Urban Housing Markets

Drawn from Kaplan, Wheeler & Holloway, Chapter 9

What is the importance of housing?

For households & individuals Largest single expenditure for most

people Means of expressing personal and

family identity Fundamental expression of ethnic and

class identity Refuge from public life Realm of private life protected by law

What is the importance of housing? For society

Creates labor markets Creates consumer markets Creates demand for durable goods Occupies space Depends on various kinds of

infrastructure Depends on various kinds of services Occupies the most carefully protected

(restrictively zoned) spaces in the city

Housing Market Sectors

market Non-market

Privately funded

Private market housing90% of US hsg

Private non-market housing

Publicly funded (govt. subsid.)

Public market housing

Public non-market housing

Housing Market Sectors

market Non-market

Privately funded

Private market housing90% of US hsg

Private non-market housing

Publicly funded (govt. subsid.)

Public market housing

Public non-market housing

Private market housing Like other goods

reflects many individual decisions about quality vs. affordability

varies in type to suit various lifestyles Unlike other goods

is often rented rather than owned by the poor

a fundamental reason the poor get poorer and the rich get richer

cannot be moved so location is one of various aspects of its value

Housing supply Varies on several dimensions

public vs. private housing age size placement on lot location and accessibility architectural style landscaping style & quality other on-site improvements (e.g. pool) adjacent functions--desirable & undesirable

Filtering Homer Hoyt

vacancy chains & filtering new unit at edge ultimately creates vacancy

near center each household occupies successively nicer

housing (at least until children reach college) each neighborhood slowly declines in terms

of income relative to the rest of the urban system

implication: market’s tendency to build new housing for the wealthy ends up providing housing for all groups

Vacancy Chains

Hoover & Vernon

1. initial urbanization2. transition (density increases)3. downgrading (conversion from

single family to multifamily use)4. thinning (abandonment)5. renewal (usu. with public sector

(i.e. govt.) involvement)

Home buying

few people can pay for their home outright--so it’s an

unusual market

Home buying before Great Depression banks required

down payment greater than 30% of home cost and loan term 10 yrs. or less few people could afford this

FDR created the HOLC to lend directly to homeowners, then the FHA to guarantee S&L mortgage loans longer term loans 20+ years lower down payments lower interest (since Fed assumed the risk) led to Post WWII suburbanization

Discrimination may be given different information

given to buyers/renters depending on their racial/ethnic background told about fewer units shown fewer units

may be directed (steered) toward units other than the advertised unit

may be offered less favorable lease or mortgage terms

Lending discrimination redlining

refusal of lenders to finance mortgages in certain neighborhoods

refusal of federal government to guarantee home loans in certain neighborhoods (FHA)

prohibited in 1975, but it continued after that time

applicant-level discrimination stills occurs in some cases 2%-12% depending on how you measure it

Predatory lending Instead of denying loans to the poor the

poor are sought out and offered loans loans may have exploitative lending

terms Home Loan Refinancing can be “sold”

aggressively, esp. to older or less educated people, then used to squeeze the equity out of their homes without paying the owners their due

Bottom line “Discrimination tax” (John Yinger)

costs of extra home-search time, worse lending terms, and reduced options

$3000-$4200 more will be paid by black homeowners for similar housing

$3300-$4400 more will be paid by Hispanic homeowners for similar housing

additional costs are imposed on a day-to-day basis by the restricted opportunities for people forced to live in sub-optimal housing

Fannie Mae & Freddie Mac Government sponsored enterprises

Federal National Mortgage Association (Fannie Mae) & Federal Home Loan Mortgage Corporation (Freddie Mac)

Are allowed to purchase home loans from original lenders and bundle them for resale to investors

while people may default on loans, bundles of loans are seen as a secure investment

these enterprises free up loan money, making it easier for people to acquire loans

government regulation requires them to increase lending to “underserved markets” i.e. minorities & the low & lower middle classes

Urban Blight

causes and attempted solutions

Causes of “urban blight” ageing housing stock

oldest housing stock is in need of repair suburbanization

economy of older areas suffers from loss of middle and upper classes to suburbs

blight as self-fulfilling prophecy growth machines (reflecting inner city business

interests) lobby for federal redevelopment funds city designates neighborhoods as “blighted” maintenance by landlords in these areas has no

more utility

Public housing

Units built never matched units destroyed

Urban renewal money was spent on: freeways & roads hospitals universities government offices sports facilities middle and upper income housing

The new look of the 1960s

The new look of the 1960s

Public housing

Originally PH seen as temporary place of residence for the “deserving poor”

white families facing temporary misfortune later, PH was used as essentially permanent

housing for the poorest segments of the population

PH demonstrated the failure of the housing market to provide adequate range of housing through filtering

PH became stigmatized, hated, and shunted away to parts of the city least able to defend themselves, and also least able to offer opportunities to the residents

design flaws made PH dangerous & dehumanizing

Pruitt Igoe (the most infamous public housing project)

1956

1971

Pruitt Igoe (the most infamous public housing project)

1972

Gentrification old houses can be purchased cheaply

white, middle class buyers can take advantage of Fannie Mae & Freddie Mac targeted programs

input “sweat equity” (labor) flocking (neighborhood “turns around”)

change economic conditions in city become customers for certain inner city businesses

(some old, most new) drive up property tax assessments pay higher taxes helping city out of financial woes drive up rents and create economic incentive for the

demolition of rental properties

Actual realtor’s listing (from Toronto)

Grand High Park residence.

“Diamond in the rough” with parking.

Awaits your touch. Exceptionally high

basement with separate entrance.

Easy access to High Park & subway.

Stroll to trendy Bloor Street shops & restaurants.