New New Orleans: production or vouchers?
“When you come to a fork in the road, take it.”
What’s the best way to re-house the thousands displaced from
- Supply side. Build (or rebuild) whole new communities.
- Demand side. Give people cash home-renting power and let the find them housing.
Yes, subsidy is often involved.
Aside from its timeliness, the question encapsulates a long-standing debate about housing affordability: production or vouchers, as a recent Economist article neatly lays out:
If Katrina has demolished hopes for reforming Medicaid, it has at least stirred up debate about housing policy. In all, Katrina destroyed or damaged roughly 300,000 homes.
The joke headline World ends tomorrow: poor and minorities hardest hit captures an economic reality: because of the Law of Economic Gravity, housing for the poor has the worst locations
According to the National Low Income Housing Coalition (NLIHC), around 70% of these were occupied by low-income households (earning less than $40,800 in
Although a few households are renters by choice, most are renters because of economic imperatives: renting is a more flexible tenure, it more readily accommodates shifting family circumstances, and it costs less per square foot consumed.
There’s a reason you can buy a FOR RENT sign in any hardware store.
Unsurprisingly, renters have limited independent economic resources, and need housing quickly:
The administration’s immediate answer — to buy up trailer parks to house the newly homeless — looks an unsatisfactory stop-gap.
Actually, the Administration is proposing not to buy but to build new mobile-home communities (to give them their preferred euphemism).
Even while distinguishing build from buy, we can question whether the new towns have a functional urban infrastructure:
Many of the parks are a long way from any potential source of employment. Horror stories are circulating about “FEMA City” in Florida, where 1,500 people displaced by Hurricane Charley in August 2004 are still living in 500 trailers. They can’t afford to live in the new houses rebuilt on the sites of their old homes. So they fester in a crime-ridden ghetto.
Bit purple, that prose, especially considering the site itself:
About 1,500 people who lost their homes or were already homeless still live in a makeshift mobile home/trailer park run by the Federal Emergency Management Agency in Charlotte County, Fla., since Hurricane Charley struck last year.
– but the concern is valid.
The vast majority of those displaced are renters, many of them formerly residents of New Orleans’ dreadful public housing. Which makes the following prospect risible:
As a longer term solution, Mr Bush has proposed his urban homesteading plan. He would distribute federal property to “homesteaders” who pledge to build their own homes.
Dream on.
That is surely better than the huge public-housing projects for the poor of the 1960s and 1970s.
That’s a straw man choice: no one has built concrete canyons for a quarter-century. Today’s best practice involves townhouses, low-rises and mid-rises, and income mixing, as exemplified by HOPE VI (another program which the Administration has consistently sought to repeal or zero-fund).
HOPE VI in Tulsa.
Yep, no need for housing like this, none whatsoever …
But the Department of Housing and Urban Development (HUD) has identified only 4,000 potential spots for the quarter of a million displaced people.
Construction is costly, requires specific skills (the new buildings must comply with zoning), and slow. Where do the folks live while they’re building the Little House on the Bayou?
Also, roughly half the people affected by Katrina were renting their property; many are unlikely to have the wherewithal to be able to build their own place.
So let’s forget the self-build fantasy. Should the government even be in the
An alternative could be rental vouchers. After the 1994 earthquake near Los Angeles, which left 20,000 people homeless, Congress swiftly appropriated $200m to provide special vouchers for use anywhere in the state. At least 10,000 people used them to move into stable apartments, often in better neighbourhoods than those they had left. There are some 1m vacant rental units in the South. Surely it would be better to use them, not build trailer homes?
Much of the New Orleans diaspora has already resettled elsewhere, absorbed into those previously vacant rental apartments, whose owners are even now appreciating the higher occupancy and stronger cash flow that has suddenly resulted. If we do not know how many will return, should we rush to build new homes?
Republicans like them for ideological reasons; Democrats (who in this case don’t have to deal with the teachers’ unions) like them because they get money to the poor.
That oversimplifies on both counts.
· Democrats tend (not exclusively) to prefer property-based assistance, which if done properly can be a nexus of services as well as market-quality housing, but if the choice is between vouchers and nothing, they choose vouchers.
· Republicans end (not exclusively) to believe that customer choice forces the market to provide better quality for the same dollars.
There is thus a strong policy case for the socioeconomic benefits of portable assistance:
At their best, vouchers help “deconcentrate” poverty. For instance, in the Gautreaux Program, an experiment to combat racial discrimination in Chicago’s public housing in the late 1970s, poor blacks were given vouchers to move to the white suburbs.
Two things about Gautreaux: (1) it was court-ordered, and (2) the scale of deconcentration was very modest, and the distances short (e.g.
Just follow the Eisenhower ….
It seemed to help them. Their children tended to do better in school and go to college, explains James Rosenbaum, a sociology professor at
Human beings are an observant herd, and when better role models predominate, so do better children. Good housing incubates good families.
Conversely, there’s a very powerful case that means-testing the resident’s share of rents (whether in vouchers or property-based Section 
has perverse incentives and leads to dependency:
That does not mean that vouchers work perfectly. They can create perverse incentives: HUD’s vouchers work on the basis that you should spend 30% of your income on rent, but if your rent is pegged at that proportion, there is less incentive to try to get a pay rise.
Can? As presently constituted, vouchers do create perverse incentives. Add in withholding and loss of other benefits (e.g. child care, Medicaid) and a Section 8 householder who gets a first job can pay a marginal implicit tax (total economic costs) greater than 100%. But that criticism is independent of the assistance-basing, so should be ruled out of court for a portability debate.
[Vouchers] also encourage poor families to move to public shelters, because residents there are often given priority when it comes to vouchers.
True enough, and again, not intrinsic to vouchers but rather to the allocation and award system. As Woody Allen said at the beginning of Annie Hall, vouchers suffer from the Catskills Complaint: “The food is terrible here … and such small portions.”
“We house only one in four eligible families? Well, la-di-da, la-di-da, la, la.”
Not only do we have far too little rental assistance (assisting only one eligible household in four), the Administration has spent the last five years consistently trimming, paring down, or generally ignoring HUD:
Last year, Congress rejected the administration’s proposal to cut $1.6 billion from the Section 8 program, which would have cancelled the vouchers for some 250,000 households. This year, the administration is again trying to cut the program to save money.
Now when there is a great urgent need, HUD is so ineffective (”hollowed out,” in Bruce Katz’s evocative phrase) it has been bypassed for the spectacularly ill-suited FEMA.
Returning thus to the fundamental question, how best to re-house displaced New Orleanians? The pragmatic economist answers, Whichever way is likely to be better and more swiftly funded.
