I was going through old boxes yesterday, trying to set up the office now that it is done and ran across a term paper I wrote for a Real Estate Graduate Class at Webster University. The topic “Alternatives to Public Housing” I wrote the paper in October 1994, unfortunately the issues of public housing have not changed and the concepts of the paper are still solid. It is ashamed that when we had the opportunity with the housing crises, we did not take advantage of the large inventory of homes that Fannie May and Freddie Mac foreclosed on to make a change to our Public Housing Program. Perhaps someone will read this paper and a change can happen.
Below is the text of my Term Paper
WEBSTER UNIVERSITY
ALTERNATIVES TO PUBLIC URBAN HOUSING
TERM PAPER
CURRENT ECONOMIC ANALYSIS
BUSINESS 562
HAL HANSTEIN
WEBSTER GROVES, MISSOURI
OCTOBER 1994
Introduction
Urban Public Housing is riddled with problems, high unemployment, crime, poor quality schools, teen age pregnancy, single mothers, lack of role models, public corruption, bad design and more. The problems keep getting worse.
President Clinton said in a speech in an urban ghetto located in Chicago, “We cannot survive as a people if our children cannot grow up safe and free from fear in good schools; on safe streets’ doing wholesome, constructive things.”‘
Background
The history of Urban Public Housing began in the late 1940’s early 1950’s, it was the end of World War II and the GI’s where coming home starting new families there was little housing available. During the war, the country’s resources were allocated to the war effort. Little or no new housing being constructed during this time.
Concurrently there were major changes that effected employment specifically in the mechanization of the agriculture industry, primarily in the south’s cotton and tobacco industries, eliminated the need for unskilled farm labor. This caused an exodus of unskilled labor from the south, searching for employment in northern industrialized industries. As the migration of southern labor enter the north, new manufacturing techniques render the existing plants obsolete, forcing industry to the suburban area’s where property was plentifully for the new design factories. Middle income families moved out of the urban public housing to live in the suburbs, where the new jobs were and the “American Dream” of home ownership was possible.
Economist John Kain suggested In 1968, “that poor blacks lacked access to jobs, especially manufacturing jobs, in part because those jobs were moving to the suburbs, far from the innercity areas where most poor blacks lived.” 2 ‘ President Clinton, Remarks by the President to residents of the Robert Taylor Homes, Chicago, Illinois,The White House, office of the Press Secretary, 17 June 1994, 10:20 A.M. CDT 2 Philip Kasinitz, “The Real Jobs Problem,” Wall Street Journal, 26 November 1993, A8 Public Housing is an old concept starting with the Housing Act of 1949 which “promised : “a decent home and a suitable living environment for every American family.” It was with high spirits that the Chicago authorities set about housing the black southern migrants that had been arriving in the city by the thousands each day. These blacks were being driven up by the mechanization of the cotton harvest in the deep south. It was their misfortune that this coincided with the decline of big industry in the north. Nor did it help that white Chicagoans refused to allow blacks to settle in their neighborhoods. The city government herded blacks together, reinforcing the residential segregation that exists in practically every American city, but which is extreme in Chicago. Just as damaging as the racial segregation is the economic equivalent that afflicts public housing. For a start, private enterprise is generally forbidden on such land, giving public housing its barren, institutional air. Many businesses near the Strip fled after blacks, in the words of a resident “got Happy” following their newly won civil rights in 1960’s and rioted. Those businesses that remain a scattered handful of shops, certainly no banks– have to be protected like forts. Today, middle class blacks as much as whites bristle at attempt to end such economic isolation by placing new public housing in better off areas.” 3 In the beginning the purpose of public housing was to provide low income people with quality shelter, residents were interviewed by the social worker and credit history was check. But today, there is no control on entry. As the years have gone by, the “achievers” have moved out to the suburbs, where the jobs are and the quality of life is better. Those residents remaining are creating a new “underclass of people” “the degeneration of the ghetto was unprecedented. The underclass was “a new class of people…dwelling in enclaves of despair”(Chicago Tribune). The underclass was so rife with violence that killing a mugging or robbery victim is now fashionable”(New York Times Magazine). The underclass consisted of a seemingly irreducible core of poor inner-city blacks…trapped in an unending cycle of joblessness, broken homes, welfare and, often, drugs (U.S. News).”‘ “Poverty’s foundation: housing,” The Economist, 11 April 1992, A26 David Whitman, “The surprising news about the underclass. (ghetto may shrink),” U.S. News & World Report. 25 December 1989, 73
The Problems
Lack of role models
All that remained after exodus of working middle class families in the urban housing project was a group of unskilled, uneducated people. There were few role models that people could look up to respect, there by perpetuating a spiraling decline of the urban public housing projects. Lack of skilled job opportunities The companies that relocated to the suburbs, seeking new manufacturing techniques in order to lower production cost, left many unskilled workers in the inner city area where they once operated, this is an example of structural unemployment that is caused by technology changes. “…urbanologists call “spatial mismatch”—jobs have left the city while many entry-level workers have stayed behind. Fully two-thirds of recent employment growth has occurred outside cities, and there are now more jobs outside than inside large cities.” 5 A study of employment patterns in an impoverished Brooklyn neighborhood(Red Hook) conducted by Jan Rosenberg a sociologist at Long Island University, and Philip Kasinitz suggest that “enterprise zones will not be enough. The primary reason for ghetto unemployment is not the lack of nearby jobs but the absence of social networks that provide entry into the job market….There is substantial “positive discrimination” in favor of nonresidents, as well as considerable “negative discrimination” against residents…The primary quality employers look for in an unskilled position is reliability, and most report that the best way to find reliable employees is by personal referral…Social networks may be centered on a particular neighborhood, but they are often not, particularly in the sort of high crime ghettos that discourage the formation of strong local ties….In some cases employers preferred not to hire people who lived too close to work for fear that the complicated lives of the poor would spill into the workplace.”6 5 Kenneth Labich, “New hopes for the inner city,” Fortune, 6 September 1993, 82 6 Phillip Kasinitz, ‘The Real Jobs Problems,” The Wall Street Journal, 26 November 1993, A8
Poor educational system
Partly because of overcrowding and the decay of age on the public schools, but mostly because of the “social segregation” the cities imposed on the school district caused in part by great disparities of tax base, causes inequality of educational opportunity to the poor who live in the urban housing properties. Because of the poor quality of education, the skill level of even those people who do go to school is below the level necessary for today’s jobs.
“Skill requirements, even for entry-level jobs, are rising rapidly, so some ghetto residents with little education and poor work habits will still be passed by in tight job markets.”‘
Higher education benefits both the receiver of the education in the form of greater job opportunities and more pay but it also benefits society by increasing GDP.
Kent Salveson, a real estate developer of low income housing in South Central Los Angeles said “education was the key–Success depends on what you know; that’s what people pay for.” 8
Configuration of design
Besides a lack of nearby skilled jobs and educational opportunities, the other major problem of public urban housing was it’s design. The government stack one building on top of another with little architectural aesthetic value and no consideration of the necessary amenities for the families that were to live there.
7 “Poverty’s foundation: housing,” The Economist, 11 April 1992, A26 8 Kenneth Labich, “New hopes for the inner city,” Fortune 6 September 1993, 82
The inner city ghetto’s are none of the above. According to Secretary Cisneros the problem with most major city’s is “…the configuration of the public housing is a big part of the problem. First of all, we have created a legacy of concentration….Secondly, the federal government has been part of the problem in recent years in allowing income levels to drop so dramatically in public housing that the residents of public housing share all of the same problems…Now, that’s the base condition. Then it is exaggerated by–rather it is complicated by the war for turf, and particularly for control of drug producing properties. There is a gang war in Chicago right now. . .” 9 Vance Lane chairman of the Chicago Housing Authority agrees “Its a public policy mistake to stack people on top of each other, Lane said in an interview in his Chicago office. It does not work. We’ve got three or four generations of reinforcing negative and antisocial behavior. We quite simple have to undo it. To reverse the pattern, Lane has proposed an ambitious $2.6 billion plan to demolish 21,000 public housing units, including 10,000 high-rise apartments. The displaced residents would be relocated to new housing scattered throughout Chicago and its suburbs….Lane said his goal is to break up the concentration of poverty by enabling poor people to live among middle and upper middle income families that would serve as role models.”‘°
Lack of popularity
Urban Public Housing is not politically popular. Only 5% of the population lives in public housing, and “more than three-quaters of the nation’s poor do not live in urban 9 Henry Cisneros, Secretary of Housing and Urban Development and bill Bryson, Acting Associate Attorney General, Press Briefing,The White House, office of the Press Secretary, 16 April 1994 10:38 A.M. EDT 10 “Bonds play role in Chicago leaders drive to rewrite national public housing policy–April Hattori,” Bond Buyer’s Public Finance Watch. 1 August 1994 ghettos.”” These people who live in urban public housing are uneducated and do not vote. The voters do not care because they do not see the harm in the continuance of present housing policy. Plus they are the major benefactors of housing in the form of HUD back loans. So why should we care?
The cost of urban poverty is very costly to all of us “The plight of the inner cities is also enormously costly to society as a whole; White House economic advisers recently estimated the various direct costs of urban poverty–welfare, food stamps, housing subsidies, and the like–at about $75 billion annually, Beyond that, the U.S. is caught up in fearsome global economic competition with a large portion of its work force ill trained and much of its urban infrastructure crumbling…It is also true that the economic disparities between cities and suburbs have, if anything g, grown more rigid.
According to the National League of Cities, per capita income for central-city residents, which was 96% of suburbanite income in 1973, declined to about 84% by 1990.”12 “The largely ignored problem is reaching crisis proportions, said Roberta Achtenberg, HUD’s assistant secretary for fair housing and equal opportunity. “There is a growing sense among the urban poor of not only isolation and alienation but psychological separation from society,” Achtenberg said. Achtenberg, who heads up the effort to carry out Cisneros’s promise of “spatial deconcentration,” said the nation’s urban poor are secluded not only by geographic location but by transportation, proximity to supermarkets and access to other public services, such as libraries and quality schools.” 13 ” Nicholas Lemann, review of The Promised Land: The Great Black Migration and How It Changed America, by Maud Lavin, In The Nation 252 ( 22 April 1991) 528 12 Kenneth Labich, “New hopes for the inner city,” Fortune 6 September 1993, 82 13 Jane Lehman, “Low-Income Housing Frontiers HUD Wants to Give Urban Residents Some Suburban Alternatives,” The Washington Post, 11 September 1993, sec. Real Estate, p. f01 Changes to current housing policies are also harder to make when the current policy benefits the wealthier citizens. “It would take another $10 billion a year to get every poverty-level house hold on to housing assistance–in effect, a tax credit for the poor. Plenty of people say the country cannot afford it. But consider this. Some 56% of federal housing subsidies or $49.9 billion, goes (mostly in the form of mortgage interest relief) to the richest fifth of Americans each year. Just $14.9 billion goes to the poorest fifth.”14 It is obvious that we are helping the wrong people, but those who are the beneficiary of VA and FHA loans are going to be resistant to change.
ECONOMIC IMPACT
The economic effect to the economy of doing nothing but maintaining the status quo is tremendous. There is an underutilization of labor, if these people were employed and better educated GDP would increase. Not to mention the cost of the social programs, health care, AFDC, food stamps, rent subsidies and more used to support these people.
The cost savings of private housing versus public housing is substantial. The government does not have to spend money building new housing units or renovating existing units, you shift the supply of housing to the private sector. There has been a surplus of housing in most markets in recent years, we can you this surplus for government subsides housing. In those markets were there is no surplus, the extra demand will cause developers to build more multifamily housing units, thereby increasing supply to those communities. The private sector can supply housing more cost effective than the federal government can. “By contrast, said Kale Williams, executive director of the council (The Leadership Council for Metropolitan Open Communities), it takes $50,000 to $70,000 to rehabilitate on unit of public housing.” 15 14 “Poverty’s foundation: housing,” The Economist, 11 April 1992, A26 15 “Moving from fear, jobliessness to hope,” Chicago Tribune, 29 April 1990, sec. Chicagoland p. 3
SOLUTIONS
Many possible solutions for the urban housing crises exist. Two of the most popular ideas are the relocation of residents and economic enterprise zones. “The country’s top housing officials are looking for ways to end decades of economic segregation that sent affluent residents to the suburbs and warehoused the poor in the central cities.”16 I believe that the integration and relocation of the predominately minority inner city residents to the white suburban area is the best solution both economically and socially. It is not popular with the residents and landlords of suburban USA because they view these people as evil, they fear that they will bring to their communities, crime drugs and civil disorder. Some minority groups do not favor this concept either because they fear that it will weaken their political power, strip the people of their ethic traditions and those who do relocated will face racial discrimination. In Chicago there is such a program that does work, it is called “Gautreaux”. The purpose of the program is to move poor black families from the ghettos to the mostly white suburbs where greater educational and job opportunities and less crime. The program began in 1976 since then over 3500 families have been relocated into white suburbs. “Only residents of segregated housing projects in Chicago are eligible for the program…Only families with acceptable housekeeping habits, credit, rental, family
referred…On the suburban end, the program firmly lines up the cooperation of private landlords in advance, and, most important, it operates in quasi-secrecy. The landlords and the families moving out from the projects are under strict instruction not to tell anybody how they got there–they are just the new folks who happened to move into the apartment house, not people from subsidized housing projects in Chicago” 17 16 Jane Lehman, “Low-Income Housing Frontiers HUD Wants to Give Urban Residents Some Suburban Alternatives,” The Washington Post, 11 September 1993, sec. Real Estate, p. f01 17 Nicholas Lemann et al., “Don’t Give Up: Poverty Programs That Work,” Washington Monthly. June 1988, 28 Participants of the program pay 30% of their income as rent, the housing authority pays the rest. Physically it is sometimes difficult to locate affordable housing in the suburbs, since they are made up of family owned single family homes and what apartments there are, most of them are only one or two bedrooms, too small for larger families. “It can be difficult to locate suitable apartments where landlords are willing to participate in a federal desegregation program.”i° The Secretary of housing is a strong proponent of the Gautreaux program and “is campaigning to change the “fundamental pathology” of American life the- widening gulf between impoverished minority center-city ghettos and better off white-suburbia.” 19 Gautreaux works mainly because of “spatial deconcentration” or “scattered site housing” the relocation of poor minority families in mostly white suburbia. Relocating a large group of inner city poor does nothing but moving all of the problems that are associated with the ghetto, “When you concentrate all the poor people in one rural area together, you get all the same problems you get when you concentrate poor people in urban areas-drug and alcohol abuse, domestic violence, a propensity to criminal behavior,” said Joanne Mermelstein a specialist in rural social work at the University of Missouri at Columbia.” 20 The Program has a high degree of success, “Northwestern University Professor James Rosenbaum found that “dispersed” mothers found employment in greater numbers (64 percent) than those who stayed in the city (51 percent). Likewise, dispersed children went to college more frequently than city-bound kids (54 percent to 21 percent), found full-time employment more often (75 percent to 41 percent) and were more likely to work in jobs with benefits (55 percent to 23 percent)” 21 People who move to the suburbs were able to improve themselves financially thereby increasing 18 “A local success goes national,” Editorial, Chicago Tribune, 8 December 1993, p. 18 19 Alex Polikoff, “Making mobility possible is the key to saving the Dantrells in Chicago’s future,” Chicago Tribune, 24 June 1994, sec. Perspective p. 19 20 Martha Shirk, “Rural County’s Poor Becoming Isolated,” St. Louis Post Dispatch, 28 November 1993, p. 1A 21 David Ramos, “Hus-died masses: Cisneros wimps out on housing reform,” The New Republic, 14 March 1994, p. 12 the country’s GDP. In an interview on CBS 60 Minutes called “Alice doesn’t Live here anymore,” Ms Dolores Irvin the director of the Gautreaux Program said, “Low-income people are no different than anybody else. They want the same things out of life. They just have not been given equal access.”22 “If 15 percent to 20 percent are able to get jobs in three to five years, the equation is more than balanced by the savings in public aid, crime, health care and the rest of it, Williams said(executive director of the Leadership Council for Metropolitan Open Communities-Chicago). Every year, when registration is opened, tens of thousands of would-be applicants jam the phone lines hoping for acceptance into the program. But only 2,000 are chosen, and just 350 of those are helped into housing in any given year because of the low vacancy rate for affordable units.”23
Landlord participation in the program is essential to its success “without a diligent endeavor to develop landlords willing to take rent subsidies in every kind of community, what the tenants did was drift down an already well-trodden path into the ghetto”24 This example is proven by the trail of decay that followed the spread of the ghetto in north county suburbs, it follows the trail of least resistance. What we must do is encourage landlords to accept rent subsidies. Maybe we need to create some tax advantage for them to get the programs started. We need to limit the number of families that can receive rent subsidies per geographic area, in order to maintain the economic viability of the neighborhood. We do not simply want to relocate the ghetto from one place to another. 22 Ms Dolores Irvin, “Alice Doesn’t Live Here Anymore,” interview by Morley Safer CBS 60 Minutes, 19 December 1993, 7:00-8:00 P.M. 23 “Moving from fear, jobliessness to hope,” Chicago Tribune, 29 April 1990, sec. Chicagoland p. 3 24 Joseph Berger, “A Minority Program Is Slowly Trying to Get a Foot in the All-White Door,” The New York Times, 12 June 1994, p. Y19 One idea is to make accessable all FHA, VA and other federal housing foreclosures to these families that need the assistance most. In 1993 over 124,491 FHA and VA Guaranteed home loans were foreclosed on. About 80% of these homes have 3 or more bedrooms and are located in suburban areas. The wealthiest one fifth of the population benefits from government back loans. This resource should be made available to the poor in order that they might be able to escape the urban ghetto. We are now spending 50,000-$70,000 to renovate existing public housing, the cost to the government of these foreclosed homes might only be slightly more. “Recently, CHA Chairman Vincent Lane asked all the region-city and suburbs-to participate in the de-densification of high-rise public housing.” 25 The net result after years of urban housing policy we have segregated the urban poor from quality housing, jobs, education and most importantly the self respect that the people of the urban poor desperately need. This urban segregation is not much different than the difficulties that many third world nations face. We need to remove the “barriers” to housing. We need to give people a choice of where they want to live, we need to stop piling people on top of people of the same economic class, we need to fully integrate society to become the melting pot that our founding fathers dreamed of. 25 “Not So Scattered-site Housing,” Editorial, Chicago Tribune, 31 July 1994, p.2
SOURCES CONSULTED
“A local sucess goes national.” Editorial, Chicago Tribune. 8 December 1993, p. 18 “Alice Doesn’t Live Here Anymore”, executive producer Don Hewitt, nar. by Morley Safer, CBS 60 Minutes. 19 December 1993 7:00-8:00 P.M. EDT American Banker-Bond Buyer, Bonds play role in Chicago leaders drive to rewrite national public housing policy, April Hattori, bond buyer’s Public Finance Watch, 1 August 1994 Berger, Joseph, “A Minority Program Is Slowily Trying to Get a Foot in the All-White Door,” The New York Times, 12 June 1994, sec y p. 19-20 Bovard, James, “Clinton’s Wrecking Ball for the Suburbs,” The Wall Street Journal, 04 August 1994, p. Al2 Gottlieb, Harry N., “Voice of the people (letter)- Housing Gains,” Chicago Tribune, 9 September 1988, sec. Perspective p. 26 Gratteau, Hanke, “CHA Residents Offered A Way Out Of Projects,” Chicago Tribune, 31 December 1985, sec. Chicagoland p. 10 “HUD Program Not Wrecking Suburbs” Editorial, The Wall Street Journal, 17 August 1994, p. A13
Kasinitz, Phillip, “The Real Jobs Problem,” The Wall Street Journal, 26 November 1993, p. AS
Labich, Kenneth, “New hopes for the inner city. (self-directed neighborhood improvement),” Fortune, 6 September 1993, p. 82 Lemann, Nicholas, Rev. of “The Promised Land: The Great Black Migration and How It Changed America” by Maud Lavin, The Nation, 22 April 1991, p. 528 Lemann, Nicholas, et al. “Don’t give up: poverty programs that work; selling salsa, banking in the ghetto, and 11 other strategies for helping the poor,” Washington Monthly, June 1988, p. 28 Lehman, H. Jane, “Opening Low-Income Housing Frontiers HUD Wants to kGive Urban Residents Some Suburban Alternatives,” The Washington Post, 11 September 1993, sec. Real Estate p.f01 “Not So scattered-Site Housing,” Editorial, Chicago Tribune, 31 July 1994, p. 2 Polikoff, Alex, “Making Mobility Possible is the Key to Saving the Dantrells in Chicago’s Future,” Chicago Tribune, 24 June 1994, sec. Perspective p. 19 “Poverty’s foundation: housing. (American Survey),” The Economist, 11 April 1992, p. A26 Powers, William F., “Valley Green: On the Verge Of a New Life Residents, Government Renew D.C. Development,” The Washington Post, 20 June 1992, sec. Real Estate p. e01 Ramos, David, “HUD-dled masses: Cisneros wimps out on housing reform. (U.S. Housing and Urban Development Sec. Henry Cisneros),” The New Republic. 14 March 1994, p. 12 Saddler, Jeanne, “Greates Threat to Washington, D,C.’s Health May Be Growing Exodus of Black Middle Class,” The Wall Stree Journal, 7 September 1994, p. A14-15 Shirk, Martha, “Rural County’s Poor Becoming Isolated,” St. Louis Post-Dispatch, 28 November 1993, p. 1A Stein, Sharon, “Moving from fear, joblessness to hope,” Chicago Tribune, 29 April 1990, sec. Chicagoland p. 3 The White House, Press Briefing by Secretary of Housing and Urban Development Henry Cisneros and Acting Associate Attorney General Bill Bryson ,16 April 1994, 10:38 A. M. EDT The White House, Press Briefing by Secretary of Housing and Urban Development Henry Cisneros and Assistant Secretary of Housing and Urban Development Andrew Cuomo, 22 December 1993. 3:20 P.M. EST The White House, “Remarks by the President to Residents of the Robert Taylor Homes,” Robert Taylor Homes, Chicago Illinois, 17 June 1994, 10:20 A achat cialis soft.M. CDT Todd, Cynthia, “U.S. Upgrade of Darst Homes Sparks Debate,” St. Louis Post- Dispatch, 21 June 1994, p. Al Whitman, David, “Hope for the homeless. (some programs that work),” U. S. News & World Report, 29 February 1988, p. 24 Whitman, David, “The surprising news about the underclass. (ghetto may shrink),” U.S. News & World Report, 25 December 1989, p. 73