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Friday, April 1, 2016

Cities Need Low-Quality Housing

Imposing Middle Class Standards Makes Housing Unaffordable on Lower Class Incomes

The market urbanism axiom — permitting housing supply to increase is key to achieving affordable housing — has been made recently by Rick Jacobus at Shelterforce and Daniel Hertz at City Observatory.

However both argue that even with an increasing supply, low-income people will need aid in order to afford what the authors feel is adequate housing. History shows us, though, that if developers are allowed to serve renters in every price range, they will.

The movie Brooklyn portrays the type of housing many of our grandparents and great-grandparents lived in when they emigrated to the United States. People of very little means could afford to live in cities with the highest housing demand because they lived in boarding houses, residential hotels, and low-quality apartments, most of which are illegal today.

Making housing affordable again requires not only permitting construction of more new units, but also allowing existing housing to be used in ways that are illegal under today’s codes.

Young adults living in group houses with several roommates have found a way around these regulations, but low-income renters were better-served when families and single people could pay for housing that was designed to meet their needs at an affordable price. Alan During explains the confluence of interest groups that successfully eliminated cheap, low-quality housing:

The rules were not accidents. Real-estate owners eager to minimize risk and maximize property values worked to keep housing for poor people away from their investments. Sometimes they worked hand-in-glove with well-meaning reformers who were intent on ensuring decent housing for all. Decent housing, in practice, meant housing that not only provided physical safety and hygiene but also approximated what middle-class families expected.

This coalition of the self-interested and the well-meaning effectively boxed in and shut down rooming houses, and it erected barriers to in-home boarding, too. Over more than a century, it acted through federal, state, and local rules in ways that sounded reasonable at the time: occupancy limits and requirements for private bathrooms, kitchens, and parking spaces. The net effect, however, was to essentially ban affordable private-sector urban housing for those at the bottom of the pay scale.

It’s true that the lowest-income Americans may not be able to afford a standard of housing that the median voter finds acceptable, but this is true for goods ranging from food to winter boots. Because food and clothing providers are allowed to sell goods at a broad range of quality levels, consumers are able to pick which level works best for their preferences and budget. Singling out housing as a good that requires special standards and assistance may soothe urban reformers’ consciences, but it makes low-income people worse off by eliminating choices that would otherwise be available to them.

Today’s housing reformers are using the same fear mongering about microapartments that Jacob Riis used over a century ago, saying that they lead to neighborhood overcrowding and that they are rented by undesirable people. Because a person in the lowest income decile has a higher living standard in every category of goods than a person in the lowest income quintile did 100 years ago, today’s low-quality, market-rate housing would be of a better standard than the tenements that helped fuel the progressive movement.

But a visit to the Tenement Museum shows that while tenement housing conditions are unimaginable by today’s standards, they were also home to upwardly mobile people. Many people who were children born in tenements in the 1920s grew up to have middle-class occupations and lifestyles.

Tenements provided housing that met a qualification that both Hertz and Jacobus stress; it was conveniently located and provided residents with easy access to jobs. Both writers point out that affordable housing is not only a regional issue, but that low-income people need to be able to live within a reasonable commute of the jobs that will allow them to improve their standard of living. Low-quality housing is key to achieving this goal.

While a free market would never achieve inclusionary-zoning’s intended (but rarely realized) outcome, in which units within a single building are rented at widely variable price points, American urban history shows that when supply is permitted at all price points, low-income and high-income neighborhoods are relatively closer together than they would be in the regulated markets the authors prefer.

During points to new microapartment developments as a promising sign that low-end supply is being provided, but these new construction projects are still out of reach for many renters. By allowing boarding houses and the subdivision of existing housing, market-rate housing could be much more affordable. This is the process through which Harlem’s middle-income row houses rapidly became affordable to low-income renters in the late nineteenth and early twentieth centuries.

While left-of-center analysts are increasingly advocating for the importance of an increasing housing supply to create the conditions that allow for low-income people to afford housing, Hertz advocates for housing vouchers while Jacobus supports more radical policies including rent control and social housing.

However, neither of these policies would benefit low-income people as much as providing them with the freedom to choose to allocate their own resources among many important goods, from housing, to food, to childcare. A basic income, rather than a voucher that can only be used for housing, respects the ability of low-income people to make the budgetary tradeoffs that are best for their households, even if these choices include housing that is below middle class standards.

This post first appeared at the Market Urbanism blog.

  • Emily Washington is a contributor to Market Urbanism and a policy research manager at the Mercatus Center.