is government in the housing business? The standard answer
is because the market fails to provide adequate supply, particularly
to house the nations poor. Thus an array of government
programs from vouchers, mammoth housing construction, favorable
tax policies and top-down mandates on cities and towns take
up the slack caused by market failure.
multifaceted approach is politically popular, given the rent-seeking
demands made by various constituencies including the poor,
developers, urban planners and others. Despite the billions
lavished upon public- and publicly-supported privately-managed
housing, every municipality today is under pressure to expand
the affordable housing stock. As it does, it repeats the same
free market provides everything from automobiles, furniture,
computers and appliances to toothpaste, frozen foods, landscaping
and 57 varieties of ketchup, yet conventional wisdom suggests
that it cannot provide housing. Therefore, it is argued, the
long arm of government must find a way to meet this demand.
In fact, the role of the public sector has long gone unchallenged
by both the left and the right. The dismal results, the rotted
urban core of public housing, blighted cities and persistent
poverty, remain almost unabated. Once government has committed
to public housing, nothing else can take its place. All the
while, cities cannot discover what new, imaginative uses the
free market might have invented for these frozen areas.
Howard Husock maintains that the heavy-hand of government
is flawed, not because it is unable to manage the public housing
project down the street nor because it cannot fully socially
engineer the problem with vouchers and tax credits by moving
the poor into the suburbs, for example. Husock contends that
all programs the entire hodgepodge created by the state
are flawed to the core because the permanence of public
housing is not a safety net but a hammock. Few people muster
the courage to say that living in public housing should be
subject to time limits.
is a serious charge that might be dismissed as the ranting
of an idealistic libertarian content with perhaps letting
the local government pick up the garbage and fix a pothole.
But it is not. Husock, the director of the case study program
at the John F. Kennedy School of Government, has command of
every detail in American housing policy and knows all too
well the familiar arguments for the status quo. He does not
suffer any of them gladly. But the truth cannot be brushed
aside and buried among the tomes of public sector rationales,
repackaged as if they were old wine in a new bottle. The unintended
consequences of government action are so profound and disturbing
that everyone in the halls of Congress, the U.S. Office of
Housing and Urban Development, the Federal Reserve Bank and
state capitals should re-examine their core values.
Americas Trillion Dollar Mistake: The Failure of
American Housing Policy, Husock, with the eye of both
a journalist (an award-winning one at that) and an academic,
dismantles the entire progressive approach to housing. An
essay titled, We Dont Need Subsidized Housing,
is bound to shake the intellectual foundations of any prospective
effect, Husock sets out to convince us that public housing
actually harms the poor by limiting the prospects of urban
renewal. He also argues that the trillion-dollar shakedown
by community activists in the 1990s who deftly used the Community
Reinvestment Act as a weapon against banks would have probably
made radicals like Saul Alinsky proud. But they too fail.
The advocates do little to improve working class neighborhoods
since they channel money extracted from banks into programs
that lend to borrowers who are in no position to pay their
mortgages even if they are not required to make a down payment.
the ostensibly free-market tool favored by conservatives,
are a solution in search of a problem. With female-headed
households making up more than 80 percent of voucher holders,
the problem isnt housing; its out-of-wedlock births.
No housing program has ever made a dent in the out-of-wedlock
rate. As Husock notes, housing is affordable if there are
two wage-earners in the household. Moving such clients into
the working class neighborhood artificially inflates the cost
of housing nearby; moving such clients into the suburbs only
increases the demand for public services. Husock writes, Section
8 housing supports the weakest section of the real-estate
market the house that cant sell, the absentee
owner who doesnt perform well in the private sector.
It subsidizes the marginal sector.
did we get here? Husock says that three remarkably tenacious
myths promote the government as houser argument:
1) the market will not provide housing for the poor; 2) by
taking the profit motive out of the equation the state can
do better than small property owners in providing housing;
and, 3) the moral qualities of the poor are a product of their
proves that the market did in fact provide a substantial amount
of private housing in big cities like Chicago, New York and
Boston. Up until the New Deal, some 40 percent of the population
in the city of Boston lived in 65,376 units of triple-deckers.
Yet these structures were vilified by housing reformers. Today
the perverse incentives before builders encourage them to
follow the money of high cost subsidized housing.
dogma of housing before profits has been particularly
disastrous. Small property owners who have the incentive to
maintain their buildings can do a far more effective job if
only given the chance. Yet a state-financed affordable
housing complex in Cambridge costs $1.3 million for
eight units an astounding $162,500 per-unit price made
worse by maintenance costs. Governments and their nonprofit
management housing groups cannot continue to manage housing
below cost any better than a private landlord. In the long
term, government itself becomes the villainous landlord.
thinks less of the argument that the physical evils of poor
housing produce crime and social pathologies. No amount of
tinkering has improved the social environment where public
housing is located. Instead, tragically, those who work must
live alongside those who do not. Subsidies deny the self-sacrificing,
working poor the chance to put physical and social distance
between themselves and the nonworking poor. Public housing,
rather than independently achieved private housing, impels
many to settle at the low rung of the economic ladder. Moving
up would mean moving out.
critique of the status quo succeeds without providing a glimpse
of hope, and Husock finds it where few of the professional
housers intend to look: in Habitat for Humanity
or in the City of Charlotte, where time limits not
unlike welfare reform act of 1996 are applied also
to public housing. Both models place emphasis on the character
of the recipients by careful screening and sweat equity. For
Habitat for Humanity the results are staggeringly successful.
Few of its newly minted homeowners face foreclosure. These
results are missing in public programs.
Trillion-Dollar Mistake unfortunately does not seriously
examine the indirect subsidies to the private market that
are used by the middle and upper class, namely the mortgage
deduction. While there is some question as to whether the
value of the deduction has held up over the years, it remains
a vehicle for misallocating capital investment in the United
States. Any reform of public housing that doesnt pay
heed to this problem would be unjust.
any harm caused by the tax code is miniscule in both economic
and social terms compared to the calamity of the current system.
The poor and the taxpayer deserve better than theyve
been getting from Uncle Sam.
on 09-Dec-2004 11:42 AM