David R. Henderson  

The Case for Low-Income Housing

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Any discussion of trailer parks should start with the fact that most forms of low-income housing have been criminalized in nearly every major US city. Beginning in the 1920s, urban policymakers and planners started banning what they deemed as low-quality housing, including boarding houses, residential hotels, and low-quality apartments.

This is from Nolan Gray, "Reclaiming 'Redneck' Urbanism: What Urban Planners Can Learn from Trailer Parks," August 12. The essay is republished from "Market Urbanism."

The whole piece is excellent. Watch an old movie about the 1920s or 1930s and you'll often see boarding houses. I had always assumed that the reason was a decline in demand. I'm sure that was a major factor as people got wealthier. But this piece reminds us that there was regulation against supply also.

Another excerpt:

In light of the United States' century-long war on low-income housing, it's something of a miracle that trailer parks survive. With an aftermarket trailer, trailer payments and park rent combined average around the remarkably low rents of $300 to $500. Even the typical new manufactured home, with combined trailer payments and park rent, costs around $700 to $1,000 a month. Both options offer a decent standard of living at far less than rents for apartments of comparable size in many cities. The savings with manufactured housing are a big part of the story: where the average manufactured house costs $64,000, the average site-built single-family house now costs $324,000. The savings don't come out of shoddy construction either: manufactured homes are increasingly energy efficient, and their manufacturing process produces less waste than traditional site-built construction. With prosperous cities increasingly turning into playgrounds of the rich due to onerous housing supply restrictions, we shouldn't take these startlingly affordable rents lightly.

And:
Besides revealing a natural acceptance of traditional urban design, trailer parks also illustrate the capacity for low-income communities to engage in private governance. Compared to many low-income neighborhoods, trailer parks are often fairly clean and relatively safe. How could this be? The answer lies in the exchange at the heart of a trailer park: a trailer owner pays rent not only for a slice of land in an apparently desirable location but also for a kind of club good known as "private governance." Edward Stringham describes the concept as "the various forms of private enforcement, self-governance, or self-regulation among private groups or individuals that fill a void that government enforcement cannot."

HT@ James Hanley.


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COMMENTS (10 to date)
Anonymous writes:

Plausibly because whenever a budget option becomes a sufficiently small part of the market, banning it becomes politically feasible. Why ban it? Because it gives the wonderful feeling of progress. As we become richer, we not only climb higher on the ladder of wealth, but we successively cut off the lowest rungs. So the cheapest choice is not just barely needed anymore, it's banned. Nobody has to use it, because we've all moved on together as a society.

Perhaps if you support this you can argue that keeping the budget choice around makes people less willing to support redistribution than when the poor will have nothing at all unless the reasonably-okay option is subsidized for them.

rapscallion writes:

I've long thought American cities would benefit from favelas like in Rio. That's just one of the areas where Brazil is way ahead of us.

Matthew Moore writes:

@rapscallion.

Banning lower quality housing does not magically make nicer homes affordable.

David R. Henderson writes:

@Matthew Moore,
Banning lower quality housing does not magically make nicer homes affordable.
Exactly. Indeed, the reduction in supply at the low end makes nicer homes less affordable.

Handle writes:

When thinking about these neighborhood regulation topics, it's completely inapposite to focus on the character and cost of the structures, instead of understanding that the proper cynosure are the qualities and characteristics of the neighbors. Over the last century, the correlation between these qualities and the average income level of an area's residents has increased dramatically, and so looking back even a generation or two is apt to be utterly misleading.

I used to live in a Midwest college town with a few, extremely affordable trailer parks and some public housing. I would also check the police blotter and District Attorney's case file on a regular basis.

Despite taking up a tiny fraction of the town's overall space and population, it was a completely typical observation that, in an average month, the vast majority of cases of violent crimes involved residents of those complexes. Almost all the witnesses in the cases lived in those areas too. It is a very dramatic and obvious manifestation of the Pareto Principle - "10% of the people cause 90% of the problems," and concomitantly they produce a wildly disproportionate per capita drain on local resources.

My wife and her classmates doing Social Work practica spent almost all their time in those communities too, burning themselves out and having no apparent lasting impact on anyone.

What many cities are really doing by prohibiting expansion of the availability of these cheap quarters is an extension of the general phenomena of NIMBYism, and treating the problematic denizens of those parks and projects like hot potatoes who will, by force of necessity in response to the passive aggressive and land-use regulations with a plausibly deniable true purpose, move themselves to some other place.

And that sets into motion the typical 'race to the bottom' competition among localities, with even the most otherwise-sympathetic communities quickly realizing that, unless they jump on the bandwagon too, they will have to bear the entire brunt of this class of individuals by themselves, which effectively punishes any 'virtue' they would like to exercise on the issue. And consequentially that gives rise to a quick establishment of entrenched uniformity in these matters.

Which is furthermore why it is also inappropriate to analyze these housing regulations in isolation, since the root causes of these sorts of problems are a combination of economic and social trends for which there are probably no good remedies, and also the current jurisprudential regime which makes any plausibly effective responses to the problem of increased crime in these low-income areas totally illegal, giving communities no other practical option but to try and shuffle these people off elsewhere by surreptitious means.

john hare writes:

Handle.
That is the best stated counter argument to my opinions that I have seen yet.

Even where mobile homes are allowed there are restrictions to drive up costs. One of my employees lives in one mobile and has another one rented. There is an underused park a mile or so from his current property that he could have probably bought with reasonable leverage. It had about a half dozen rough mobiles there with spaces for several more. About that time we spotted 5 mobiles for free (you move) about ten miles away. The additional units would have made the project worth doing. Unfortunately, you can't permit mobiles over a certain age, which is why they were free. He has the skills and backing to have upgraded them into acceptable $500.00 a month rentals mostly during the fruit season. Instead there are many more families doubling up or paying more in other locations.

There are several other building techniques that could produce economical housing as well if it were legal. Not to discount the objections Handle brought up, just that that should be a different argument.

Abe writes:

Slightly OT, but this (probably dumb) question has always bugged me. Why are trailers cheap to live in? I'm surprised that it isn't cheaper to live in a small apartment than it is to live in a trailer. A trailer home is just a house with an extra feature: you can hook up to a tow and drive it away. So it should be more expensive, right? I mean, if trailers were actually cheaper to live in than buildings, wouldn't rich people live in trailer mansions?

Benjamin Cole writes:

I think free marketeers and libertarians need to summon up some nerve here.

If you will forthrightly say "Eliminate the minimum wage," then also forthrightly say, "Let's eliminate property zoning."

That is it. Get rid of property zoning.Completely!

Also, decriminalize push-cart vending and truck-vending.

Milton Churchill writes:

I hope you don't mind me linking to a book I read recently on this topic. For those that might be interested...

https://www.amazon.com/Unlocking-Home-Alan-Durning-ebook/dp/B00DX5O2O4#nav-subnav

@Handle

"Despite taking up a tiny fraction of the town's overall space and population, it was a completely typical observation that, in an average month, the vast majority of cases of violent crimes involved residents of those complexes. Almost all the witnesses in the cases lived in those areas too. It is a very dramatic and obvious manifestation of the Pareto Principle - "10% of the people cause 90% of the problems," and concomitantly they produce a wildly disproportionate per capita drain on local resources."

Many great points. In addition, these people are only a drain on resources because the resources are so freely made available. The answer is not zoning restrictions (though communities might be left with no option), it is eliminating completely government-owned "public" property and any and all forms of welfare. Under a system of private property, security, protection, etc., the owners of the housing units would need to collect rent directly from the tenants and would be responsible for maintaining order. Unfortunately, local communities are often powerless to implement, completely, such a system. The federal government can swoop in over state and local jurisdictions and partner with property owners or local self-serving politicians and bureaucrats, and dole out funds confiscated from payers of federal taxes.

Handle writes:

John Hare:

All of this implicates a larger and underaddressed topic ad well.

Libertarian economists are quite fond of emphasizing the reality of trade offs, opportunity costs, and unintended consequences. A lot of political rhetoric ignores down sides, and these economists are which to point out that there's no such thing as a free lunch, and most of our problems are better thought of as optimizations among competing values rather than maximization of one particular goal.

And all of that is perfectly valid and accurate and provides an important corrective pushback to sloppy thinking or political overreach.

However, no one is without their own blind spots, and this particular topic is one of those for many of these economists. Optimization and trade offs means one cannot consider any topic in isolation and ignore other important related factors without making serous errors in analysis.

In this case, libertarian economists tend to want to maximize three things which are, in the experience of normal people, at odds in reality. One is to maximize land use liberty with a minimal amount of regulation over real property. The next is the civil liberties of individuals - their privacy, bargaining position, etc. - vs. The law enforcement and criminal justice system, at least as typically understood in our current constitutional jurisprudential regime. And the last is aggregate social welfare, which means that people get to live in communities with characteristics aligned with their preferences, which includes things like safety and security and the tax burden of ensuring those things.

And my view is that all of those things are obviously good, but, alas, given our present social conforms, they can't all be increased at the same time. And as a result, if one avenue of local regulatory change is blocked to a local community because of federal controls (in this case criminal procedure) then they are merely responding to incentives to try and use the other levers left available, even under hypocritical pretenses if need be, to optimize their local circumstances.

So it's not very useful to try and call out local communities on one value, without being willing to acknowledge their complex human circumstances, define ones priorities, and signal a willingness to bargain and compromise on one goal to achieve another.

So, for example, libertarian economists could say, "We understand your problem, and in exchange for relaxing land use regulation, we will support the expansion of police powers and techniques that will help you control crime in an easier and cheaper fashion, even if that might degrade the current state of civil liberties or 'social justice', because, while we don't like those changes, a freer market in real property and housing will more than compensate in an overall net increase in social welfare."

Now, obviously our legal system makes academic support for changes in that direction practically impotent, and since everyone knows this, no one even bothers. But it does no one any good to fail to acknowledge the true origin of this local regulatory behavior as if it were merely a matter of public choice or political corruption or bad economic thinking.

Now, those things are certainly present and contributing factors in many locales, but the matter of the pressures generated by these trade offs is also floating around in the heads of many local decision makers who have direct experience dealing with the issue, and there is no mystery that they will tend to turn a deaf ear to those who fail to signal understanding of the issue and sympathy with their tough spot.

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