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Sunday, March 19, 2017

The Hidden War on Affordable Housing

If developers are allowed to serve renters in every price range, they will.

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.

A War on Cheap Housing

Imposing special standards on housing may soothe urban reformers’ consciences, but it makes low-income people worse off.

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 micro-apartments 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, it was 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.

The Tenements

By allowing boarding houses and the subdivision of existing housing, market-rate housing could be much more affordable.

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.

Historical trends provide evidence that people born into New York’s worst housing moved onto better jobs and housing over time. The Lower East Side tenements were first home to predominantly German and Irish immigrants, and later Italian and Eastern European Jewish immigrants. The waves of ethnicities that dominated these apartments indicate that the earlier immigrants were able to move out of this lowest rung of housing.

The Tenement Museum provides multiple oral histories of people who were born in their apartment building and went on to live middle-class lives. In The Power Broker, Robert Caro provides an account of one community that had moved out of the Lower East Side to better housing in the Bronx:

The people of East Tremont did not have much. Refugees or the children of refugees from the little shtetles in the Pale of Settlement and from the ghettos of Eastern Europe, the Jews who at the turn of the century had fled the pogroms and the wrath of the Tsars, they had first settled in America on the Lower East Side. The Lower East Side had become a place to which they were tied by family and friends and language and religion and a sense of belonging — but from whose damp and squalid tenements they had ached to escape, if not for their own sake then for the sake of their children, whose every cough brought dread to parents who knew all too well why the streets in which they lived were called “lung blocks.”

This anecdote provides color to the demographic trends of upward mobility in pre-New Deal New York City. The East Tremont community demonstrates the ability of low-income people to improve their families’ plights in less than a generation. Not only had the people of East Tremont saved up to leave the tenements, but according to Moses’ account, all of the families in the community were saving to send their children to college, indicating further economic mobility for the children who were born in New York’s worst housing.

Allowing low-quality housing in today’s world won’t bring back the tenements of old.

Evaluating low-income residents’ lives in the tenements requires not comparing their lifestyles to their middle-income contemporaries’, but rather to their own alternatives. No one’s first choice is to raise their children in an area known as the “lung blocks” because of a high rate of tuberculosis. But the people who inhabited these blocks were fleeing famine, revolution, and violent anti-Semitism. While neither famine nor a tenement is ideal, the people who chose tenements did what they thought was best for themselves and their family given what they knew about housing conditions in America from their countrymen who traveled before them.

The Disaster of Public Housing

Some people have suggested that government housing support is a better option than cheap, privately-provided housing. But government housing has a long, broad, and universal history of decrepit living conditions, poor safety, and negative economic mobility. Indeed, a welfare state large enough to provide housing support to millions of immigrants would have drastically increased voter-opposition to the United States’ relatively open doors. Between 1840 and 1930, the United States accepted over 400,000 immigrants per year. If native-born American’s tax dollars were going to support housing for these immigrants, the reality is that far fewer would have been allowed to enter the country. Instead, they may have had to face circumstances far worse than New York tenements in Europe.

Allowing low-quality housing in today’s world won’t bring back the tenements of old. Since 1871, real per capita income has increased by an order of magnitude, and low-quality housing today will reflect that change. But even if given the choice, a Syrian family might choose to move to a ’20’s-style tenement over their current situation–if such a choice were legal.

Those advocating greater government support for housing seemingly embrace ahistorical accounts of previous and current public involvement in housing. Rather than leading to better housing for the poor, the most common outcome has been the elimination of residences deemed inadequate by politically influential people. In 1934 in an early slum clearance project, one of the dreaded “lung blocks” was demolished to make way for Knickerbocker Village, public housing for middle-income workers. The rental rate was more than twice that of a typical tenement, leaving the displaced tenement residents to search for housing they could afford as reformers razed it.

Charlie Gardner explains this process at the Old Urbanist:

It might not be going too far to say that the traumatic process of urban renewal instigated an involuntary filtering, as residents of the poorest areas were literally displaced — cast out of condemned homes — and forced to seek new housing from among a diminished housing stock.  These people probably did move into somewhat higher-quality housing, but at higher cost and possibly in more crowded conditions as well.

Early public housing projects in New York, Chicago, and Los Angeles were constructed for predominantly white, working- or middle-class tenants. Not until the 1960s did some of the earliest public housing become accessible to truly low-income people. At the same time, cities shifted toward building housing designed for its lowest-income residents. The role of government-provided housing in creating generational poverty is well-known. Unlike the children born into tenements, people living in public housing today tend not to improve their economic circumstances throughout their lifetimes or across generations.

Inclusionary zoning avoids the problems of concentrated poverty; however, it will never put a substantial dent in the need for housing that is accessible to the truly low-income. Furthermore, it exacerbates affordability problems for those who don’t win the IZ lottery. Today’s tenant-based Section 8 vouchers are a step in the right direction away from the horrors of slum clearance, government-built housing, and privately-built Section 8 projects. However, the $40 billion that the federal government spends annually on housing still leaves a decades-long waiting list in many cities. Simply allowing private property owners to lease smaller and lower-quality units would let vouchers go further and provide options that are better than homelessness for those who don’t receive vouchers.

Are Micro-Apartments Enough?

Alan During points to new micro-apartment 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 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.

Adapted from two articles first published by Market Urbanism.

  • Emily Hamilton is a Research Fellow for the State and Local Policy Project at the Mercatus Center at George Mason University. Her research focuses on urban economics and land-use policy.