Multifamily Housing and Health Care

Multifamily Housing and Health Care
The economics of multifamily housing is something I understand. The economics of health care is a complete mystery to me. I believe the two have a strong correlation going forward.

Apartment rents are a component/percentage of household income. So is medical care. As costs of discretionary items increase as a percentage of income (things like health care), the location of housing will become more of a focal point.

Multifamily housing close to job centers and transportation hubs is usually more expensive than apartments at further distances from these points. Well, that's fair; multifamily housing that is closer to jobs requires less money for transportation. Easy trade-off. Easy to understand. There is no such trade when it comes to health care.

According to the Depart of Labor, in 2007 housing represented 32% of consumer discretionary income. Health care represented 28%

Can that be true? The two things necessary to sustain life are food and shelter. How is it a single discretionary item could possibly be such a big percentage of income???

The American middle class has more to consider however. Consider these facts:

•Many states tax food. Food costs continue to rise often as a function of fuel costs and speculation (did you know both Coke and Pepsi buy corn futures because their products no longer use sugar- they use corn syrup).

•Transportation to our place of work is a necessity. No transportation, no work. We cannot drive a car without state-mandated "must have" auto insurance.

Recently we've been in a zero percent inflation environment. This doesn't seem to slow the increase in health care costs, however. Here is where I see housing and health care colliding:

Increases in health care costs continue to Erode Disposable Income.

With medical expenditures taking up a greater percentage of disposable income, this leaves less income for housing. Certainly, we could say the same thing for food, fuel costs or utilities as all impact disposable income. With greater access to medical care Life Spans will increase.

Again, another pending collision between health care and housing..... Where are all these people going to live? Where are we on the development path of seniors care versus day care?

I have questions. Yes, our standard of living is better than previous generations. But at what costs? Note the cost of housing is correlated to household income. Many households have two incomes. Is this now a mandated necessity to maintain housing affordability for a middle class standard of living?

One suggestion to remedy spirally medical costs is proffered by Clayton Christensen author of the book Disrupting Class.

Doctor Christensen suggest that the high costs of medical care as provided by high costs environments (like hospitals) should not be torn down. Instead, the provision of medical services should expand to lower costs environments, like clinics and in-home treatment through the utilization of technology.

Calling all social science graduate students (and Masters students in Real Estate) for further study.......

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