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?

Suburbanites can rally en masse against (and for) zoning issues

Suburbanites may participate at low rates in local elections but they certainly can be energized by controversial local zoning proposals. More on the ongoing Haymarket case in Itasca, Illinois:

Itasca plan commissioners admitted they underestimated public interest in a proposed addiction treatment center when a crowd representing 16% of the town’s population packed their meeting Wednesday night…

Demonstrators marched earlier Wednesday evening through downtown Itasca to pressure a Chicago nonprofit group to abandon plans to convert a hotel into a 200-bed drug and alcohol treatment center…

Prominent politicians, advocates and other nonprofit groups have thrown their support behind Haymarket, maintaining that the center would address a shortage of easily accessible residential programs for recovering addicts in DuPage County. Proponents also say much of the outcry stems from the stigma around opioid addiction…

Opponents have focused their main objections on the size and location of a facility they say would put too much of a burden on the village’s police and ambulance services.

Quite the excitement for a suburb with less than 10,000 people. Several parts of this latest news report stood out to me:

1. A public march through the community from those opposed to the center.

2. Public demonstrations of support from those in favor of the facility. While there may be a good amount of NIMBY activity, there are also people willing to stand up for the facility.

3. That this all is based on a medical center. This is not a landfill or huge condominium building in a town of single-family homes. Of course, it is not just any medical center: it is one involving drug treatment. (And many suburbs do not like getting involved with anything to do with drugs.)

4. This is not how such local political activity works but it would be interesting to hear where Itasca residents think the facility should be located or whether they could help broker a deal for another community rather than just reject the local proposal. More broadly, how might communities and residents work together to locate facilities that may be undesirable but are needed?

Not just aiming to have separate school districts; secede and form whole new municipalities

Residential segregation is powerful in the United States and can include looking to secede from a city to form a new largely white community:

The parents’ first petition drive to create a city, which ended in 2015, looked as if it would be successful. Supporters of St. George, arguing that the schools in East Baton Rouge Parish were not doing enough for their children, had amassed more than 18,000 signatures, and submitted them to the registrar to be certified. But the same day as they submitted their petition, a group known as Better Together submitted its own forms to the registrar. “We did a withdrawal campaign,” M. E. Cormier, a spokeswoman for the Better Together campaign, told me. “We went door-to-door, told people about the detrimental effects of the creation of St. George, and we were able to get 1,000 people to withdraw their names from the petition.”…

In between the failed 2015 attempt and the new one, they tried to iron out a new strategy. They cut down the geographic area of their proposed City of St. George. The original map was roughly 85 square miles; the new area was 60. It would be easier to gain the signatures necessary for a new community with a smaller area. As soon as the proposed map was released, several people in favor of keeping East Baton Rouge Parish together noted that the new map, coincidentally, carved out several apartment complexes—places where black and low-income families lived.

St. George supporters vehemently denied the suggestion that the map was drawn with any malicious racial intent. “The decision on what areas to include and not include was based exclusively on the amount of previous support for the effort,” they wrote in a post on their official Facebook page. “If a precinct had a small percentage of signatures and clearly did not want to be in the new city, they were not included in the updated boundaries.” But practically, that meant that the proposed area of St. George became whiter and more affluent.

The organizers did something else significant as well, Michael Beychok, a political consultant who lives in what would become the new city, told me: They stopped talking so much about the schools. “They know, and we know, that the school argument is not their best argument to incorporate,” said Beychok, who is one of the organizers of One Baton Rouge, a group opposed to the creation of St. George.

The United States has a long history of communities being formed to avoid people of particular groups. This could work in multiple ways. For example, many suburbs at the turn of the twentieth century resisted annexation by the adjacent big city. Or, suburban communities incorporated in order to pursue particular zoning or development policies that could exclude certain people.

That this conflict started with school districts should be of little surprise as issues of race and class often are contested through this particular institution. While the issues can be phrased in terms of school performance or behaviors, it is often about race and class. This reminds of a chapter in Rachel Heiman’s book Driving After Class where suburbanites battle over redistricting lines with the goal of preserving privilege in certain school buildings while other students do not get the same access.

If a new municipality is formed, it would be interesting to see how its reputation develops. On one hand, the racial reasons for its formation could dog the community for decades. On the other hand, the residents of the new community may not care about outside opinions as they get to use their resources as they desire.

See a similar case last year outside of Atlanta.

A town of over 53,000 residents can elect a mayor with just over 3,600 votes

Municipal elections in Illinois took place this past Tuesday. In my suburban community of just over 53,000 residents, here are the results for the two races:

WheatonMunicipalElectionResultsApr19

In races for two important local positions, voter turnout was relatively low. Of the roughly 41,000 adults in the community 18 and older, the mayor was elected by 3,617 voters while his opponent had just over 3,200 votes. In the councilman race, the numbers are a little harder to interpret because voters could select two but the numbers are certainly not much higher. Overall, under 20% of adults voted (hard to know how many are registered) and less than 10% of those adults selected the next mayor.

Perhaps there are a variety of factors at work:

  1. Do residents/voters believe that municipal elections matter? What do local officials do anyways?
  2. Holding municipal elections separately from larger races – state and national races that tend to get more attention – could lessen enthusiasm.
  3. Perhaps the candidates are not that exciting (the two mayoral candidates shared multiple characteristics) or they are unknown to broad swaths of the community.

Low voter turnout is now common and it may not take much to be voted in to local office. But if suburbanites claim to value local government, it is not hard to see the disconnect between choosing local leaders and wanting to maintain local control.

 

Local political slates: contrast “values” and “progress”

Local government races in many suburbs and small towns are non-partisan but this does not stop opposing groups of candidates from aligning themselves with particular ideas. See this example from Lake Zurich, Illinois:

The race for three seats on the Lake Zurich village board pits two slates with fairly disparate ideas about where the village should be headed and how to get there against each other. Among the key differences between LZ Values and Lake Zurich Progress is how to spur development in the struggling downtown.

Simple names but complex ideas. Presumably, one group wants to hold on to the best of what Lake Zurich is – the LZ Values slate – while the other has ideas about positive change for the community – Lake Zurich Progress. Local voters who are looking for help in who to vote for can just latch on to these ideas rather than the candidates themselves or particular policy positions. And this might be necessary when local turnout is so low (despite how Americans tend to value local government).

When the landlord for a single-family home is an institutional investor…

Alana Semuels explores what happens when you rent a house from an institutional investor:

I talked with tenants from 24 households who lived or still live in homes owned by single-family rental companies. I also reviewed 21 lawsuits against three such companies in Gwinnett County, a suburb of Atlanta devastated by the housing crash. The tenants claim that, far from bringing efficiency and ease to the rental market, their corporate landlords are focusing on short-term profits in order to please shareholders, at the expense of tenant happiness and even safety. Many of the families I spoke with feel stuck in homes they don’t own, while pleading with faraway companies to complete much-needed repairs—and wondering how they once again ended up on the losing end of a Wall Street real estate gamble…

As the industry started to grow, the major players all described their desire to standardize and improve the business of being a landlord. But even to the companies’ employees, the effort to become more efficient started to look more like craven attempts to squeeze tenants. “It shouldn’t be just about making money, but that’s what it turned into,” Shanell Hanson, who was a property administrator for Colony American Homes in an Atlanta suburb from 2014 to 2016, told me. Hanson said the company had six maintenance workers for 2,100 homes in the area she managed. Residents would frequently call with substantial problems: Sewage was overflowing, or the house was full of mold. But with such a small staff, Hanson could rarely deal with the problems quickly. And the law was on the corporations’ side: If tenants want to seek financial remedy for a landlord not keeping the property in adequate condition, under Georgia law, they have to take the landlord to court, a costly and lengthy process. “It’s almost impossible to do without an attorney,” Lindsey Siegel, an attorney at Atlanta Legal Aid who works on housing issues, told me…

Many other single-family landlord companies were cutting corners on maintenance and repairs. “As the corporation got bigger, it just got worse, in terms of what we had to work with and how we had to deal with problems,” a former Los Angeles leasing agent who worked for Waypoint between 2015 and 2017 told me. (She spoke on the condition of anonymity because she still works in real estate.) Regional teams received bonuses for keeping costs low, she said, which incentivized them to skimp on spending. Instead of responding to tenants personally, supervisors would send calls for maintenance to out-of-town call centers—which would in turn assign maintenance workers dozens of repairs in a day, not realizing that Los Angeles traffic could mean that relatively short distances could take hours to traverse…

Tenants also say that rather than taking advantage of economies of scale, the rental companies are taking advantage of their clients, pumping them for fines and fees at every turn. This impression is backed up by the financial reports of the companies themselves. American Homes 4 Rent increased the amount of money it collected from “tenant charge-backs” (essentially billing tenants for repairs after they move out) by more than 1000 percent between 2014 and 2018, according to company earnings reports, though it only grew the number of homes it owned by 70 percent over that period. In some states, Invitation Homes keeps the utilities in its name, and charges tenants a monthly $10.99 “utility service fee,” which is in addition to the cost of water, gas, and electricity. The company increased its “other property income”—the amount it collected from resident reimbursement for utilities, service charges, and other fees—by 114 percent between the first nine months of 2017 and the first nine months of 2018, despite only growing the number of homes it owned by 71 percent. On an earnings call in 2017, Invitation Homes’ then-CEO John Bartling said that “automated charges to residents” drove profits in the quarter, leading to a 22 percent increase in “other income.”

I wonder how much of these issues are due to overwhelming emphasis in the United States on homeownership rather than renting. Do large companies think they can do this to renters because the long-term goal is to sell the property for a large sum to a homeowner (or another investor)? Similarly, do renters put up with this for a longer period of time because they expect to leave the rental market? Or, perhaps in markets where renting is more common and more rental units are available, renters would leave these situations sooner and institutional investors would have to do more to keep renters?

I would also be interested in more information on the profitability of such companies. How lucrative is it to purchase thousands of homes? While Americans historically are opposed to government involvement in housing (unless it is subsidizing suburban single-family homes), stories like these seem like they could be used to justify more government intervention in regulating housing. But, what if regulations cut into profits? The housing industry is a large and profitable one.

Another angle to take here would be to examine how these institutional investors do or do not contribute to local communities. One justification of homeownership in the United States was that it gave owners a stake in their local community and government. Yet, much capital in the world today is global and real estate decisions made thousands of miles away could heavily influence smaller communities that look like – they are full of single-family homes – they are constructed to emphasize local control.