Urban Housing Markets

1
Urban Housing Markets

• Drawn from Kaplan, Wheeler Holloway, Chapter 9

2
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

3
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

4
Housing Market Sectors
market Non-market
Privately funded Private market housing 90 of US hsg Private non-market housing
Publicly funded (govt. subsid.) Public market housing Public non-market housing
5
Housing Market Sectors
"third sector housing"
market Non-market
Privately funded Private market housing 90 of US hsg Private non-market housing
Publicly funded (govt. subsid.) Public market housing Public non-market housing
"public housing"
6
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

7
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

8
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 markets tendency to build new
  housing for the wealthy ends up providing housing
  for all groups

9
Vacancy Chains
10
Hoover Vernon

1. initial urbanization
2. 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)

11
Home buying

• few people can pay for their home outright--so
  its an unusual market

12
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 SL
  mortgage loans
• longer term loans 20 years
• lower down payments
• lower interest (since Fed assumed the risk)
• led to Post WWII suburbanization

13
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

14
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

15
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

16
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

17
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

18
Urban Blight

• causes and attempted solutions

19
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

20
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

21
The new look of the 1960s
22
The new look of the 1960s
23
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

24
Pruitt Igoe (the most infamous public housing
project)
1971
1956
25
Pruitt Igoe (the most infamous public housing
project)
1972
26
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

27
Actual realtors 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.