urban housing markets drawn from kaplan, wheeler & holloway, chapter 9
TRANSCRIPT
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.