don’t Move Here” bumper stickers — and in Spokane it has been supercharged during the pandemic and companies’ shift to remote work.No matter how many times it happens, no matter how many cities and states try to blunt it with recommendations to build more housing and provide subsidies for those who can’t afford the new stuff, no matter how many zoning battles are fought or homeless camps lamented, no next city, as of yet, seems better prepared than the last one was.Just a few years ago, a Spokane household that made the median income could afford about two-thirds of the homes on the market, according to Zillow. Now home prices are up 60 percent over the past two years, pricing out broad swaths of the populace and fomenting an escalating housing crisis marked by resentment, zoning fights and tents.Nadine Woodward, the mayor of Spokane, Wash., said the city might be too expensive even for her own son and his wife.Rajah Bose for The New York TimesBeing an “it” place was something Spokane’s leaders had long hoped for. The city and its metropolitan region have spent decades trying to convince out-of-town professionals and businesses that it would be a great place to move. Now their wish has been granted, and the city is grappling with the consequences.The Great ReadMore fascinating tales you can’t help but read all the way to the end.Garage doors, a straightforward finishing touch, have become a source of woe for the home-building industry, thanks to supply-chain issues.Was the “Russian flu” of the late 19th century actually a pandemic driven by a coronavirus? And could its course give us clues about our pandemic?Our reporter hid seven tracking devices in her husband’s belongings to see how invasive they were and which ones he would find.Growth is never perfect, and Spokane’s influx has been accompanied by a booming employment market that has increased wages, turned abandoned warehouses into offices and helped the city recover jobs lost during the pandemic. This is normally called progress. But for people who already lived in and around Spokane or the suburbs just across the border in north Idaho, the shift from living in a place that was broadly affordable to broadly not has come on with the suddenness of a car crash. Now many workers are wondering what the point of growth is if it only makes it harder to keep a roof over their head.Even the mayor isn’t immune. In an interview, Nadine Woodward, a Republican who was elected in 2019, noted that her son and daughter-in-law, newlyweds who moved home during the pandemic, were living with her and her husband while they figured out where they could afford to settle. They came back to Spokane from Seattle, where they were long ago priced out. Austin was the next city on their list, but then its home prices shot up to about where Seattle’s were when they left. At this point, even Spokane is seeming pricey.“I never thought I’d see the day where my adult children couldn’t afford a home in Spokane,” Ms. Woodward said.Between Seattle and MinneapolisStanding by a snow-covered lawn on an overcast afternoon, Steve Silbar, a local real estate agent who has been selling homes for five years, explained Spokane’s transformation in terms of a six-inch screen. When he thinks of a typical buyer, Mr. Silbar said, he imagines a couple thousands of miles away, perhaps on a beach, looking at their phones. They’re considering moving to a cheaper city, and do a search for homes.Clients like this are why Mr. Silbar invested $3,000 in a camera that allows him to create three-dimensional tours of his listings, and why the exterior of every home he sells is showcased with an aerial video shot by a drone. In a market that attracts so many outsiders, a virtual walk through the interior and bird’s-eye flight over the street can be the nudge buyers need to bid on a home they’ve never entered, in a city they’ve never seen.“I have to assume that the person that is looking at my listing has never been to Spokane, does not know about Spokane, has no clue,” Mr. Silbar said.Steve Silbar, a real estate agent, showing a home in Spokane. He relies on virtual methods to help buyers from outside the region.Rajah Bose for The New York TimesSpokane is the largest city on the road from Seattle to Minneapolis. This fact is frequently cited as the logic behind its economy: It’s between things. The city was incorporated in 1881 and grew into a transportation hub for the surrounding mining and logging industries. It remains a hub, only instead of shipping out timber and silver, businesses revolve around Fairchild Air Force Base and a collection of hospitals and universities that draw from the rural towns that stretch from eastern Washington to northern Idaho and into western Montana.The transition from past to present plays out across a skyline in which the usual collection of anonymous bank and hotel towers is broken up by historic brick buildings that seem to be either in a state of abandonment or rehabilitation or occupied by low-rent tenants while waiting for redevelopment. The current boom has already made its mark in the form of new apartment towers, warehouses turned office buildings and an empty lot that will soon contain a 22-story building that will be the city’s tallest.Driving around town, Michael Sharapata, a commercial real estate broker who moved to Spokane from the Bay Area in 2017, gave a staccato accounting of new leases, such as the millions of square feet that Amazon occupies out by the airport, or the satellite offices rented by various regional accounting and building firms.His family is coming, too. After Mr. Sharapata and his wife moved north, they were followed, in rapid succession, by his brother-in-law in Austin, another brother-in-law in the Bay Area and his sister-in-law in Salt Lake City.“We were looking for an affordable community that had an opportunity to accommodate all of us,” he said.As in most of urban America, much of the growth in the Spokane area is on the fringes, where heavy equipment and the skeletal outlines of new subdivisions unfold in every direction and into Idaho. Building permits have surged, and the cadre of mostly local builders who had the market more or less to themselves now grumble that the rapid growth has attracted big national builders like D.R. Horton and Toll Brothers.All of this happened fairly recently. In the years after the Great Recession, when homebuilders were in bankruptcy or hibernation, migration to the Spokane region plunged. That pattern shifted in 2014 when, as if a switch had been flipped, waves of migrants started arriving as already high-cost cities like Seattle and San Francisco saw their housing markets go into a tech-fueled frenzy.By the end of 2014, migration to the Spokane region had jumped to more than 2,000 net new residents, compared with a net loss the year before, according to Equifax and Moody’s Analytics. Annual growth has only continued, rising further with the pandemic to more than 4,500 net new residents.Sometimes they come for the chance to buy their first home. Other times it’s a bigger house or some land. Joel Sweeney, an academic adviser at Eastern Washington University, wanted the best of both: a single-family house on a quiet street that was close enough to downtown that he could walk to a good brewery. That sort of Goldilocks urbanity could cost a million in Austin, where he and his wife lived until last year. When they moved to Spokane they paid less than a third of that.“You could not get a house for $299,000 in Austin where you could walk to a bunch of different stuff,” he said.Nurses and teachersLindsey Simler, who grew up in Spokane, wants to buy a home in the $300,000 range, but put her search on pause after a dozen failed offers.Rajah Bose for The New York TimesThe white house with the red door sits on a quiet block near Gonzaga University. It has two bedrooms, one bathroom and 1,500 square feet of living space.Mr. Silbar, the real estate agent, has sold it twice in the past three years. The first time, in November 2019, he represented a buyer who offered $168,000 and got it with zero drama. This year it went back on the market, and Mr. Silbar listed it for $250,000. Fourteen offers and a bidding war later, it closed at $300,000.When Mr. Silbar got into the business, he said, his clients were “nurses and teachers,” and now they’re corporate managers, engineers and other professionals. “What you can afford in Spokane has completely changed,” he said.The typical home in the Spokane area is worth $411,000, according to Zillow. That’s still vastly less expensive than markets like the San Francisco Bay Area ($1.4 million), Los Angeles ($878,000), Seattle ($734,000) and Portland ($550,000). But it’s dizzying (and enraging) to long-term residents.Five years ago, a little over half the homes in the Spokane area sold for less than $200,000, and about 70 percent of its employed population could afford to buy a home, according to a recent report commissioned by the Spokane Association of Realtors. Now fewer than 5 percent of homes — a few dozen a month — sell for less than $200,000, and less than 15 percent of the area’s employed population can afford a home. A recent survey by Redfin, the real estate brokerage, showed that home buyers moving to Spokane in 2021 had a budget 23 percent higher than what locals had.One of Mr. Silbar’s clients, Lindsey Simler, a 38-year-old nurse who grew up in Spokane, wants to buy a home in the $300,000 range but keeps losing out because she doesn’t have enough cash to compete. Spokane isn’t so competitive that it’s awash in all-cash offers, as some higher-priced markets are. But prices have shot up so fast that many homes are appraising for less than their sale price, forcing buyers to put up higher down payments to cover the difference.A dozen failed offers later, Ms. Simler has decided to sit out the market for a while because the constant losing is so demoralizing. If prices don’t calm down, she said, she’s thinking about becoming a travel nurse. With the health care work force so depleted by Covid-19, travel nursing pays much better and, hopefully, will allow her to save more for a down payment.“I’m not at the point where I want to give up on living in Spokane, because I have family here and it feels like home,” she said. “But travel nursing is going to be my next step if I haven’t been able to land a house.” ‘Positive activity’From her seventh-floor office atop the Art Deco City Hall, Ms. Woodward, the mayor, looked out at the Spokane River, where in the warmer months a gondola glides past her window to a park built for the World’s Fair. Spokane hosted the fair in 1974 as a means of revitalizing its blighted downtown, and during the recent interview Ms. Woodward pointed out the window at cranes and construction sites that she calls “positive activity.”Spokane’s job market is among of the strongest in the nation, and the virtuous economic cycle — of people coming for housing, causing businesses to come for people, causing more people to come for jobs — is in full swing. And yet, as in Seattle and California before and increasingly across the nation, the scourge of rising prices, particularly for rent and housing, makes it feel less virtuous than advertised.The recent Realtors report warned of “significant social implications” if the city doesn’t tackle housing. The issues included young families not being able to buy or taking on excessive debt, small businesses not being able to hire, difficulty keeping young college graduates in town.In the dominoes of the housing market, the disappointments of aspiring buyers like Ms. Simler get magnified as they move down to lower-income households. With homes so hard to buy, rents have shot up, and the vacancy rate for apartments is close to zero.All of this has compounded at the lowest end of the market, where the nonprofit Volunteers of America’s Eastern Washington and Northern Idaho affiliate, which runs three shelters and maintains 240 apartments for people who were formerly homeless, said it will lose a quarter of its units in the next fiscal year as more of its funding goes to higher rents.Julie Garcia, right, founder of Jewels Helping Hands in Spokane, at her organization’s warming and food tent for people in need.Rajah Bose for The New York TimesA homeless camp in Spokane, where Mayor Woodward declared a housing emergency last year.Rajah Bose for The New York TimesIn December, as temperatures dropped and shelters filled, advocates and members of the homeless population protested by setting up several dozen tents on the City Hall steps. The encampment was gone two weeks later but has since been reconstructed on a patch of dirt on the other side of town. In the winter cold it smells like ash and soot from the open fires burning to keep people warm.Last year, Ms. Woodward declared a housing emergency, and her administration has put in place initiatives that mirror those of housing-troubled cities on the West Coast. The city has built new shelters, is encouraging developers to repurpose commercial buildings into apartments, is making it easier for residents to build backyard units and is rezoning the city to allow duplexes and other multiunit buildings in single-family neighborhoods.Ms. Woodward pointed to Kendall Yards, one of the developments outside her City Hall window, as an example of what she wanted to see more of. The mixed-density project could be a postcard picture of what economists and planners say is needed to combat the nation’s housing shortage and sprawl. In defiance of the single-family zoning laws that dictate the look of most U.S. neighborhoods, Kendall Yards has houses next to townhomes next to apartments, with retail and office mixed in.People in town seem to love it, but are leery of there being more places like it, especially in their neighborhood.“I think it’s awesome — I have friends there, and we go down there to the farmers’ market and walk around,” said John Schram, a co-chair of the neighborhood council in Spokane’s Comstock neighborhood. “That’s just not my vision of what I want for me. My concern is that I move into a neighborhood because of the way that it was designed when I got there, and when somebody else comes in and wants to change that I’m going to be concerned.”He added: “I have nothing against duplexes and triplexes, just not next to my house.” More

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    Rising Mortgage Rates Add to the Challenge of Buying a House

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    The average rate on a 30-year, fixed-rate mortgage is now the highest since May 2019. And home prices are expected to rise, though probably more slowly.Home prices remain high, and rising borrowing costs are adding to the challenge of buying a home heading into the traditional spring selling season.The pace of housing price increases may slow from double- to single-digit percentages this year, said Danielle Hale, the chief economist for Realtor.com. But prices are still expected to go up, and conditions will probably continue to favor sellers.“Prices will continue to grow, just at a slower pace,” she said, and one of the main reasons is that mortgage rates are expected to rise. “Higher mortgage rates decrease affordability for anyone taking out a mortgage,” which the majority of home buyers do, she said.The average rate on a 30-year, fixed-rate mortgage this week rose to 3.92 percent, the highest rate since May 2019, according to the mortgage finance giant Freddie Mac. A year ago, the average rate was 2.81 percent. Freddie Mac’s weekly survey looks at loans used to buy homes, rather than at borrowers refinancing loans they already have.Mortgage rates are rising quickly. The Mortgage Bankers Association forecasts average rates will be slightly above 4 percent by the end of the year — still low in historic terms, but higher than the 3 percent or lower that borrowers have been seeing. (The association includes rates for refinances as well as purchases in its forecast.)Why are rates rising? In response to higher inflation and a strong employment market, the Federal Reserve is expected in March to begin a series of increases in its benchmark interest rate, indirectly helping to push up mortgage rates. (In general, mortgage rates are tied to the 10-year Treasury bond, which is affected by various factors, including the outlook for inflation.) Consumer price increases recently have reached levels not seen in 40 years, mainly because of lingering supply constraints from the pandemic.The average borrower with a 20 percent down payment would pay about $100 more a month on a new mortgage than one taken out at the end of last year because of rising rates and higher home prices, said Andy Walden, vice president of enterprise research strategy at Black Knight, a mortgage data provider.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: We asked readers to send questions about inflation. Top experts and economists weighed in.What’s to Blame: Did the stimulus cause prices to rise? Or did pandemic lockdowns and shortages lead to inflation? A debate is heating up in Washington.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.Rates are rising as strong demand for homes, along with a tight supply of properties for sale, has pushed up home prices. The typical sale price of a previously owned home in 2021 was just under $347,000, according to the National Association of Realtors — an increase of nearly 17 percent from 2020.Shoppers should still expect a competitive spring housing market, Ms. Hale said. Some potential buyers who have been on the fence may move quickly to lock in mortgage rates before they rise further. “It gives shoppers some urgency to close sooner rather than later,” she said.But some shoppers — particularly first-time buyers — may decide to wait until even higher rates help cool off prices later in the year. The largest share of home buyers are millennials ages 21 to 40, many of whom are first-time buyers, according to the National Association of Realtors.“The spring season will be very interesting,” said Lawrence Yun, the chief economist with the Realtors association.Ultimately, the housing market needs an increase in inventory, Mr. Yun said. “We need a supply of empty homes.” Builders have faced challenges in keeping newly built homes affordable including high lumber prices and difficulty finding construction workers.Buyers may need to consider more affordable homes in less urban areas, Mr. Yun said. That may depend on whether homeowners expect to be able to continue working remotely.One variable in the number of homes for sale is the winding down of mortgage forbearances granted during the pandemic. Many homeowners have been able to resume payments after their payment pause expired. But some may be unable to, forcing them to sell their homes, said Michael Fratantoni, the chief economist with the Mortgage Bankers Association. The number of borrowers in forbearance has been declining, to an estimated 705,000 homeowners at the end of 2021.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Far From the Big City, New Economic Life

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    GAINESBORO, Tenn. — There is not much to suggest prosperity in Gainesboro, a hamlet of 920 in Tennessee’s Upper Cumberland region. Almost one in seven homes are vacant. One-quarter of the population lives in poverty.Yet from his office in the Jackson County Courthouse, County Mayor Randy Heady outlines a picture of plenty: Revenue from sales and occupancy taxes almost doubled in the last fiscal year, and he expects another 20 percent increase this year. “Sales tax is up, occupancy tax is up, liquor tax is up,” he said.And outsiders are flocking into the county. “They are coming from other states, trying to get away from the high taxes,” Mr. Heady said. “People are moving from Arizona and California, New York and New Jersey.”Economists have long voiced fear that rural places like this are being left behind. The last of the textile businesses, once an economic mainstay, departed in the 1990s. Jackson County and several other counties in the Upper Cumberland are considered “distressed” or “at risk” by the Appalachian Regional Commission. More

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    From Liverpool to London, Inflation Means Tighter Wallets and Colder Homes

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    LIVERPOOL, England — For the past few weeks Vincent Snowball hasn’t needed to use the weekly food bank that runs out of a church near Liverpool’s city center. But he’s still there each Tuesday, laying out fabric swatches to advertise his upholstering services, and to socialize with the people he grew up with.Like many people across Britain, Mr. Snowball, 61, has been forced to cut down his already modest expenses to stabilize his finances. Prices are rising at their fastest pace in three decades.“I go to Tesco and I get a shock,” he said, referring to Britain’s ubiquitous supermarket chain. The prices there are “troubling,” he said. Instead he shops at Aldi, the rapidly growing chain that claims to be the cheapest supermarket in Britain.Prices are rising steeply in the United States and across Europe, driven by rising energy costs and supply-chain issues triggered by the easing of pandemic rules. But in Britain, there is a fear that sharply escalating heat and electricity bills, combined with food inflation, will push millions more into poverty.The Bank of England on Thursday lifted interest rates for the second time in two months — moving before the Federal Reserve or the European Central Bank. But policymakers acknowledge there is little they can do about the global factors driving inflation.Up and down the country, people are turning their heat down or off, switching to cheaper supermarkets, taking fewer car trips, cutting out takeout and restaurant meals, and abandoning plans for vacations.Because natural gas prices have risen so much, Vincent Snowball rarely turns on his heat, using it mainly for hot water. “I’m very conscious about what I use,” he said.Mary Turner for The New York TimesThursday brought more painful news when the government’s price cap on energy bills was raised by 54 percent, or about 700 pounds ($953) annually, reflecting high global prices for natural gas. The increase will affect 22 million households beginning in April. That same month, a large rise in National Insurance, a payroll tax that finances the National Health Service, among other things, will also take effect, further shrinking take-home pay.Although inflation is expected to peak in April, at 7.25 percent, Bank of England economists say household finances will continue to erode: For the next two years, household incomes after inflation and taxes will be less than the year before, the bank said. This will be the third stretch of time in about a decade that real wages have shrunk in Britain.This period is “somewhat unprecedented because it comes on the back of a very huge Covid shock” and Brexit, said Arnab Bhattacharjee, a professor of economics at Heriot-Watt University in Edinburgh and a researcher at Britain’s National Institute of Economic and Social Research.Mr. Snowball’s gas bill has risen, after a surge in natural gas prices in Europe late last year, and so he mostly uses it for hot water. Despite living in the northwest of England, he rarely turns the heating on. “I’m very conscious about what I use,” he said.But there are limits to how much Mr. Snowball can withstand. He receives about £300 ($403) in state support toward his £550 monthly rent and another £213 a month in working tax credits, financial support for people on low incomes. There aren’t any luxuries to cut.Having cup of tea and a chat at the food pantry run by Micah Liverpool, a charity. Since the pandemic began, the number of Britons receiving the main public income benefit has doubled.Mary Turner for The New York Times“There’s millions of people like that,” Mr. Snowball said.Although the British economy has slowly shaken off much of the torpor from the sharp recession brought on by the coronavirus, millions aren’t enjoying the recovery. Since the start of the pandemic, the number of people receiving Universal Credit, the main government income benefit, doubled to six million. Since the peak nearly 11 months ago, it has fallen only to 5.8 million. The number of people using food banks also jumped, according to the Trussell Trust, a nonprofit that provides emergency food packages, and independent groups.A cost-of-living crunch was forewarned last fall but “what came as a surprise this time round was the degree of food price inflation,” Mr. Bhattacharjee said. “This has not happened in the past decade.” In December alone, food and nonalcoholic drink prices rose 1.3 percent, the fastest monthly pace since 2011.For more and more people, it’s impossible to ignore. Katie Jones’s main food shopping trip, which she does twice a month, used to cost up to £80; now it’s more likely to be £100. Ms. Jones, 33, works full time in Liverpool city center at a branch of a national coffee shop chain. She lives across the River Mersey with her partner and their three children where, in December, the energy bills increased from £95 a month to £140.“We no longer have takeaways in the house,” she said. “Partly it was for health reasons, but I also noticed just how much it costs.” And there are fewer date nights with her partner because she can’t push the cost of them out of her head.In Earlsfield, the local food bank has had to cut more expensive food and toiletry items from its packages.Mary Turner for The New York TimesFood inflation is hurting those who are trying to help. Managers of the Earlsfield Foodbank in southwest London recently decided to cut items from their offering — including juice, snacks, cheese and peanut butter — because they are too expensive now. And they will provide fewer toiletries and household items, such as laundry detergent.Each week, the food bank buys a wide variety of fresh vegetables and fruit, and other food, to supplement its donations. In the past few weeks, the cost of supplies has increased worryingly.“That number is going up and isn’t really sustainable throughout the year,” said Charlotte White, the manager.As the cost of purchases rises, so does the list of people seeking help. Last week, eight more people registered with Earlsfield Foodbank, and 71 people received food parcels. In March 2020, they were averaging 25 guests a week, with fewer families and working people.“Families are already at, if not beyond, breaking point,” said Ruth Patrick of the University of York and the lead academic of Covid Realities, a national project in which about 150 low-income parents and care-providers have documented their experiences through the pandemic. “We get a really dominant message coming through about fear and anxiety and worry about how people will get by.”“Probably, I was quite comfortable last year,” said Joanne Barker-Marsh. “Now there is no buffer.” She is considering selling her home, which is becoming less affordable.Mary Turner for The New York TimesThrough the project, Joanne Barker-Marsh, 49, has found some emotional, and at times financial, support. She lives in a two-bedroom house on the outskirts of Manchester with her 12-year-old son Harry, and worries that, with its high ceilings and uncarpeted floors, it is too cold. Understand Rising Gas Prices in the U.S.Card 1 of 5A steady rise. More

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    It’s Been a Home for Decades, but Legal Only a Few Months

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    On paper, the converted garage behind the Martinez family home in the Boyle Heights section of Los Angeles is a brand-new unit of housing, the product of statewide legislation that is encouraging homeowners to put small rental homes on their property and help California backfill its decades-old housing shortage. Two stories tall with 1,100 square feet of living space that is wrapped in a curved exterior wall, adorned with pops of pink around the windows and decorative white squares, it looms over the squat main house as a statement of something different behind a chain-link fence.The inside tells a longer story. For years the unit was illegal, built clandestinely in the mid-1990s by Bernardo and Tomasa Martinez as part of a $2,000 project that turned the garage into a cold but habitable unit with a bed and bathroom. The family rented it for $300 to a friend, then $500 to Bernardo Martinez’s brother, using the money to offset their mortgage and weather unemployment during the Great Recession.Eventually the unit housed their son, Luis, who lived there several years later while he was getting a master’s degree in architecture. Luis Martinez designed the latest conversion and, during an interview on the driveway, noted that the garage may have become a legal residence in 2020, but it has long been someone’s home.“The city rules are finally catching up to how these places are being utilized,” Luis Martinez said.Until last year’s renovation, the Martinez family’s backyard home belonged to the shadow inventory of unpermitted housing that has swelled across Los Angeles and other high-priced cities as affordable housing shriveled. Amateur developers build them for profit. Homeowners build them for family or to help with the mortgage.Mr. Martinez, right, an architectural designer and a co-owner of Studioo15, with his parents, Tomasa and Bernardo Martinez, at their home in Los Angeles.Philip Cheung for The New York TimesIn a tight and expensive housing market, where homes are desperately needed but also hard to build, people of every income level have decided to simply build themselves. The result is a vast informal housing market that accounts for millions of units nationwide, especially at the lower end.“This is one of the most significant sources of affordable housing in the country,” said Vinit Mukhija, an urban planning professor at University of California, Los Angeles.Over the past two years of the pandemic, as policymakers have struggled to contain the spread of disease in overcrowded housing and prevent widespread evictions among vulnerable tenants, Covid-19 has laid bare how precarious — and poorly understood — the United States housing market has become. A little over 100 million people live in rental housing across the U.S., but nobody knows exactly how many people are at risk of eviction, how many lose their housing without a formal notice, or even much about pricing trends.Almost nowhere is this disconnect greater than with informal units, which cities tacitly accept as a crucial part of their housing supply but don’t exactly condone and often empty or demolish if someone complains. This practice creates a kind of legal gray area in which tenants and owners don’t want to be found out and can both find it difficult to access tenant protections or financial aid, such as the $46 billion in pandemic rental assistance created by federal stimulus programs.Surveying the surrounding neighborhood from the roof deck of his old garage home, Luis Martinez counted off a few of nearby informal units: A corrugated steel addition that consumed the yard of a house a few lots away; a roll-up garage door that hides an unpermitted home down the street; the remnants of a shower that was once inside a backyard unit, demolished after city inspectors discovered it.Los Angeles County, home of 10 million people, has at least 200,000 informal units, according to researchers at University of California, Los Angeles. That’s more than than the entire housing stock of Minneapolis.‘Horizontal density’An uncompleted accessory dwelling unit, center, in the backyard of a home in the Boyle Heights neighborhood of Los Angeles.Philip Cheung for The New York TimesSome are rudimentary structures that lack plumbing. Some are two-story pool houses that rent for several thousand dollars a month. Off-the-books housing shows up in rich neighborhoods and poor neighborhoods, everywhere it is needed.Which in California — home of the $800,000 median home price and sprawling, roadside homeless camps — can seem like it is everywhere. Over the past decade, the state has added a little over three times as many people as housing units and is far below the national average in housing units per capita, according to a recent analysis from the Public Policy Institute of California. Population growth has slowed and even fell last year, but the supply of homes is so low and the demand so great that prices only continue to rise.Looking to add units, the state legislature has spent the past five years passing a flurry of new laws designed to increase density and speed the pace of new construction. They’ve vastly lowered regulatory barriers that prevented backyard homes and essentially ended single-family zoning with legislation that allows duplexes in most neighborhoods across the state. A byproduct of these laws is that there is now a path for existing units to get legalized, a process that can require heavy renovations and tens of thousands of dollars. Cities including Los Angeles and Long Beach have also created new ordinances that clear the way to legalize unpermitted units in apartment buildings.As a designer who specializes in residential structures, Luis Martinez has lived this at home, and has now made it his career. His design business, Studioo15, has surged over the past two years as residents across Los Angeles have used the new state laws to add thousands of backyard units. Yet about half of his clients, he said, are people like his parents who want to have existing units legalized.Bernardo and Tomasa Martinez, both in their early 60s, immigrated to Los Angeles from Mexico in 1989. Working in the low-wage service sector — she was a waitress; he worked as a laborer loading a truck — they settled in a two-bedroom house in South Los Angeles that had four families and 16 people. Luis Martinez, who crossed the border as a child, was surrounded by love and family, in a house where money was tight and privacy nonexistent.Eventually the family was able to buy a small three-bedroom in Boyle Heights, on the east side of Los Angeles. It sits on a block of fading homes that have chain link fences in the front and a detached garage out back. To supplement the family income, the Martinezes converted the garage into a rental unit without a permit. Bernardo Martinez and a group of local handymen raised the floor and installed plumbing that fed into the main house, while Luis helped with painting.Luis remembers that nobody complained, probably because the neighbors were doing the same thing. “It was normal,” he said, “like, ‘I live in the garage’ and some garages were nicer than others.”Mr. Martinez went to East Los Angeles College after high school, then transferred to the University of California, Berkeley, where he got an architecture degree in 2005. In the years after graduation, when the Great Recession struck, his father lost his job and, after a spell of unemployment, took a minimum wage job mowing the lawn at a golf course. To help with bills, they rented the garage unit to Bernardo Martinez’s brother for $500 a month. “With the minimum wage, you can’t afford to pay a mortgage and food for everybody,” Tomasa Martinez said.‘Home Sweet Legal Home’The point of informal housing is that it’s hard to see — it is built to elude zoning authorities or anyone else who might notice from the street.Jake Wegmann, a professor of urban planning at the University of Texas at Austin, describes this as “horizontal density,” by which he means additions that make use of driveways and yard space, instead of going up a second or third floor. Because both the tenants and owners of these units don’t want to be discovered, there is essentially no advocacy on behalf of illegal housing dwellers, even though the number of tenants easily goes into the millions nationwide.Their presence is often logged in the form of proxy complaints about city services. “We talk about there not being any parking on the street, we talk about sewer pipes deteriorating, we talk about there being overcrowded schools, but oftentimes unpermitted housing is underlying all this,” Dr. Wegmann said in an interview.Ira Belgrade lives about ten miles west of the Martinezes in a Mid-Wilshire ZIP code where the typical home is worth $2 million (in Mr. Martinez’s neighborhood, it’s less than $600,000). His economic calculus was still the same.Behind his house sits a two-story office and entertainment room that has three pairs of French doors and is flanked by rows of ficus trees that wrap the yard in shade. Mr. Belgrade and his wife used to run a talent management business from the building, and never considered renting it.Then, Mr. Belgrade’s wife died in April 2009 after a long illness. Business started declining and the mortgage on his house became a struggle. “My life was like a wreck and I thought ‘Well, you know, if I can make this into a full apartment I could just rent the thing and I could chill out,” he said. “The city said ‘No you can’t have it’ so I said ‘Screw it’ and did it anyway.”Ira Belgrade in front of the accessory dwelling unit behind his home.Philip Cheung for The New York TimesHe hired a contractor to install a full kitchen and rented it for $3,650. Nobody noticed for four years. Then came an anonymous complaint, and he got tagged with a code enforcement violation.Mr. Belgrade said he spent three years struggling to get the unit legalized. At one point, he walked around his neighborhood taking pictures of 28 backyard homes that he believed were also not on the city’s books, in preparation for a mass complaint.“My argument was, ‘If you shut me down, you have to shut down these other 28 homes,’” he said. “It was total self-preservation.”Mr. Belgrade held out long enough to get the unit legally converted under the state’s new backyard unit laws. Along the way, he learned so much about city and state housing law that he acquired a new career. Instead of managing actors or casting movies like Army of Darkness, Mr. Belgrade now runs a consultancy called YIMBY LA, for “Yes In My Back Yard Los Angeles,” which advises people building new backyard units and also helps get permits for people who had them on the sly. The company’s tagline: “Home Sweet Legal Home.”When cities pay attentionThrough ten years as a code compliance officer for the County of Los Angeles, Jonathan Pacheco Bell estimates that he entered about 1,000 different homes, most of them in the unincorporated areas around South Los Angeles. He handed out violation notices and watched illegal housing get destroyed or vacated.But, after a decade of enforcement work, he said he came to accept that zoning codes become something of a fiction in the face of an affordable housing crisis. Many informal units are substandard or unsafe. But most, he said, are not. And until recently, the county’s policy of removing them was, in his view, creating more problems than it solved.Mr. Pacheco Bell is now a consultant who gives frequent talks at planning conferences. In those presentations, he tells the story of a family he cited in 2016, just as the state laws on accessory dwellings were changing. The family patriarch had died in a bus crash in 2009 and, to supplement her income, the widow hired a neighbor to build a backyard home. It cost $16,000 to build and she was able to rent it for $500, providing years of income for her family and one unit of affordable housing in a region that badly needed it.Mr. Pacheco Bell showed up after an anonymous complaint. The unit had plumbing and a kitchen. There was a crucifix on the front door, magnetic letters on the refrigerator and a child’s homework assignments taped to the wall. The home was usable and well-maintained, but was in violation of zoning codes because it was too close to a fence. Mr. Pacheco Bell wrote the unit up and returned a few months later to confirm it had been demolished. Walking around the backyard, and seeing the outline of the home and the rubble, made him question the job he was doing.“And as a planner I had a crisis of consciousness, like ‘How many people have I made homeless?” he said.Los Angeles has extended many tenant protections to residents of illegal units, but advocates for tenants say most renters aren’t aware of them. Landlords say they live in fear of being outed by tenants who can decline to pay rent until they get the unit permitted, a process that can take months.It all creates a market in which relationships are central to its function and proximity to each other can cut both ways. Sometimes tenants are treated as roommates or extended family, trading favors with their landlords and paying a low monthly rent. Other times, they live with abusive landlords who can steal food from refrigerators or expect them to do unpaid chores, threatening eviction when they don’t comply.“Renters have to make a choice: Are you going to live in a place that costs more? Or do you put yourself in a situation where you’re likely to have overcrowding and you might have restrictions over things like having guests over?” said Silvia González, director of research at the Latino Policy and Politics Initiative at UCLA.Dr. González is unusually close to her research: She grew up in Pacoima, a neighborhood of working-class Latino families in the San Fernando Valley, and spent much of her childhood living in an unpermitted home behind an aunt’s house.In a study for the nonprofit Pacoima Beautiful, she and other researchers found that these units can act as a bulwark against gentrification because they create low-cost housing and allow families to pool resources, as the Martinez family did. The benefits of legalizing them are clear enough: Units become safer, value is added to homes and tenants get the security of a sanctioned unit.Now that the law has changed, however, upstart developers are rushing to build new units and are bidding up parcels where they can be developed. This has caused fears that the once-illegal housing density serving as a source of last-resort shelter in many neighborhoods could become an engine of displacement. To head that off, Pacoima Beautiful recommended that cities and the state create low-cost financing mechanisms to encourage homeowners to get permitted.It took the Martinez family a decade to dig out from the Great Recession, but over time Bernardo Martinez worked his way back into the logistics industry and now runs an import/export business that moves clothes, toys and other merchandise between Los Angeles and Mexico. The family built back their savings, and was able to finance the $200,000 backyard unit.Boyle Heights remains an epicenter of L.A.’s gentrification battles, and Luis Martinez has found himself embroiled in them. In 2017, he purchased a duplex close to his parents and commenced an owner move-in eviction so he could live in one of the units. During the dispute, protesters marched outside his parents’ house and both the tenant who left and the one who remained sued him, alleging the duplex was uninhabitable and that he refused to fix it. Mr. Martinez disputed the allegations and settled earlier this year.The newly legalized unit behind his parents’ house is unlikely to assuage any gentrification fears. The building’s wavy surface looks like it landed in Boyle Heights after taking the wrong exit, and inside there are marble counters and a wine fridge.It sits empty now, but Mr. Martinez said his family plans to rent it out someday — he guesses they could get $2,500 in monthly rent — so his parents can retire and let the yard work for them. More