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Book Review

How Subsidized Housing Keeps the Poor Down

Book Review by Carol W. LaGrasse, April 9, 2005

America's Trillion-Dollar Housing Mistake—The Failure of American Housing Policy
Howard Husock (Ivan R. Dee, Chicago 2003)

For over four centuries, free people at the lowest rung of the economic ladder in colonial America and the United States bought, built, or rented their shelter with their own money or labor. Then came the mid twentieth century, when government demolished hundreds of urban neighborhoods, mostly black, and consigned the residents to high-rise, impersonal housing warehouses built by government. When the gross failure of mass public housing became all too apparent, the government, in notable cases, had these same massive complexes wrecked. Today, according to Howard Husock in America's Trillion-Dollar Housing Mistake, government still provides 1.3 million public housing apartments and 2.7 million units of other publicly subsidized housing, dominated by units receiving federally subsidized vouchers. Husock says that, with all but two exceptions, the City of Charlotte and State of Delaware, today's innovative government-subsidized housing, whether publicly or privately owned, helps to keep the poor down, breeds resentment in lower middle class neighborhoods, and spreads the blight of urban decay. Moreover, according to Husock, government subsidies of housing are not necessary.

The subsidies purport to fill a need for dwellings for the poor that would otherwise be unmet by the private sector. However, without inflexible zoning, quality requirements in building codes unrelated to health and safety, and rent control, the private sector would invest in the lower end of the housing field, creating more opportunities for rental and homeownership by low-income families. In addition, without the interference, unfair competition and perverse incentives of housing vouchers and community development mortgage mandates that the federal government inflicts on banks and neighborhoods, the private sector would have a fair chance to compete and provide housing as it has over the years. Furthermore, the flux that would normally take place in urban centers as a result of high end mobility both out of down-trending center city areas and into gentrifying urban areas with desirable location, would stimulate the natural forces of economics, opening previously upper and middle income dwellings to the poor and, in the other direction, stimulate and improve neighborhoods. Husock further points out that, when economic opportunity exists, retail and service establishments will enter low-income areas irrespective of subsidies, where government does its job of policing.

Husock outlines six decades of public housing projects and other types of subsidized housing for the poor in the United States, the trillion dollar ($1,000,000,000,000.00) housing mistake, as he aptly calls it. Beginning with President Franklin D. Roosevelt's National Housing Act of 1937, the numbers have ultimately become daunting. Today, 3,200 public housing authorities concentrate the poor in "permanently subsidized communities where illegitimacy remains the unquestioned norm and work isn't seen as leading anywhere." The author faults the nation's vast public housing system for "sheltering exactly the same people whom welfare reform targets—unwed mothers, whose fatherless families have proved incubators of social pathology."

Moreover, the author documents, housing vouchers have failed to improve the situation because they offer perverse economic incentives and either concentrate the social pathology in different enclaves or spread islands of decay in neighborhoods where the subsidized are unprepared and unable to contribute to the community while they spread disruption and crime. "Vouchers are creating new all-black communities" instead of promoting integration, as planned, because the poorest of the poor are selected for vouchers. Upwardly mobile, hard-working poor of all races resent the infliction of the disorderly poor on their neighborhoods, with their crime and depressing of property value.

Husock reserves his most severe analysis for the Clinton-era toughening of the treatment of banks under the 1977 Community Reinvestment Act (CRA) signed by President Jimmy Carter under the aegis of eliminating "red-lining." The Clinton era foisted severely low lending standards on the mortgage industry. Husock shows that the Boston-based Neighborhood Assistance Corporation of America (NACA) epitomizes the aggressive use of the radical CRA standards to distort the mortgage market. With an annual budget of $10 million, NACA closes on 5,000 mortgages per year, earning the organization a $2,000 fee on each transaction. Carrying the supposed need to end red-lining to an extreme, NACA, with millions in federal funding, acts as a gate keeper for mortgage lending to supposedly oppressed and permanently disadvantaged borrowers for whom society must bend the rules. Down-payment requirements are "patronizing and almost racist," says Brian Marks, NACA's chief executive, a former Scarsdale resident. Banks kow-tow to Mark's disruptive tactics at annual meetings and their targeting of bank executives' homes. But Husock believes, "There is no surer way to destabilize a neighborhood than for its new generation of homebuyers to lack the means to pay their mortgages."

The solution, Husock argues, is to deal with the housing issue in the same common sense way that welfare reform has been tackled, cutting the welfare rolls in two—a result far exceeding the expectations of reform advocates ten years ago. Charlotte, North Carolina, is "providing a blueprint for transforming the nature of public housing, or even, over the long term, phasing it out," Husock writes.

"The key to Charlotte's new approach is time limits," Husock emphasizes. Charlotte's idea is very much like the heart of what was once considered a radical proposal for welfare reform—that aid should be short-term and depend on the recipient's commitment to lift herself out of the cycle of dependency, in this case, dependency on public housing.

Forty percent of the households in Charlotte's large projects have stayed there five years or more. (In New York, the capitol of public housing, the average stay in public housing is just over eight years.) Charlotte has enrolled over 500 of its 1,800 non-elderly households in its "Transitional Family" program. The voluntary five-year time limit basic to the program combines independence-oriented counseling, education, and financial management, with the incentive of access to newer townhouse-style dwellings instead of the older, conventional projects. After obtaining a high school diploma and holding a job, the tenant is eligible to enter the housing authority's air-conditioned complex in one of Charlotte's best neighborhoods if she agrees to pay the rent even if she loses her job. The rent increases as income goes up, but the difference is put in escrow for the time when the tenant enters the private rental or home-buyer's market.

Going even further, the State of Delaware has imposed a mandatory three-year limit for its non-elderly residents in subsidized housing. Husock points out that residents are eased into the change in lifestyle because Delaware's program warns residents for missing work, failing to keep kids in school, or being late for rent. Three demerits mean that the resident is evicted from public housing.

Husock meets those who criticize the Delaware program as punitive and unfair, by saying that they wrongly assume that the condition of the poor is static and that they will remain dependent. He points to their years of training and support, the bustling economy, and the "change in worldview of the poor to make them more independent-minded." And, he says, it is important to acknowledge that in such a "no-nonsense regime," some residents will move back with their parents or resort to shelters.

In summary, he points out, "The value to cities of getting rid of public housing would be inestimable." Their social pathology would be eliminated, land would be restored to the tax rolls, and vitality would replace the frozen, stultifying concentration of public housing while opening the future for places like Harlem in Manhattan. At the same time, the demoralized residents would be on their way into the economic mainstream.

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