Marketplace - Insurance price spikes threaten supportive housing programs

Episode Date: November 28, 2024

Permanent supportive housing programs are a preferred remedy for the homelessness crisis, experts say. Such apartments have more than doubled in the past decade. But lately, the organizations that run them are battling a new threat: property insurance charges, which have thrown some programs into dire financial straits. Also in this episode: Wage growth shows signs of cooling but remains ahead of inflation and analysts expect a record holiday season for buy now, pay later.

You know, today may be Thanksgiving, but tomorrow, you could say, kicks off a different kind of feast, one where the deals come quick and some of the payments come later. From American public media, this is Marketplace. In New York, I'm Marie Magraece in for Kai Rizdal. It is Thursday, the 28th of November. Happy Thanksgiving. Good to have you along. Now, it's safe to say many consumers, maybe yourself included, will wake up from their Thanksgiving food comas with a simple mission in mind.

Snag as many deals as possible. With Black Friday Tomorrow we officially start the holiday shopping season, and according to data from Adobe, about $18.5 billion of our purchases this year, let me say that again, $18.5 billion, are expected to be made using Buy Now, Pay Later. That's a new record, up more than 11% from last year. Typically, Buy Now, Pay Later, or BNPL, it lets shoppers split their purchases into installments. So you pay about every two weeks. And depending on the plan, it's typically interest-free.

Here's Marketplace's Stephanie Hughes with a closer look. An earlier version of Buy Now, Pay Later? Lay away. You know, pay now, slowly, receive later. In a way, the concept of buy now, pay later has been around for decades, but it's now having a digital moment. Vivek Pandya is lead insights analyst for Adobe. Pandya says buy now, pay later options

have become more common. Wherever people have a digital shopping cart, buy now, pay later is there. Also, with inflation, the items in those carts have gotten more expensive. You have some consumers who've been in a more strained financial position and they need to lean on BNPL to get what they need. Pandya says consumers often use Buy Now Pay Later for the big stuff, think a television or a mattress. But in the past couple of years, he's seen people using it to buy the necessary stuff, think groceries. Also, about three quarters of buy now, pay later spending takes place on a mobile device, which means it's easy

to hit buy. Mobile shopping really facilitates a lot of impulse buying. Also, at a time of still high interest rates. I think the 0% interest spread across two months is pretty attractive, right? Trevor Forbes is with TSG, a payments analytics firm. Being able to split it up as you get your check, you can make that deposit towards that purchase without having to do it all at once. There can be problems that come with using buy now, pay later. Like, say you don't have enough money to pay later. Lisa Gill is with Consumer Reports.

That non-payment can wind up on your credit report, and non-payments start to really ding that credit score pretty hard. On the flip side, Gill says some consumers use Buy Now, Pay Later, make that first payment, and then never receive what they thought they bought, while others have trouble returning it. So they were still paying on merchandise that they had never received or that they were extremely unhappy with. And that is where it gets into like, ugh. Gill says it's also possible to take out a bunch of buy now pay later loans at the same time with different companies. And she says the more loans people have, the more likely they are to get

overextended and wind up in what she calls a financial kerfuffle. I'm Stephanie Hughes from Marketplace. Wall Street was closed for the holiday, so we'll take a different spin. Details, numbers, coming up. You know, inflation is likely one of the reasons more shoppers than ever are expected to use buy now, pay later this season. Or I should say, not really inflation, but rather its lasting impact. Because inflation is cooling and the rate of price increases is gradually coming down. Wages though are a bit of a happier story. In October, average hourly earnings were up

4% year over year. Prices, meanwhile, rose by an annual rate of 2.3%. So what's this all mean for people's household finances heading into the holidays? Marketplace's Mitchell Hartman has that one. Back in 2022, inflation peaked at 9% and wage gains fell way behind, eroding the purchasing power of most workers, says Julia Pollack at ZipRecruiter. But since then, pay has been cashing up, and wages have now been rising faster than inflation. For about a year and a half.

Still, Pollack says, most workers are lagging behind where they would have been if pre-pandemic trends had continued. Because prices are still so much higher than they were before the pandemic. Meanwhile, if you work for a small business, you've likely been getting smaller pay bumps than the average American worker. Frank Fiorelli tracks wage inflation for payroll processor paychecks. It's definitely come down from last year where we were seeing some pretty robust growth.

You know, it moved under the 3% rate a couple months ago and then it popped back up. So a little bit of a uptick. All in all, says Ted Rossman at bank rate when it comes to workers' purchasing power. Even though the job market's been good, they're not feeling great about things. That's especially true of low and middle income wage earners, says Rossman. Many of them are overwhelmed by high prices for everyday living expenses, using credit cards to make ends meet, then falling behind. Bankrate reports half of credit card holders carry debt over from month to month, at an

average interest rate just over 20%. But some people are paying 25, 30 store credit cards. A lot of those are in the mid-30s. I mean, it's crazy. These are rates we used to think of for deep subprime borrowers, but now it's become increasingly common. There is some light on the paycheck horizon though. Julia Pollack at Zip Recruiter says heading into 2025, a majority of employers posting jobs on the site are boosting wages.

Almost one in four employers say they're planning significant increases of five percent or more. So it looks as though wage growth is back on track. The incoming Trump administration is a bit of a wild card though. Mass deportations could lead to labor shortages, driving wages higher. Those higher wages plus steep new tariffs on, could push prices higher as well. I'm Mitchell Hartman for Marketplace. So let's go from macro, thinking big picture about wages, to the very micro. I host a marketplace podcast called This is Uncomfortable, and I recently talked with a woman named Nikki Massey. When Nikki got offered a job many years ago, she didn't

really question the salary, which isn't unusual. 40% of employed adults who did not ask for more pay said they were satisfied with what they were offered. That's according to Pew. But what if you found out later that maybe you could have been making more money all along? Nikki described that moment to me. I was in my home office and the Human Resources Department decided to do a presentation. Nikki, who's in her late 40s, was working as a senior manager for a nonprofit in D.C. During this remote presentation, she remembers HR sharing a chart of her company's salary ranges. And that's when she saw her salary, $75,000, corresponding to the very bottom of her position's range.

It was a punch in the gut moment. I was just like, am I not doing a great job? Is this like a vote in their confidence in me? Like, what does this even mean that, you know, I make the absolute rock bottom that I can make for this position? And what was the highest amount? I believe the highest amount was like maybe 110 or 112 or something like that. It didn't make sense to Nikki. She'd worked at this company for 12 years and had been in that position for the last three. And management often praised her work. She wasn't sure who to turn to for advice. Her mom, who'd passed away, was

the only person in her life who had a professional job. I have people to talk it through about how I felt about it. I didn't have people to talk it through and say, okay, well, here's maybe what you should do next. Like strategically. Yeah. Hmm. Okay. So then the meeting ends. And then what do you do? I don't like causing a stink about things, but it was just like I might have to cause

a stink about this. Nikki's always felt fortunate to make a decent salary. But she's a single mom who helped put her two daughters through college. She hadn't taken a proper vacation in years. There was a giant hole in her kitchen ceiling, and she owed the government more than $65,000 in student debt. She set up a meeting with her boss, made the case for why she deserves a higher salary, and then she waited. Meanwhile, as time passed, she could feel her frustration hardening. I know this sounds cheesy but I just

didn't think that sort of thing would ever happen to me or that I would deal with that. And up to that point, I'd had sort of an idyllic view of the organization. I was like, we are family. We're family. And I was like, you know, that was like sort of my very real cue of like, you know, your job is not your family, your job is not your friends. And I think that that felt like a little bit of a betrayal to me. And when you say that, you thought you would never have to deal with that? What do you mean by that?

Um... I think that I thought that I was in a privileged position for a woman of color. Hmm. Because, you know, here I am, I have this college degree, I have a nice salary job, and I thought that, you know, I've risen above all of that, now I'm gonna college degree, I have a nice salary job, and I thought that I had risen above all of that. Now I'm going to be successful, and it's just like, you know, just not that scenario.

LESLIE KENDRICK We can't confirm what other factors might have been at play for Nikki. But we know Black women on average experience one of the largest pay gaps when compared to their male counterparts. Last year, according to the census, black women working full time earned 66 cents for every dollar made by white men. Not long after talking with her boss, Nikki got a promotion, but with no salary increase. She did manage to negotiate a bump, and then about a year later, she got another promotion. It wasn't, I didn't think, oh, you guys like me, you really like me. Um, it was more like, this is probably what I should have been making the whole time.

Even in the middle of all these promotions, she still felt like there was a lack of transparency, no recognition that she might have been underpaid. The trust that I had in the organization was kind of gone. I don't trust that I'm going to advance here the way that I would want to or need to. I think I want to start looking for another job. Lauren Henry Nicky applied for a position at another nonprofit to be the director of fundraising and marketing. She landed an interview and at the end of it, they asked her, what's your salary expectation? Nicky I did have to practice that

because it was like every time I said it, I would stutter. So I said it very confidently. I said, my salary expectation is 118. And do you know what she said to me? What did she say? She said, great, we're going to pay you 127. No. And I was just like, oh my gosh.

What? And then you're like, no, no, just kidding, 150. Well, part of me was wondering like, why, if you knew that, why, why, why did you ask me that question? Trying to name her salary felt like a question on a test she didn't know how to study for. Nikki's been working at this new job for the last two years, making more money than she could have ever imagined. She took her daughters on their first true vacation in years and plans to fix that hole

in her kitchen ceiling. As your children are getting started in their careers, what do you hope to tell them about how to think of their own value in the workplace? There's this sort of this propensity that I have, and I feel like other people have this propensity to just in general, lowball yourself or feel like you have to be the absolute expert at something before you can demand your worth

from something. There's not as big of a risk in taking a chance and just asking for what you want, as I seem to have perceived there being my whole life. Sometimes Nikki wonders if she could be making even more money today if she'd started negotiating earlier in life. Who knows? But she's set on helping her daughters, passing down the kind of wisdom she wishes someone

would have shared with her. If you want to hear more stories about life and how money messes with it, be sure to check out the Marketplace podcast that I host. It's called This is Uncomfortable. You can listen wherever you get your podcasts. Coming up... I think I would like to see less gray hair on my head. Wouldn't we all? But first, let's do the numbers.

U.S. markets were closed today for the Thanksgiving holiday. Tomorrow, Black Friday, the markets will have a shortened trading day. The great getaway started early, of course, with millions driving and flying to get to their destination. Just short of 80 million of us will drive 50 miles or more, according to AAA. They'll pay an average of $3.07 for a gallon of regular. Last year, it was 3.25 gallons. In New York, where I'm currently hosting, the average is $3.16.

Yesterday, TSA screened more than 2,700,000 travelers. TSA is expecting to screen more than 18 million travelers for the period between Tuesday and next Monday. That's an increase of 6% from last year. In Europe, Britain's footseed was flat and Germany's DAX increased nearly a percent. You're listening to Marketplace. This is Marketplace. I'm Rima Grace. To tackle homelessness, political leaders across the country have touted a seemingly

simple solution—build homes for people who don't have them. Better yet, put those homes in places where unhoused folks are already living—in cities close to public transportation and services. But here's the thing, more and more insurers are seeing those properties as too risky. Not because of potentially catastrophic storms or wildfires, but because of who lives there in the urban neighborhoods where they're located. KQED's Erin Baldessari has that story. Two years ago, Solomon Bukenya's hands were so swollen,

he could hardly move his fingers. So one day, when he was alone and needed to press a small button on the side of his prosthetic leg to remove it, he says he had no choice but to call 911. They came and told him, I can't press this button. Please, can you press it for me? And that's all they wanted to do. Imagine calling 911 for only that small thing.

Bukenye, now 65 years old, had been homeless since about 2007, living in cars and on the street. His health was deteriorating. I was so weak, my hands, my joints. I couldn't walk. But early last year, he got permanent housing in downtown San Francisco, where he gets health care and free meals. I'm feeling more stronger.

I'm like a 20-year, 25-year-old. That's the way I feel in my body. Research shows this kind of housing, known in the field as permanent supportive housing, leads not only to positive changes for residents, but to taxpayer savings too. Travis Hamilton is with Episcopal Community Services, which owns and operates Bucenna's building. It's so much more affordable in comparison to incarceration or long-term

hospitalization or literally the cost of one emergency room visit. The success of this model is a big reason it's grown. Across the country, the number of one emergency room visit. The success of this model is a big reason it's grown. Across the country, the number of these supportive apartments have more than doubled over the past decade, to over 660,000 units in 2023. But with the new buildings comes new insurance claims, evidence of which was on display at the apartment complex where Rukenya lives.

So unfortunately there was some water damage and we do have our elevators out currently. Hamilton says it can take time for people who've lived outside for a decade or more to reacclimate to apartment life. Folks take medication or are sleepy, not feeling well, leave the stove burner on, which can cause fires. It might only be a small stove fire, but water from sprinklers wreaks havoc. And each accident, even minor ones, can cause tens of thousands of dollars in damages. Beth Stokes is the executive director of Episcopal Community Services. We've had six fires over the past two years alone. We have had over seven floods. As a result, Stokes says insurance premiums

for her organization increased 34% over the past year, a mercy compared to other housing providers who've seen premiums more than double, forcing them to dip into operating reserves. Stokes says it's gotten so bad that insurance costs are now an existential threat. Because a lot of us are deeply concerned and what we're carrying on our books, we're all very concerned about the sustainability of the model.

Karen Collins with the American Property Casualty Insurance Association says the rise in claims for this kind of housing is piling up on top of other challenges in the industry right now, hurricanes and wildfires, higher rebuilding costs. All of these combined have resulted in very significant losses in the last few years. And so we are seeing premiums having to increase across the entire U.S. Unlike other landlords who might pass costs on to tenants, supportive housing providers can't. Rents are capped and subsidized by taxpayers. State insurance commissions are only just beginning to study this problem. Solutions could include a public backstop,

similar to federal flood insurance, or just more funding. At Episcopal Community Services, Hamilton says they're already doing what they can by designing buildings with features to prevent damage. We learned this from a painful lesson at another permanent supportive housing site that timers and stoves are really important. There are extra drains in the bathroom so water doesn't seep to floors below and monthly house inspections. If it looks like a resident needs help, Hamilton says there's support. Hey, what happened?

How can we help you prevent these in the future? Because preventing that next fire or flood might mean keeping the doors open. In San Francisco, I'm Erin Baldessari for Marketplace. It's that time of the year when friends and family gather to eat, play games, reminisce about the good old days, and yeah, maybe talk about what's on their minds. What if though this is something you do pretty much every day because you run a business with your family? We decided to check back in with Amber and Mallory Pollock, co-owners of Backwards Distilling Company in Casper, Wyoming, at one of their busiest times of the year.

It's been a good year for us overall. Most of the data coming out from sales data recently is indicating that there's some pulling back happening in the alcohol industry, particularly on the off-premise side of things, with people buying off of liquor store shelves. However, our tasting room sales and everything that we do here on site has been going really well. Costs have been a challenge. We've really tried to hold our prices to try to remain as competitive as we can, but we've

got a proposition of tariffs on the horizon again, which last time that happened, that affected glass, cardboard, aluminum, sort of a lot of the things that we do package in. And I don't think we have a lot of room to further absorb those increases. And so it's likely that we will have to consider a new pricing structure in the near future. I don't know if Mallory has anything to add. I think I would like to see less gray hair on my head. But something tells me that being part of a small family business will not allow for that. Yeah, I don't think it's reversible.

We are 10 years in business this week. This Friday we're doing a retro menu. We're throwing it back to some drinks that were on our menu years ago. And I just have these like, ah, this memory of like, oh my gosh, that drink was so hard to make and it was so cumbersome. I kind of joke, you know, with staff like, oh yeah, that frozen drink that took you three seconds to make, we used to make those by hand, one by one by one, with like an individual little blender.

And now it's just, you know, a big production of it. So I think that one is wild for me to see just on a micro level. Yeah, I think too when we opened we had one product, it was one bottle we made vodka. So every drink on the menu was vodka and that was the only thing we were selling. But I counted it up the other day for a presentation I was giving and we have put more than 30 products to the market now. To go from just a single product that we were making to have launched all of these different entries into the market, it's really wild.

I was going through my phone today and through my social media trying to reach out to folks who have supported us over the years to let them know that we're celebrating 10 years and to thank them for whatever it was that they contributed to our success. So it was really a very interesting kind of retrospective look at it. And many of them were or are still regulars, right? Yes. We have seen relationships come and go. We've seen first dates turn into engagements.

We've had engagements here, you know. We joke like when couples split, who's going to get backwards in the divorce? And I think it's very, very special to me to be able to witness that and see just how far we've come over the past 10 years. That's Amber and Mallory Pollock co-owners of Backwards Distilling Company over in Casper, Wyoming. This final note on the way out. Australia just became the first country to ban social media for children, specifically

those under 16. Lawmakers say the legislation is to help protect their mental health. You might be wondering, okay, but how exactly will it be enforced? The legislation does not make that clear, but platforms like TikTok, Instagram, Snapchat, and the likes will have a year to meet the requirements. Otherwise, the law says they'll be liable for fines of up to $33 million. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher, and Stephanie Sieck are the marketplace editing staff.

Amir Babawi is the managing editor. And I'm Rima Reyes. We'll be back tomorrow. This is APM.