Tag: Housing

Markets and Social Justice in Housing and Education

For decades, discriminatory housing policies in the U.S. restricted the ability of black citizens to purchase homes outside of predominantly black ghettos. From the 1950s through the 1970s, real estate speculators called “blockbusters” made some progress opening up white-only neighborhoods to black families until an odd coalition of segregationists and left-wing activists succeeded in regulating blockbusters out of existence. Tragically, the U.S. housing market has remained largely segregated even until today. Moreover, because a family’s access to a quality education is determined primarily by the location of their home, black children are disproportionately assigned to low-performing district schools, depriving them of opportunity. 

Sadly, misguided suspicions about the market led left-wing leaders to support paternalistic regulations that harmed the very people they intended to help – a disastrous mistake that many modern progressives are now repeating in education policy.

In a recently updated version of his 1998 paper, “A Requiem for Blockbusting,” Dmitri Mehlhorn of the Progressive Policy Institute details the sordid history of discriminatory housing policy in the U.S. When Southern agricultural jobs dried up in the early 20th century, black workers began migrating to the industrial North. The response was ugly:

White Americans mostly reacted to this migration with coordinated and violent hatred. Driven by xenophobia, they used physical, political, and economic power to drive blacks into strictly circumscribed ghettos. The ugliness was a team sport, including local governments, state and federal agencies, courts, businesses, and the media.

At the federal level, the Federal Housing Administration encouraged racial covenants, stating that they “provide the surest protection against undesirable encroachment and inharmonious use.” These covenants contractually prohibited homes from being resold to black families. By the 1940s, integrated neighborhoods had ceased to exist in every major city in the United States.

The U.S. Supreme Court eventually ruled against racial covenants in housing, but racists found workarounds. As Mehlhorn details:

For instance, both federal and local agencies encouraged white flight by steering resources to whites seeking segregated suburban houses and schools, while cutting those resources for black families. So-called “urban renewal” laws were used to raze expanding black neighborhoods that threatened white institutions. Federal funds were used to construct massive public housing projects for the displaced black residents.

We are still feeling the effects of these discriminatory policies today, particularly in education, which is intimately linked with housing policy. According to a 2012 study by the UCLA Civil Rights Project, “80% of Latino students and 74% of black students attend majority nonwhite schools (50-100% minority), and 43% of Latinos and 38% of blacks attend intensely segregated schools (those with only 0-10% of whites students) across the nation.”

Why Is the Rent Too Damn High? Because We Ignore the Real Problem

Rising home prices and apartment rents have been in the news lately, but almost no one is looking at the real causes behind these problems. Instead, they are proposing band-aid solutions that will do little to help most people afford housing but will greatly benefit special interest groups.

According to the news, BostonLos AngelesMiamiNew YorkPortlandSan Francisco-Oakland, San JoseSeattle, and Washington, DC, among other major urban areas, are all suffering from housing crises. Economists who have studied these regions know why their housing is becoming less affordable.

First, urban-growth boundaries and other land-use regulations in most of these regions have limited the amount of land available for new housing. Urban planners say these regulations are needed to control the externalities caused by urban sprawl. However, as New Zealand’s Deputy Prime Minister recently noted in a speech about a similar housing crisis in Auckland, urban planning itself “has become the externality” that is making housing the most expensive.

Second, in many of these regions–specifically, Los Angeles, New York, San Francisco-Oakland, San Jose, and Washington–rent control has only made housing less affordable for everyone not lucky enough to live in a rent-controlled apartment. Even though some of these cities exempt new developments from rent-control rules, developers know that such exemptions could be eliminated at any time and are wary of investing in new housing. Many of these and other cities have also passed “inclusionary zoning ordinances” that force developers to sell or rent 10 to 20 percent of the new housing units they build at below-market rates, which both discourages new development and increases the cost of the market-rate units that are built.

Although these problems are obvious to anyone who understands the rudiments of supply and demand, they are almost completely ignored by politicians, housing officials, and low-income housing advocates. Instead, the almost exclusive focus is on building government-subsidized (or, in the case of inclusionary zoning, developer-subsidized) housing. Yet this does nothing to solve the problem for the vast majority of homebuyers and renters.

The Most Racist Urban Area in America?

Yesterday, the Department of Housing and Urban Development (HUD) approved a new fair housing rule called Affirmatively Furthering Fair Housing. This follows the Supreme Court’s recent ruling allowing HUD to use disparate impact as a criterion for determining whether a community is guilty of unfair housing practices.

 Wikimedia photo by Bernard Gagnon.

In one form of disparate impact analyses, HUD compares the racial makeup of a city or suburb with the makeup of the urban area as a whole. If the city doesn’t have enough minorities, it is presumed guilty and must take steps to attract more. Under the Affirmatively Furthering Fair Housing rule, that could mean subsidizing low-income housing or rezoning land for high-density housing.

While I have no doubt that prejudice is still a factor in housing in America, there are many other factors that influence the distribution of people across an urban area. These include religion, education, and personal tastes in food, recreation, and other activities. For example, low-income families with children will be more likely to live near a Walmart Supercenter while high-income families with no children will be more likely to live near a Whole Foods. To expect every suburb, most of whose borders are based on little more than historical accidents, to have a perfect mix of races is absurd.

This Is the Housing Market You Wanted, Hillary Clinton Staffers

The New York Times reports:

For decades, idealistic twenty-somethings have shunned higher-paying and more permanent jobs for the altruism and adrenaline rush of working to get a candidate to the White House. But the staffers who have signed up for the Clinton campaign face a daunting obstacle: the New York City real estate market….

Mrs. Clinton’s campaign prides itself on living on the cheap and keeping salaries low, which is good for its own bottom line, but difficult for those who need to pay New York City rents….

When the campaign’s finance director, Dennis Cheng, reached out to New York donors [to put up staffers in their apartments], some of them seemed concerned with the prospective maze of campaign finance laws and with how providing upscale housing in New York City might be interpreted.

Here are some words that don’t appear in the article: rent control, regulation, zoning. But those are among the reasons that housing is expensive in New York. As a Manhattan Institute report noted in 2002:

  • New York City and State have instituted policies that severely distort the dynamics of housing supply and demand. Only 30 percent of the city’s rental units, for instance, are subject to market prices. These distortions—coupled with Rube-Goldbergian environmental and zoning regulations—have denied New York the kind of healthy housing market enjoyed by most other major cities.

And a report by Edward Glaeser and Joseph Gyourko for the Federal Reserve Board of New York Economic Policy Review suggests that “homes are expensive in high-cost areas primarily because of government regulation” that imposes “artificial limits on construction.”

As I’ve said in other contexts: This is the business you have chosen. If you want the government to control rents and impose regulatory costs on the building of housing, then you can expect to see less housing and thus more expensive housing. Welcome to your world, Hillary Clinton staffers.

Housing and Wealth Inequality

American Nightmare is in some ways the most profound of the three books I have written for Cato. It covers a wide range of issues, including a detailed explanation of the 2008 financial crisis. But the overarching theme is that urban planning and zoning are best viewed as a form of economic warfare by the upper and middle classes against the working and lower classes. While that might not have been the original intent, to judge by the smug attitudes of the beneficiaries of such planning and zoning, they are perfectly happy with the results.

The book, therefore, was really about inequality, an issue that of course has been made popular and controversial by Thomas Piketty’s book Capital in the Twenty-First Century. Piketty’s thesis is that income inequality is necessarily rising because the returns to capital wealth are greater than overall economic growth, thus giving people one more reason to hate capitalists.

Last month, a paper by an MIT graduate student in economics named Matthew Rognlie, examined Piketty’s thesis in detail. Rognlie found that, contrary to Piketty, the returns on most kinds of wealth and capital have not been greater than overall economic growth, and therefore haven’t been contributing to income inequality. The one exception, Rognlie found, was housing.

Ignoring the Law of Supply and Demand

A recent report from Fannie Mae finds that baby boomers are not leaving their comfortable suburban homes for lively inner-city communities with walkable streets. As a news article about the report observes, this challenges the “conventional wisdom that ‘empty nester’ baby boomers would eventually downsize from the homes where they raised families, flocking instead to apartments or condos.”

Rather than conventional wisdom, it would be more accurate to say that this notion was wishful thinking among urban planners who believe more Americans should be packed into high-density “compact cities” where they will get around by foot, bicycle, or transit rather than by automobile. In contrast, demographers have known that populations of virtually all age groups, whether millennials or empty nesters, are growing faster in the suburbs and exurbs than in the cities. After all, the baby boomers’ parents overwhelmingly preferred to “age in place” rather than move when their children left home; why should baby boomers be any different?

Despite this, regional planning agencies all over the country are writing plans that presume America will need no more single-family homes, especially on large lots, and instead will need lots of apartments, condos, or townhouses. Many of these plans effectively zone away the possibility of new single-family homes on large lots while they subsidize construction of high-density housing. For example, the San Francisco Metropolitan Transportation Commission’s Plan Bay Area mandates that 80 percent of all new housing be in high-density urban centers.

To justify these plans, the planning agencies often hire Arthur C. Nelson, the University of Utah urban planning professor who in 2006 predicted that the U.S. will soon have 22 million surplus single-family homes on large lots. Nelson wrote a 2011 report predicting that the Bay Area, which has one of the most acute housing shortages in America today, would have a surplus of nearly 572,000 single-family homes by 2040; Plan Bay Area relied heavily on this report to justify its strict land-use policies.

Polarization and Freedom

A new Pew poll finds that three out of four “consistent liberals” would rather live in a community “where the houses are smaller and closer to each other” but within walking distance of schools, stores, and restaurants. Conversely, three out of four “consistent conservatives” would rather live in a larger home on a large lot even if it means driving to schools, stores, and restaurants.


Source: Pew Research Center. Click chart to download Pew’s 121-page (3.5-MB) report on polarization in America.

Pew says this shows that “differences between right and left go beyond politics,” which Pew claims is one of the seven most important things to know about polarization in America. Yet the left has turned the choice between a traditional suburb and a so-called walkable community into a political issue, so it is no wonder that people’s views on this choice are polarized.

Disappointingly, Pew’s report on polarization defines everything in terms of liberal vs. conservative. Pew’s big news is that the share of Americans who are consistently conservative or consistently liberal has more than doubled since 1994–yet you have to read deep into the report to learn that these groups make up just 21 percent of the country. The report says little about the other 79 percent of Americans, yet you’d think they would be important since they outnumber the consistent ones by almost four to one.