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Monday, December 7, 2015

Home- It Takes a Village to Build It

With this end of year post, I'm going to take the liberty to veer from my usual technical "how to" post to reflect on the current state of housing in America. Throughout the year, I have read article after article about America's housing shortage- there's not enough of it, it is too expensive, and as a result, many people don't have it, and others are stuck in a cycle of poverty as they try to hang onto it.

This has become an urgent issue for many cities and their leaders. (Meanwhile, Congress is cutting funding for affordable housing.) Cities like New York, San Francisco and Los Angeles have become economically segregated and prohibitively expensive for a large portion of their workforce. The Mayor of San Francisco recently announced a major initiative to produce more affordable housing, including use of bonds to raise $500 million. The Mayors of Los Angeles and Portland recently declared a State of Emergency due to the homeless problem. But this isn't just a big city problem. The apartment vacancy rate in my town, Chico, California (population approx. 90,000) is under 2%. It's also a statewide problem in California. The 2015 California Economic Summit cited the production of affordable housing as one of the three top priorities for the State in the coming year.

I don't think this issue has started to garner so much attention because leaders have suddenly started to be more sensitive to the needs of poor people. It's because the lack of affordable housing has begun to make an even more evident negative impact on the middle and even upper-middle class (i.e. they can't afford to live where the jobs are), and it effects other things that everyone cares about: economic well-being and the efficient use of public resources. As people appreciate the interconnectedness of the urban environment and the economy, they realize that a housing shortage cannot be isolated or ignored.

In order to refocus our priorities, we need to re-frame the way we think about housing. Since the post-WWII housing construction boom, our American society has viewed housing through the lens of individual choice and responsibility. The single-family home has been personalized like the automobile. This line of thought suggests that the responsibility for securing and maintaining a home lies solely with the head of the household, and it is of no concern to anyone else.

However, the perceived reality of homeowners being fully capable of purchasing and maintaining their home on their own is a myth. An individual's property actually has been everyone else's business for a long time, especially in post-WWII America, where federal stimulus programs (e.g. the GI bill, the mortgage interest tax deduction, government-backed mortgage securities) made it possible for middle America to afford homes. In addition, large-scale government investments in infrastructure, such as the Interstate Highway program, opened access to more land and greater supply, and subsequently more affordable homeownership opportunities. Who paid for those investments? Everyone, especially the wealthy, thanks to a tax structure that was much more progressive than it is now.

In the American experience, safe and sanitary housing has been more available when the government has taken an active role, and less available when that role has been abdicated to private property owners whose primary concern is personal profit. Even the homesteading of the 19th Century was made possible by government investment, such as the U.S. military relocating Native Americans and protecting settlers, and federal investments in rail and land surveying.

What has made a village a "village" from the dawn of civilization has been the communal construction of shelter. Cooperative construction of such shelter was usually the first order of business in establishing the village, and participation in that effort has traditionally been part of the societal social compact.

But even in the age of private property law, a home's monetary value is inexorably linked to developments in the community that surrounds it. If the City decides to put a nice park across the street from your home, you win, whether you did anything to deserve it or not. If the City doesn't help rehabilitate the dilapidated housing across the street from your home, and traffic on your street is awful because most people commute by car instead of living near work, you lose, whether you did anything to deserve it or not.

It's time to start thinking about the availability of affordable housing as a critical common concern of all citizens, and worthy of bold investment on a national scale. I'm not talking about massive communist housing blocks and one-size-fits-all top-down central planning. We already know how to make federal investments in a way that is responsive to markets and sensitive to local decision-making. The Community Development Block Grant (CDBG) program (conceived in the Nixon Administration) provides grants for public improvements benefiting low-income populations to local governments. The CDBG program sets broad spending criteria, and then allows local governments to spend CDBG funds in a way that meets local priorities, fosters local partnerships, and addresses local needs. It has proven to be broadly popular and effective. We need a similar program that will allow local governments to leverage other effective programs such as the Low Income Housing Tax Credit (LIHTC) to stimulate the production of affordable housing.

Unfortunately, Congress is not going to do this on their own anytime soon. In the meantime, housing professionals and activists should recommend and support solutions at the state and local levels. There are many proven models that can be pursued, such as local housing trust funds, social impact bonds, inclusionary zoning, and land use regulatory reform (see Paul Krugman's recent op-ed). We should also ask politicians how they are going to address the housing shortage, and hold them accountable at the ballot box if they do not. As is often the case, change will have to come from the bottom up, in particular from city leaders and their citizens who experience the impacts of the housing shortage on a daily basis.