Freeman

ARTICLE

Best Housing Hope

APRIL 01, 1974 by BERNARD SIEGAN

Copyright 1973 Bernard H. Siegan

Mr. Siegan is the author of Land Use Without Zoning and many articles on the subject. He practiced law for 20 years in Chicago before moving in 1973 to La Jolla, California where he is an adjunct professor of law at the University of San Diego Law School.

Most people with incomes below the national average cannot afford to buy or rent new housing. This is not a condition solely of modern times nor of high inflation. It has probably existed throughout history. There never has been a time or a civilization, and probably never will be one, in which all people had equal access to material goods. Moreover, in the case of housing, the new products are not always preferred to the old —at least this must be concluded from the many wealthy people who willingly pay huge amounts for old houses.

However, there are many people who feel that those of lesser means are entitled to new housing, almost as a matter of right. They contend that if the private sector cannot provide such housing, then it is the obligation of government to do so.

This was an underlying premise of the 1968 national housing act which called for the construction or rehabilitation of six million housing units for low and moderate income families over the succeeding decade and established subsidy programs to accomplish that aim. Another basis for that legislation was the conviction that government could effectively and efficiently subsidize the construction of housing for the less fortunate in our society.

Time has shown that Congress in passing this legislation, did not understand the operation of its own government. Admittedly, it was a mistake easily made, for the task appeared relatively simple. Establish subsidy programs, provide them with billions of dollars, and it would be only a question of time before those billions would create new and better housing for the country’s less fortunate citizens, at a reasonable per unit cost. Nothing could have been further from the truth.

Much housing was constructed under the program; in fact about 20 to 25 per cent of residential housing starts for 1970 and 1971 were for subsidized and public housing. Unfortunately, most of the beneficiaries probably were not poor people. By the time the product reached its intended recipients, a great many had profited along the way, including many who cheated and gave and accepted bribes. There were many scandals in the program, but even these might have been explained away had the program largely accomplished its purposes.

The results however, were highly unsatisfactory. Much of the construction was by the government’s own evaluation defective and of poor quality. Perhaps the program created as many tax shelters for the rich as housing shelters for the very poor. A significant number of projects failed financially, and possibly worst of all, some of the developments intended to eliminate the slums themselves turned into almost instant slums.

With scandals and costs mounting and results remaining unsatisfactory, the Nixon administration in 1972 began to contract the subsidy programs and subsequently froze funds appropriated for them. "We can no longer afford $100 billion mistakes," said George Romney, who assumed office as Secretary of the Department of Housing and Urban Development a strong proponent of subsidized housing and left office an equally ardent opponent.

Government-Built Housing Is Costly and Wasteful

If the total cost of the subsidy programs were averaged over the successful units—which, of course, were far fewer than those built —the cost of each unit might be quite similar to the cost of housing in Beverly Hills (with hardly the same resale value). Even governments can go broke on this basis, and taxpayers can and should become very angry.

But the cry goes out: "How else can we provide for the housing needs of the less fortunate in society?" The operation of the real estate market provides the answer: enable or allow builders to produce more private housing, and the less affluent will benefit as much as the more affluent. Due to the operation of the filtering process, construction of housing for the well-to-do will equally benefit those of average, moderate and low incomes.

What is the filtering process? Filtering in housing occurs when new homes and apartments are constructed and families move into them, vacating their former residences for occupancy by others. The others, in turn, may vacate still other units and the process continues through many sequences.

A study of filtering in seventeen metropolitan areas of the country, made by the Survey Research Center at the University of Michigan, has shown that on the average the construction of one new unit makes it possible for a succession of 31/2 moves to occur to different and more likely better housing accommodations. New construction thus helps more people indirectly than it does directly; 21/2 moves occur to existing housing and only 1 move to new housing.

The study shows that more than one-third of all those who move are likely to be in the lower and moderate income categories, the targets of the subsidy programs. It also reveals that while most new construction occurs in the outer portions of the metropolitan area, these moves extend to older areas near the center of the city, where the poorer portions of the population tend to live.

The experience of the subsidy programs has demonstrated that new housing has not always meant decent housing; and it is decent housing, whether new or old, that should be the nation’s objective. More private construction will accomplish that goal for more people without the huge waste of resources that seems inevitably to accompany government’s efforts.

Accordingly, governments can best serve housing needs by eliminating laws and regulations such as zoning which impede development of the land. An unrestricted private market still remains the most efficient and effective means yet devised to provide better housing for the less affluent.  

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April 1974

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