Module 4: Discussion

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MODULE

Seminar in Urban Problems

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University of Memphis Department of Public &

Nonprofit Administration

Euchner & McGovern (2003) Chapter 4 – Housing and the

Structure of Place

4

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Housing and the Structure of Place

 Housing refers to homeless shelters and mansions and everything in between

 Housing is connected to one’s personal conceptualization of “home”

 “Lumpy” – big and clumsy commodity in the free market; takes substantial investment, not portable, time consuming; buying a house is a long-term bet

 Building affordable housing isn’t typically profitable in the free market

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Housing and the Structure of Place

 “Government plays a vital role in making existing land usable” – infrastructure (streets, utilities, etc.) is key to development

 Cities typically have large areas of usable land, but government lacks the financial resources to prepare for development

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Housing and the Structure of Place

 Housing has ripple effects on the individual:  Typically their biggest expense  Location impacts access to opportunity (e.g.,

jobs)  Location tied to public education – “where

you live often determines how much you learn” (p. 140)

 Location tied to taxes

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Housing, Opportunity, and the City

 “American Dream” is often synonymous with one owning their own home

 Poor and minorities are less likely to live in well- maintained housing – society needs to offer the opportunity to work up to better housing

 Housing impacts the labor force  Home-life impacts work life  Children (future labor force) are impacted by the

home environment  Traditional gender roles have kept women out of the

labor force and as a homemaker

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Housing, Opportunity, and the City

 How is housing an “urban” issue?  Cities constantly contend with where to

develop – “tale of two cities” encompasses housing

 Loss of developer interest – easier to build in suburbs than cities

 Building housing in cities requires meticulous planning in relation to surroundings

 Sub-standard housing is prominent in poor and minority communities in cities

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The Character of American Housing Policy

 Private ownership is the foundation of housing policy – collective ownership of housing in the U.S. is atypical

 Major federal government influence – tax breaks on mortgage interest – primarily benefits middle/upper class

 Primary federal government housing agency – Department of Housing and Urban Development (HUD)

 Public policy related to housing can be conflictual

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Housing, the Economy, and the City

 Housing is related to roughly between 15-20% of the overall U.S. economy  Congressional Research Service’s (2019)

Introduction to U.S. Economy: Housing Market

 State of housing market typically represents the state of the rest of the economy

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Housing, the Economy, and the City

 How to measure housing affordability?  Percent of income (usually less than 30%)  Shelter poverty standard – if housing expenses

impact the ability to afford other necessities  Owning vs. renting

 Government-funded housing assistance programs (e.g., “Section 8”) assist with affordability but have typically long waiting- lists and have minor impacts on shelter poverty rates

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Housing, the Economy, and the City

 How to measure housing affordability?  Percent of income (usually less than 30%)  Shelter poverty standard – if housing expenses

impact the ability to afford other necessities  Owning vs. renting

 Government-funded housing assistance programs (e.g., “Section 8”) assist with affordability but have typically long waiting- lists and have minor impacts on shelter poverty rates

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Housing, the Economy, and the City

 Gentrification typically comes at the expense of poor and minorities – displaces communities

 National Community Reinvestment Coalition’s (2019) Shifting Neighborhoods: Gentrification and cultural displacement in American cities  Concentrated in cities; near central business

districts  Black and Hispanic residents impacted

disproportionately

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Housing, the Economy, and the City

 Urban housing policy must effectively address the housing rental market  Are rentals safe, secure, and affordable?  Are there wrongful eviction protections?  How to address professional landlords (i.e.,

corporations) vs. mom-and-pop landlords?

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Housing Policy

 “Rules of the game”:  Federal government regulates banks and interest

rates – housing loans  Federal, state, and local government set laws to

prevent discrimination in sale or rent of housing  State and local regulate development (how build)

and zoning (where build)  Two policy approaches:  Create more housing (supply) (e.g., Community

Development Corporations, public housing)  Impact purchasing power (demand) (e.g., Section

8, rent control laws, mortgage interest deduction)

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Regulating the Housing Environment: Financial Institutions

 Federal government involvement in housing spurred by Great Depression

 Federal Housing Act of 1934  Among multiple other things, backed banks

on long-term low-down payment mortgages – gave opportunity for working- class families to own a home

 Introduced mortgage deduction on federal income tax

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Regulating the Housing Environment: Fairness

 Fairness in housing was late to the game – racial discrimination was rampant, Federal Housing Authority actively encouraged such (see excerpts from 1934 manual)

 Supreme Court decision in Shelley v. Kramer (1948) – “restrictive covenants” (legal clauses prevented property sales to minorities) were deemed unconstitutional

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Regulating the Housing Environment: Fairness

 Fair Housing Act (Title VIII of Civil Rights Act of 1968)  “prohibits discrimination in the sale, rental, and

financing of dwellings, and in other housing-related transactions, because of race, color, religion, sex, familial status, national origin, and disability.”

 Lacked enforcement “teeth”  Someone trying to find a place to live will unlikely

seek legal action against those supporting discriminatory practices as they don’t have the resources to do so

 Urban Institute – “no question that access to housing remains unequal” in today’s society

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Regulating the Housing Environment: Local Development

 Zoning – codes and ordinances enacted by local government to limit what kinds of building can be built where in their jurisdiction (i.e., community)  Function, size of structure, and property

alignments  Historically used to isolate poor and minority

populations  State building codes determine the rules

by which builders can build structures – difficultly is to balance between ensuring safety and limiting overburdensome codes

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The Demand Side: Improving People’s Purchasing Power

 Mortgage interest tax benefit  Tax break for people to deduct mortgage

insurance from federal income tax bill  Intended to encourage home buying  Disproportionately benefits middle-class and

affluent populations; owners over renters  Brookings Institute – the Tax Cuts and Jobs Act

of 2017 is expected to reduce the claiming of mortgage interest deduction to about 8% of all returns (down from 20%

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The Demand Side: Improving People’s Purchasing Power

 Local property tax benefit  Tax break for people to deduct local

property tax from federal income tax bill  Local property tax varies substantially from

place to place, state to state

 Would eliminating these tax benefits destroy the housing market? Limit people’s ability to purchase homes?

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The Demand Side: Improving People’s Purchasing Power

 Section 8 Vouchers (Housing Choice Vouchers) – started during Nixon (1974) as alternative to public housing  Criticisms:  Not enough vouchers, long waiting lists  Not enough Section 8 housing (i.e., rental units

that accept vouchers)  Perpetuates social and racial isolation  Program that doesn’t encourage positive

behavior on either the side of the tenant or the landlord

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The Demand Side: Improving People’s Purchasing Power

 Secondary housing market  New Deal era created quasi-government

institutions that bought mortgages from banks to free up opportunity for banks to give out more mortgages (e.g., Fannie Mae)

 Freddie Mac established in 1970 to accomplish similar ends

 Fannie and Freddie assisted with housing growth in suburbs, rather than housing growth in cities

 Fannie and Freddie were involved in subprime mortgage crisis contributing to 2008 housing crisis and recession; required government bailout – Marketplace’s 10 years after the bailout

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The Demand Side: Improving People’s Purchasing Power

 Rent Control – local government policy that places limits on landlord rent prices  Not a widely used policy – primarily in NJ,

NY, CA, and D.C.  Difficult lies with balancing market fluidity

vs. renter protection

 Urban Institute 2019 policy brief on rent control in the U.S.

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The Supply Side: Creating More Units

 Public housing  Original intent – gateway to private housing for

those in temporary need – has not been the outcome

 Isolation by design and by NIMBY powers  Most Americans who don’t live in public housing

have a stereotypical negative image of housing projects and their residents, regardless of the project or the resident

 Diverse stories about success and failures – Five Myths about Public Housing

 “Public housing reflects the ambivalence of Americans towards class and race as well as a deep skepticism about the purpose of government.” (p. 170)

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The Supply Side: Creating More Units

 Nonprofit housing development  Nonprofits – particularly locally-based Community

Development Corporations (CDCs) – play HUGE role in public housing

 CDCs make deals to build up low-income communities through obtaining funding (philanthropic, grants, loans), acquiring land, and building housing – requires STRONG leadership

 Local nonprofits supported by nationwide organizations (e.g., Local Initiatives Support Corporation)

 Relationship between CDCs and local governments is mixed – partners and conflictual

 Congressional Research Service (2019) – Effectiveness of the Community Reinvestment Act of 1977

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The Supply Side: Creating More Units

 Homelessness  Numerous contributing factors; not one single leading

structural or individual factor; complex policy response to address all or even some

 Ranges from living on the street to couch surfing; working to unemployed – all stories are different

 Primary source of data about homelessness and homeless people in the U.S. – HUD’s Annual Homeless Assessment Report (AHAR)

 Primary federal response to homelessness – Homeless Emergency Assistance and Rapid Transition to Housing Act (HEARTH Act, 2009); formerly McKinney-Vento Act

 Lack of supply of shelters, SROs, transitional housing, and permanent supportive housing

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The Supply Side: Creating More Units

 Future of Housing Policy  Two broad policy approaches: market and social

production  Market – local govt remove barriers for private

sector to address affordable and public housing crises

 Social production (CDC approach) – grassroots participation to rebuild cities “block by block” with support from both private and public sector, driven by CDCs

 Community revitalization plans are key – how does new/redeveloped housing tie in the broader community plan?  Example – Pittsburgh Community Reinvestment Group