HOMEOWNERSHIP

Between 1940 and 1990, housing growth in the United States outpaced population growth by 173 to 88 percent, and the proportion of homeowners nearly doubled. The same trend is observable internationally, and scholarly debate weighs whether demographic shifts or policy decisions are to blame.

A 2015 book by NANCY H. KWAK examines the rise of homeownership in light of US foreign policy and economic objectives. Focusing on the export of low-income homeownership programs, the book situates housing policy within broader distributional debates.

From the introduction:

"In the US, the homeownership ideal had begun forming in the mid-nineteenth century. Tracts on pastoral-republican suburbinization, Calvin Coolidge's call for a 'Nation of Homeowners,' the Better Homes in American Movement and the Home Modernizing Bureau all helped build an ideology that connected national identity with single-family owner occupancy. At the end of World War II, American advisors began urging countries around the world to push local, undocumented land uses to the margins and consider formal homeownership as a long term goal for the masses. Mass homeownership fuelled globalization by standardizing local processes of housing and land valuation, use, and tenure into a uniform system facilitating national and international investment. As more people participated in a globalized property and credit system, more of the urban landscape became friendly to corporate investment, making policymakers amenable to mass urban resettlement and modernization schemes. Implicit and reinforced in this system was the belief that the middle class served as a critical anchor for political stability, and that homeownership not only anchored the middle class but created it.

The World Bank played a particularly important role in normalizing an American version of mass homeownership at the end of the twentieth century. Up until the 1970s, the Bank had not exhibited much interest in directly addressing urban poverty, and its workers thought of housing primarily as welfare provision rather than generative investment. It was only in an era of explosive urban poverty and declining congressional support for American bilateral aid programs that the Bank took a more active role, beginning in Senegal, then moving to Tanzania, Zambia, Indonesia, and others. World Bank housing experts clarified that property rights could confer 'enormous benefits on many poor families.' "

Link to the book. h/t the one and only Paul Katz.

• "In Canada and the United States, industrialization and urbanization occurred more or less simultaneously, creating a substantial working class in the growing cities by the early 20th century. In Latin America and the Caribbean, on the other hand, dependent industrialization resulted in a rapidly growing urban population with a relatively small industrial sector, a large commercial service sector, and a significant informal urban economy." Kwak and Sean Purdy introduce a 2007 Urban History issue on "Public Housing Histories in the Americas." Link.
• "Planning colonias proletarias required surveying and subdividing land, actions undertaken by municipal engineers, architects, and planners. But it also required negotiating with resident associations and political brokers who deftly manipulated municipal codes and blueprints." Emilio de Antuñano's dissertation on urban planning in Mexico City, 1930-60. Link. And another dissertation by Michael William Sugarman compares housing policy in Bombay, Hong Kong, and Singapore from 1894-1960. Link.
• "Taking the city of Sydney, Australia, as exemplary of a dynamic that has unfolded across the Anglo-American economies, we explain how residential property was constructed as a financial asset and how government policies helped to generate the phenomenal house price inflation and unequal capital gains of recent years." A 2019 precursor to Lisa Adkins, Melinda Cooper, and Martijn Konings' The Asset Economy. Link. And stay tuned for Martijn Konings forthcoming Phenomenal World piece on property inflation.

RENTAL HOUSING

With millions facing housing insecurity, the economic downturn has sparked concerns of a new housing crisis. Where the subprime mortgage crisis thrust the centrality of unsustainable housing financing practices in the global economy into view, the Covid-19 recession has brought increased attention to widespread housing insecurity among the roughly forty-three million renter households in the US. And these units, too, are increasingly financialized.

A 2017 article by geographer DESIREE FIELDS examines these trends with a focus on New York City:

"Rental housing today constitutes an important new node for financializing projects globally, most noticeably in the US single-family market, as well as Spain and Ireland. Private equity funds have taken advantage of sharp price drops, surging rental demand and constrained mortgage credit to buy distressed real estate assets, convert them into rental housing and roll out novel rent-backed financial instruments. Tenants' homes may be subject to financialization even though residents themselves do not have mortgages.

Whereas private equity firms only discovered single-family rental post-2008, they had established themselves in New York City’s rental market in the years leading up to the crisis. New York has been characterized as a testing ground for neoliberal urban restructuring, experimentation made possible by its 1970s fiscal crisis. Three decades later, the city's mid-2000s real estate boom, together with the incomplete dismantling of postwar-era state rent protections in the 1990s, created the conditions for another round of experimentation: private equity firms, in concert with local banks and landlords, set about transforming the city's rent-regulated housing into a novel asset class for capital seeking investment opportunities, subjecting tenants to harassment, displacement and unsafe living conditions to extract financial yield. This experiment represents an important step towards incorporating rental housing into global circuits of capital."

Link to the piece.

• In another paper, Fields and co-authors Rajkumar Kohli and Alex Schafran trace the growth of single-family rental securitization in the US post-2008. Link.
• Joe Beswick et al. document the rise of corporate landlords in post-crisis London's rental market. Link. Manuel B. Aalbers and Andrej Holm compare privatized social housing in Amsterdam and Berlin. Link. Michael Byrne examines asset-management companies and financialized real estate in Ireland. Link.
• For more on the financialization of real estate, see Herman Mark Schwartz's work linking the US housing market and global capital flows. Link. See also: Saskia Sassen on mortgages, and David Harvey on capital and urbanization. Link, and link.

UPWARD ACCOMODATION

The history of public housing provision

In recent decades, policy approaches to housing provision have focused on increasing the incomes of subsidy recipients and, due to declining federal investment, promoting tenant mobility both between subsidized housing units and out of the public housing system altogether. But the discourse on housing seems to be shifting. Rather than promoting ever increasing incomes, recent proposals aim instead to control housing costs—both through increasing public housing stock and pegging rent to inflation.

In a 2012 paper, Lawrence J. Vale and Yonah Freemark offer a history of public housing in the United States. Their narrative considers how changing approaches to housing provision reveal changes in the government's definition of “deserving” welfare recipients.

From the paper:

"Public housing is too often conceptualized as a single failed program that tragically concentrated deeply impoverished single-parent minority households in ill-designed and publicly mismanaged slums. Such a viewpoint does little justice to the evolution and contingencies that motivated the growth and directions of the multiphased and multifaceted history of federally supported public housing and public-private housing. Taking a longer view, the concentrated poverty welfare phase of public housing may actually be seen as an aberration, a relatively brief interlude between about 1960 and 1990. This phase, we argue, was out of step with the larger pattern of policy preferences for housing the poor, both before and since.

Seen this way, American public housing consists of a 25-year series of efforts to accommodate the upwardly mobile working class between 1935 and 1960, a 30-year consolidation of the poorest into welfare housing between 1960 and the mid 1980s, coupled by efforts to introduce direct private-sector involvement in public housing and other programs; and a series of programs and policies since the mid 1980s to return more of public housing to a less-poor constituency, while furthering growth in other kinds of both deep and shallow subsidy programs through mixed-finance projects and tax-code intervention. After 75 years of experimentation, much of the rest of public housing operations has become completely privatized. In many cities, housing authorities are regularly turning over their conventional housing stock to private managers and often own nothing more than the land beneath their redevelopment endeavors. In this context, even the basic definitional reason for calling some housing 'public housing' now comes into question."

Link to the article.

• From November of last year, Jack Y. Favilukis, Pierre Mabille, and Stijn Van Nieuwerburgh find that "Housing affordability policies create large net welfare gains." Link. See also J. W. Mason's recent public testimony on rent control, which offers an overview of empirical findings and concludes that "there is no evidence that rent regulations reduce the overall supply of housing." Link.
• A report by Peter Gowan and Ryan Cooper at 3P compares housing policy in US metropolitan areas with those of Vienna, Helsinki, and Stockholm. Link. At the Urban Institute, Emily Peiffer discusses the history of housing policy in New York City. Link.
• "Housing Affordability in the U.S.: Trends by Geography, Tenure, and Household Income." By Andrew Dumont at the Federal Reserve. Link.
• Data for Progress maps the diversity of America's public housing communities, accounting for rates of unemployment, poverty, and population density. Link. Another map looks at flood risk, police stops, and segregation in NYCHA buildings. Link.

MODELED WISDOM

Modeling policy levers for housing affordability in urban centers

In nearly every major urban center, housing affordability is in crisis. Since the 1960s, median home value has risen by 112% across the country, while median owner incomes rose just 50%. For renters, especially since 2008, the problem is increasingly acute:nearly half of renters (over 20 million people) pay over 30% of their income on rent.

In New York City, nearly two-thirds of all residents are renters (half of whom are rent-burdened), and the politics of housing policy remain correspondingly fraught. In a recent paper, researchers JACK FAVILUKIS, PIERRE MABILLE, and STIJN VAN NIEUWERBURGH at Columbia Business School develop a dynamic stochastic spatial equilibrium model to quantify the welfare implications of various policy tools. Calibrating the model to New York City, the authors examine the interactions between funding and affordability policies to chart a possible path forward. From the paper:

"Policy makers are under increasing pressure to improve affordability. They employ four broad categories of policy tools: rent control (RC), zoning policies, housing vouchers, and tax credits for developers. Each policy affects the quantity and price of owned and rented housing and its spatial distribution. It affects incentives to work, wages, commuting patterns, and ultimately output. Each policy affects wealth inequality in the city and in each of its neighborhoods.

While there is much work, both empirical and theoretical, on housing affordability, what is missing is a general equilibrium model that quantifies the impact of such policies on prices and quantities, on the spatial distribution of households, on income inequality within and across neighborhoods, and ultimately on individual and city-wide welfare. Consistent with conventional wisdom, increasing the housing stock in the urban core by relaxing zoning regulations is welfare improving. Contrary to conventional wisdom, increasing the generosity of the rent control or housing voucher systems is welfare increasing."

Link to the paper, and link to a press release from Columbia Business School.

• Data for Progress analyzed housing proposals from the leading 2020 candidates. Link to the reports, and link to an updated version of Senator Warren's proposal.
• A report from last spring by authors Peter Gowan and Ryan Cooper advocates for an across-the-board expansion of social housing in the United States. Link.
• Tangentially related, a JFI letter from last year highlighted thinking and proposals around the implementation of a land value tax. Link.

TARGET VARIABLE

Big data's effect on the credit-scoring industry

A lengthy 2016 article from the Yale Journal of Law and Technology delves into credit-scoring then suggests a new legislative framework.

Since 2008, lenders have only intensified their use of big-data profiling techniques. With increased use of smartphones, social media, and electronic means of payment, every consumer leaves behind a digital trail of data that companies—including lenders and credit scorers—are eagerly scooping up and analyzing as a means to better predict consumer behavior. The credit-scoring industry has experienced a recent explosion of start-ups that take an 'all data is credit data' approach that combines conventional credit information with thousands of data points mined from consumers' offline and online activities. Many companies also use complex algorithms to detect patterns and signals within a vast sea of information about consumers' daily lives. Forecasting credit risk on the basis of a consumer's retail preferences is just the tip of the iceberg; many alternative credit-assessment tools now claim to analyze everything from consumer browsing habits and social media activities to geolocation data.

Full article by MIKELLA HURLEY and JULIUS ADEBAYO here. ht Will

PREMIUM MOBILITY

Tallying the gains of migration

We recently linked to a paper by LANT PRITCHETT that challenged development orthodoxy by pointing out that the income gains for the subjects of best practice direct development interventions are about 40 times smaller than those from allowing the same people to work in a rich country like the United States.

Link, again, to that paper.

That argument was built upon previous scholarship that attempted to put rigorous numbers to the obvious intuition that migration is beneficial for those drawn to wealthy countries by labor markets. From a 2016 paper by Pritchett and co-authors MICHAEL CLEMENS and CLAUDIO MONTENEGRO:

"We use migrant selection theory and evidence to place lower bounds on the ad valorem equivalent of labor mobility barriers to the United States, with unique nationally-representative microdata on both US immigrant workers and workers in their 42 home countries. The average price equivalent of migration barriers in this setting, for low-skill males, is greater than $13,700 per worker per year."