Laissez Fairness and the Housing Market

by Tony Chavira

A February 1999 report by the U.S. Conference of Mayors found that 49 percent of all households in the nation’s cities owned their homes, compared to 71.5 percent in the suburbs. The U.S. mayors said that mortgage lending discrimination forces many urban home seekers to move to the suburbs to pursue the dream of home ownership. [...] One of the most pernicious results of sprawl has been the impact on African-Americans, Latinos, and on the nation’s race relations. Urban disinvestment, white flight, and the concentration of poverty and minorities within city borders may seem like ‘natural’ facts of economic life—tragic but unavoidable. But in fact, the “residential apartheid” that prevails in so many metropolitan regions derives from deliberate policy choices. —David Bollier

Let’s stop fooling ourselves: the fight for affordable housing in the United States boils down to helping two key groups: the working poor, and urban blacks and Hispanics. But putting poor urban black and Latino communities together usually means socially isolating them from the rest of the city. It’s a phenomenon we’ve all seen and any demographer can prove. It’s also a form of racism everyone pretends not to engage in.

But think about how long it takes to make a giant step against racism. A hundred years after our nation was created? A hundred more years until the end of segregation? Ultimately, we’re all guilty of continuing this too; even the poor communities have given up on the possibility of urban economic and racial integration. It’s too easy for white people to dismiss a neighborhood as “black” and assume that white developers are unwelcome, or that they wouldn’t be as accepted because they don’t have any interest in “giving back.” The Mexican community in Los Angeles is guilty of this: when someone from the barrio succeeds, they need to give back. Not giving back is seen as selling out. It’s spending based on guilt and not on legitimate investments.

But consider the numbers: there were fewer slaves in 1860 America than black people living in cities with poverty rates above 40 percent in 1990. That kind of census statistic seems almost impossible to believe, unless you’ve seen several generations grow up in one of these poor neighborhoods. Henry Richmond, the founder of 1000 Friends of Oregon, said it best: the fact that poor black neighborhoods still exist means that around 1970 we began another 100 year fight against discrimination. But this fight’s harder to see, since it’s not as explicit as a Jim Crow-style law. Instead, it involves zoning, planning, and housing regulations that have made the suburbs more attractive to developers than the city, thus dropping the price of slum housing to cheap levels. This means that if you moved to the city because it was affordable, your investment never paid off. Your families were working poor fifty years ago and they’re working poor today.

Gentrify by Vanessa Renwick (buy poster)

Thanks in large part to early 20th century white flight, these areas are predominantly black, Hispanic and Asian. Today these working poor are grandparents whose kids and grandkids never got a proper community investment. Over time, a lack of private investment forced these neighborhoods to withstand harder hits. Their school systems began failing, the number of jobs never grew, and their streets became more violent.

Instead of addressing the fundamental reasons for these problems, our society put Band-aids on them, by running van pools to get the working poor in and out of areas with jobs, providing buses on corners to take kids away from their communities to schools, and beefing up the prison system to deal with urban dissidents/criminals. And our answer to renovating dilapidated communities became gentrification. As far as society was concerned, if urban poor minorities can’t manage the quality of their own neighborhoods, the free market demanded that they not be there anymore.

But there is another way. And it might blow your mind to know that it’s a free market solution.

In the late 1970s, Montgomery County in Maryland declared that any new housing complex could get a density bonus if the builder made 15 percent of the units affordable. Then they added incentives to build along main streets, near shops, jobs and other useful stuff, and even the greediest capitalist sleazeball developers couldn’t say no. And the investment seemed worthy: there was always a market for affordable spaces, but extra cheap units with no added burden from the county government? It was a win-win.

But the 750,000 relatively wealthy white residents of 1970 Montgomery County were leery. Cheap units in dense neighborhoods would likely bring in the kind of riff-raff their ancestors came to Montgomery County to avoid. (Or enslave.) Why would wealthy white people invite development that would bring poorer minorities into their neighborhoods? Why accept any kind of subsidized housing project, even if most of the units were luxurious? What happens when free market opportunities rub up against 1970s racial tension?

In the end (of course), the free market won. By 1998 the number of low-income to moderately-affordable units in the county passed the 10,000 mark. Today the black and Hispanic populations in Montgomery County have gone up dramatically, and (aside from the ravages of the economic downturn) the price of units went up as well. It was a free market miracle: an emotionless, bottom-line-driven housing market found a way to sell units to poorer people in wealthier neighborhoods without affecting the rest of the community’s housing price. And now there’s a sense that Montgomery is one of the most diverse communities in Maryland. It was like Horace Greeley and Milton Freidman built a county together, and somehow everything came up roses.

And prices were all over the board. During the 1980s the average affordable unit sold for $69,900 while the county average was $208,000 (which is insane for the 1980s). And the best part is that the affordable units were sold or rented to people whose average household incomes were $26,400. The rest of Montgomery? $62,000. Still, check out housing listings today on Redfin; the prices range widely and yet retain pretty good levels in comparison to all of Maryland, which is more segregated per county by income. That’s right: today, not only does Montgomery have stronger ties to public transportation, better access to jobs, a more stable housing market, better schools and better services, but it even has racial integration and upward mobility.

Okay, it’s not entirely due to a free market strategy ... it’s more business optimizing. This plan worked because it basically attuned government’s goals to a business-friendly strategy, and assumes that developers inherently understand the concept of “you scratch my back and I’ll scratch yours.” And here’s the thing about market-driven economies on the right development track: they find ways to make stuff work, and if you’re a smart economist/urban planner you can predict some of the positive outcomes. For example, since developers needed to add units, they had to hunt through Montgomery County for the most effective locations. They chose areas that were already dense with businesses and restaurants. Many even had transit stops, which freed up more land for development. And even if poorer people were in smaller units and scattered through the upper middle class landscape, they still benefited from access to services without being a financial burden on the community. And dropout rates in Montgomery County schools remained at two percent regardless of the demographic shift. That’s some serious service integration.

Opening the gates to that tiny amount of low-income people even had a surprise benefit: saving Montgomery county’s farmland. If the county had required developers to build low-income developments in a corner of Montgomery County, it would have created a real estate sinkhole. Montgomery-ites, whether for racial or economic reasons, would have moved further and further away from that sinkhole and deeper into pristine countryside. Private investors would have looked elsewhere as well, adding a new tax burden on residents who need sewage piping, roads, schools, police and fire services, and all kinds of other things in their once-rural exurbs, all while slowly eliminating acres of charming landscape.

The fact that this strategy was implemented in the late 1970s and still hasn’t caught on nationwide is mind-numbing. Montgomery County’s only 496 square miles; nothing compared to a 4,060 square mile county like Los Angeles. Imagine if this had been implemented 40 years ago in L.A. Or across the nation, in all urban and suburban areas. How much could it have affected us and the way we live our lives? Could it have stabilized our economy during this downturn? How easy would it have been to buy a home today? How many amazing neighborhoods would there have been?

And how much further along would we be in our third hundred year fight against discrimination? We’re almost 40 years into it now, so we need to step up our game and take the free market along for the ride. It’s the only way to compel society to truly level the playing field.

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