↳ Income_inequality

April 29th, 2019

↳ Income_inequality

Green Power

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.
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February 16th, 2019

Cup and Ring

GAP PROGRESSION

New life in the debates over poverty measurement

In recent weeks, a familiar debate over how we understand the global poverty rate across time reappeared in mainstream op-ed pages. Sparked initially by Bill Gates tweeting out an infographic produced by Our World in Data—which visualizes massive decreases (94% to 10% of people) in global poverty over the past two-hundred years—the notable discussants have been LSE anthropologist JASON HICKEL and Our World in Data researchers JOE HASELL and MAX ROSER.

Hickel published a polemical Guardian op-ed criticizing the publication of this chart, which, he argued, misrepresents the history it claims to communicate and relies on contestable and imprecise data sources to bolster its universal progress narrative, taking "the violence of colonisation and repackaging it as a happy story of progress." Theresponses were numerous.

Among them, a post by Hasell and Roser provided detailed descriptions of the methods and data behind their work to answer the following: "How do we do know that the vast majority of the world population lived in extreme poverty just two centuries ago as this chart indicates? And how do we know that this account of falling global extreme poverty is in fact true?"

In addition to methodological arguments regarding data sources and the poverty line, Hickel's argument emphasizes the gap between poverty and the capacity to eliminate it:

"What matters, rather, is the extent of global poverty vis-à-vis our capacity to end it. As I have pointed out before, our capacity to end poverty (e.g., the cost of ending poverty as a proportion of the income of the non-poor) has increased many times faster than the proportional poverty rate has decreased. By this metric we are doing worse than ever before. Indeed, our civilization is regressing. On our existing trajectory, according to research published in the World Economic Review, it will take more than 100 years to end poverty at $1.90/day, and over 200 years to end it at $7.4/day. Let that sink in. And to get there with the existing system—in other words, without a fairer distribution of income—we will have to grow the global economy to 175 times its present size. Even if such an outlandish feat were possible, it would drive climate change and ecological breakdown to the point of undermining any gains against poverty.

It doesn’t have to be this way, of course."

Link to that post, and link to a subsequent one, which responds directly to the methods and data-use questions addressed by Hasell and Roser.

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