Considering housing shortages and gentrification together

An MIT economist looks at the relationship between gentrification and a shortage of cheaper housing:

Unsurprisingly, the geography of a place and the community residing there are linked. Along the most measurable dimensions, richer people tend to live in places with attractive geographies. Conversely, places with undesirable attributes like industrial or transportation pollution, poor access to jobs, and uninviting climates are usually left for the poorest and most marginalized.

Usually—but not always. Occasionally, physically attractive locations come to be occupied by low-income communities, immigrant communities, black communities. Neighborhoods like these are ripe for gentrification. Changes in labor markets, large investments by public or private institutions, or even just changing preferences among the wealthy move these neighborhoods into the sight lines of richer people, and then they gentrify.

The housing shortage, meanwhile, is a region-wide round of musical chairs, in which the winners sat down before the music even stopped. Whereas gentrification reshuffles which communities occupy which parts of the city, the housing shortage can operate at the scale of cities and regions as well as neighborhoods…

Policies introduced to fight gentrification—rent control and tenant protections—may ameliorate the effects of neighborhood change, but they won’t build new homes. We must allow new construction somewhere, despite the changes this will bring. Of course, we must do so in a way that avoids gentrification.

Four quick thoughts on this argument:

1. This reminds me of my post from the other day comparing the perspective that there is not enough housing and there is plenty of housing but it is not cheap enough. This piece suggests there are multiple housing issues at work and policies might tackle one particular issue and not others (or even make other housing issues worse).

2. Does the multiplicity of housing issues require that Americans prioritize which issue matters to them most? If middle-class people want cheaper housing, that will lead to different approaches (public policies, legislation, urban planning, decisions by developers, etc.) compared to a consensus that gentrification is not desirable. Historically, Americans have tended to prioritize housing for the middle-class (broadly defined) at the expense of housing for the poor or homeless.

3. To truly address all of these issues, metropolitan-wide approaches are needed. Individual neighborhoods or municipalities are often left to tackle these on their own even though decisions by nearby neighborhoods or municipalities have significant effects on their housing.

4. Additionally, a comprehensive housing policy is needed, not just one that tackles the most important or noisiest issue at the moment. On one hand, many Americans would not want the government to become involved in such issues even as the government has promoted suburban homeownership for roughly a century.

Trump administration pushes housing deregulation

A look at the Trump administration’s approach to homelessness includes this summary of how they view housing more broadly:

Housing deregulation is probably the core of the report outlined by the Council Advisors. That lines up with the Trump administration’s overall position on housing—from Carson’s enthusiasm for breaking up exclusionary zoning to the housing plan that the Domestic Policy Council is drafting. Trump signed an executive order establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing in June.

While making it easier to build housing could ease the affordability crisis, it may be hard to achieve those reforms, Hanratty says. Several of the Democratic Party primary candidates have outlined housing plans with various strategies to promote new construction, but all of them would require sweeping new legislation. And in practice, deregulation might not produce housing that is affordable to very low-income families or people with substance-abuse or mental-health afflictions without subsidies.

This is a common conservative argument to make these days: the housing market needs to be a more free one with less interference from local governments as well as the federal government. Attempts at more explicit intervention – such as in public housing – have not proved popular. If the law of supply and demand could simply take over, the market would provide housing options for all.

However, this may not work as intended. The suburbs, a space seen as desirable by many Americans was not the result of free markets but rather the result of all sorts of social and government interventions. Would Houston’s growth without zoning look attractive for communities around the country? Without any regulations, developers and builders may have little incentive to build cheaper housing and instead pursue units that provide more profit.

Finding some middle ground where specific and limited interventions actually lead to more affordable housing will prove difficult. Without some negative consequences for communities and housing market actors who do not participate in providing cheaper housing, what can be done?

Linking Microsoft giving $500 million for Seattle area housing to tech companies and declining gov’t support for housing

Microsoft is pledging a substantial amount to address the important issue of housing in Seattle:

Microsoft plans to lend $225 million at subsidized rates to preserve and build middle-income housing in six cities near its Redmond headquarters. It will put an additional $250 million into low-income housing across the region. Some of those loans may be made through the federal programs that provide tax breaks for low-income housing.

The company plans to invest the money within three years, and expects most of it to go to Seattle’s suburbs.

The loans could go to private or nonprofit developers, or to governmental groups like the King County Housing Authority. As the loans are repaid, Mr. Smith said, Microsoft plans to lend the money out again to support additional projects.

This article frames the giving as part of the housing issues wrought by the actions of tech companies:

Microsoft’s money represents the most ambitious effort by a tech company to directly address the inequality that has spread in areas where the industry is concentrated, particularly on the West Coast. It will fund construction for homes affordable not only to the company’s own non-tech workers, but also for teachers, firefighters and other middle- and low-income residents.

From this point of view, the health of a region matters for companies. If workers, whether ones employed by a particular company or organization or others, cannot find affordable housing, it will be harder for the region to find and hold on to workers. Whereas businesses often focus on a good business climate (low taxes, tax breaks, business-friendly governments, etc.), housing is a big factor in finding a strong work force. Additionally, Microsoft can help show through these actions that they care about local conditions in ways that tech companies are often said to ignore because of their global status. Would Microsoft be the same if it were not in the Seattle region?

Another way to view this is that private companies are now taking on what the federal government should address:

The government spent about three times as much on housing programs in the 1970s as it does today, according to the National Low Income Housing Coalition. In the years since, the government has gotten out of the business of building public housing. And capital funds to repair the remaining public housing stock have been cut in half over the last 15 years.

Over this time, federal resources have increasingly shifted away from subsidizing the construction of affordable housing to subsidizing renters who find housing in the private market. And now most new below-market-rate housing is built not by public agencies, but by nonprofit developers leveraging tax credits. The value of those credits has declined recently as well, as a result of changes in the tax bill passed in 2017.

In a sense, Microsoft’s proposal is an extension of this story, as private actors continue to step in where the government once stood.

Ed Goetz, a professor at the University of Minnesota who has studied the history of public housing in America, said: “I don’t want to diminish the magnitude of what they’re doing. I think it’s important, and it will help. But it won’t solve Seattle’s problem.”

This argument suggests that private actors can only do so much to address housing issues. Because so much money is involved and the issue is so widespread, even $500 million may not do much in a single metropolitan region with high land and housing costs. Of course, the government is involved in the housing industry: the federal government for decades has supported single-family homes, primarily in the suburbs. At the same time, the government and the American people have always been more ambivalent about public housing. It is not as if  the housing market is a free market: the United States subsidizes mortgages.

At the least, this will be an interesting experiment: can Microsoft make even a small dent in the housing needs of the Seattle area? Will this help strengthen the metropolitan region or primarily serve as good publicity for the company?

Deciding at which social level to counter a social problem

Once groups of Americans agree that an issue in society needs to be addressed, they encounter an important question: at what social level should we target our efforts? There are numerous options for many important issues. For example, see an earlier post about how efforts to fight smog in Los Angeles did not seriously address driving but rather pushed Detroit to create more efficient vehicles.

Two social institutions regularly come to mind when I think about how many Americans want to address social problems: schools and the federal government. Even as different sides might not agree which problems they think schools or the federal government should, the country has regular debates about how these institutions should be doing something different.

Start with schools. Because attendance is compulsory, children spend so much time there, learning may be the universally recognized need in a knowledge economy, and what is learned as a child can carry through a full lifetime, they seem like they are great places to address issues.

For similar reasons, it may appear prudent to operate at the level of the federal government Because it has broad oversight over the United States, it has the potential to shape numerous lives. Certain issues are so big and/or affect so many people that the federal government may seem to be the only way to adequately address a concern.

Both institutions are important in our society yet enacting change at these larger levels can be very difficult. Change brings a lot of attention. Politicians on all sides get involved. Those opposed to large-scale government action can be energized. Crafting one-size-fits-all policies is difficult.

What, then, are alternatives? Here are three common ways Americans go if they do not want to go large-scale:

Work through local or national voluntary associations. This can range from the local Rotary to religious congregations and a group of neighbors who get together to do something. With de Toqueville’s oft-repeated quote about the zeal with which Americans joined such groups, this option could offer hope (even as Americans are not participating in these like they did before – see Bowling Alone).

Voluntary associations benefit from the eagerness of their members to participate but Americans can also work through local governments which are always present. Americans tend to like smaller-scale government activity and oversight. Why get the federal government or the state involved when a city or community, township, or county could try to address the matter? For some issues, this social level may be too local – larger issues are hard to deal with one community at a time. At the same time, these smaller governments could try a variety of options and this can provide information on what might work at larger levels.

Finally, Americans can work through individual action. There is a reason that we celebrate certain notable individuals who worked tirelessly and successfully to fight for their convictions: it is rare to see such individual level success (and often, these famous figures benefited from organizations and support behind them). The actions of one person may typically not accomplish much but the aggregate actions of thousands or millions of people can add up or passionate individuals can help start movements.

All together, it is not easy to figure out which option might be the most effective in order to address important social problems. For many issues, it is likely that people are trying to find solutions at all of these levels: schools, the federal government, voluntary associations, local governments, and individual action. Actions at these various levels can occasionally intersect and enrich each other, helping provide energy for a broader movement or consensus. Indeed, truly finding solutions to social concerns likely requires broad action, even if the efforts began at just one of these social levels.

Why I’m skeptical housing will become a national political issue

Even as affordable housing is a concern in a number of places in the United States, there is little national political discussion of the issue:

Franzini is joined in this quest by a curious cast of fellow travelers who are committed to raising the political profile of the American housing dilemma. As home prices creep up everywhere from established tech hubs to traditionally inexpensive cities like Boise and Nashville—and as homelessness reaches epidemic proportions on the West Coast—a number of organizations from a diverse array of sectors have recently formed to push for housing policy changes at the highest levels of government. They’re frustrated by the lack of engagement on housing that national political leaders are offering. And they’re finding that, at least for the moment, the first order of business is just educating people about the seriousness of the issue.

Here are four reasons why I believe it will be very tough to have a national political discussion, let alone pressure for the federal government to act, regarding housing:

  1. Housing is local. Americans would like local governments to handle the issue as they prefer, particularly those with more resources, to live in places that can limit others of lesser status from moving in. Residents and smaller governments argue that they should not be forced to build housing that current residents do not desire or give money to less deserving people for housing.
  2. Americans historically do not have much appetite for significant federal involvement in public or subsidized housing even as they like socialized mortgages for single-family homes.
  3. The housing industry has significant influence, from the National Association of Home Builders to the National Association of Realtors, due to the importance of the housing industry for the American economy and particular American ideals about what kinds of housing are preferred. Affordable or cheaper housing might generate fewer profits.
  4. Opponents to federal action will argue that Americans can have cheaper housing if they (a) are willing to move to metro areas that have cheaper housing (and plenty of them exist) and (b) truly take on the local power brokers that usually do not want the working and middle classes to access their wealthier neighborhoods. These arguments are plausible enough (though with issues) for a number of participants in the discussion.

A number of these reasons involve ideas about what should be part of the American Dream as well as perceptions about who can access it (so it involves race and social class).

A lottery for limited affordable housing housing, part one

Affordable housing is in short supply in numerous American cities and an example of a lottery for 95 affordable housing units in San Francisco illustrates the issue:

Subsidized housing is often rationed this way, by lottery. Many apply, few win, most are disappointed. The process is meant to be more fair than first-come, first-served. But lotteries make literal a deeper unfairness. For homeowners, the mortgage interest deduction is available to anyone who qualifies. For poor renters, there is never enough housing assistance to go around…

Amid all the wealth in this neighborhood, a one-bedroom at Natalie Gubb Commons would rent for around $1,000 to $1,200 a month, a three-bedroom up to $1,700. Apartments next door were three times as much.

That discount is possible through a mix of resources. Mercy Housing, the project’s nonprofit developer, effectively got the land free as part of a city requirement that the neighborhood’s redevelopment include affordable housing. The market-rate developer next door was subsidizing the project, along with city funds. Revenue from the state’s cap-and-trade emissions program helped. And Mercy used the backbone of nearly every affordable housing project in America, federal Low-Income Housing Tax Credits

But the tax bill’s implications for poor renters will be more profound. The odds are likely to grow worse than these: Last year, 53 households applied per each new affordable unit at The Meridian in Los Angeles; 84 for every home at Parcel 25 in Boston; 391 for each unit at Stargell Commons in Alameda, Calif.; 979 for every home at Our Lady of Lourdes Apartments in New York.

This is a reminder of both the acute need for affordable housing in more expensive cities as well as the limited approach to the issue from the federal government. Places that are often held out as the promise of America for their cultural diversity as well as their economic potential – such as San Francisco, New York, Los Angeles, etc. – are often difficult places for those who are middle-class and below.

Additionally, the federal government has never wholeheartedly committed to helping provide housing for all. As the article notes, American housing policy subsidizes single-family homes. This has been an intentional policy choice for decades, beginning before the post World War II suburban boom and then continuing through mass suburbanization as well as into the twenty-first century. It would be difficult to have a direct national political conversation about this since it tends to happen through elected representatives who rarely discuss housing and through various government agencies. Also, it is hard to know whether all those people who have moved to single-family homes in the suburbs have done so because that is what they truly wanted among numerous equal options or they were pushed to some degree by the political and cultural leanings in those directions.

There is another intriguing aspect of this article: both how the lottery is discussed as well as how the lottery is conducted. More on this in a post in a few days.

The first federal government document to mention “racism”

The Kerner Commission Report of 1968 is notable for a number of reasons. But, I had never heard this claim before:

Did the report change anything?

“I think so,” he said. “Using the word racism was important. That was the first time it had ever been in any government document. Black kids internalize this discrimination they’re feeling: ‘Maybe there’s something wrong with me.’ It was really essential to say you’re not crazy.”

I do not know whether this claim is entirely true. On the face of it, this sounds like the federal government was resistant to using a word that could easily describe decades and centuries of experiences.

But, on the hand, perhaps racism was not a commonly used term. A quick search of Google Ngram suggests the use of racism picked up steam in the 1960s:

GoogleNgramRacism

Still, even if it was relatively ahead of its time, every time I see the Kerner Commission Report I’m reminded of the applicability of its conclusions for the last fifty years.