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Real Estate Investor

Property politics: How others respond to housing inequality

After John Norquist left his longtime position as mayor of Milwaukee, he spent a decade heading up the Congress for the New Urbanism, an organization that promotes smart urban planning. Called a “fiscally conservative socialist,” Norquist has no problem combining seemingly contradictory ideas to make a workable plan, and he has long championed such plans in the areas of real estate and urban planning.

At an affordable housing conference in 2005, Norquist spoke about how cities have gone wrong when they tried hardest to do it right. He took aim at Charles-Édouard Jeanneret-Gris, a Swiss-French architect and urban planner better known as Le Corbusier, who Norquist used as a prime example of the movement that had destroyed cities. In Norquist’s view, cities have a natural flow and pattern that can be improved but can also be ruined by urban planning decisions. Le Corbusier’s sin was his penchant for wanting to bulldoze huge sections of cities such as Paris to make way for single-use neighborhoods of modernist towers to house people.

There have definitely been many wrong-headed urban planning trends in the United States in the 20th century. But each of those wrong-headed moves was an attempt to improve something.

Le Corbusier was reacting to the dirty tenements and slums that had long haunted the world’s great cities. But Norquist took him to task for neglecting the way people actually live their lives and replacing it with utopian dreams. Norquist recounted how a century ago, a family might emigrate from Germany to Milwaukee, live in a cheap apartment above a streetside retail shop and work its way up, eventually buying the shop and moving the family to a nicer neighborhood. Then they’d rent the apartment above their store to immigrants from Poland (this is a very Milwaukee-centric example, mind you). Those new tenants would go through the same upward trajectory, and on and on.

Last month, the Financial Times writer Kate Allen explored the ways that cities and countries deal with a problem with which we are very familiar here in the City by the Bay. How can fast-growing cities, with booming economies and growing populations, prevent their populations from becoming even more economically stratified and forcing out the middle class? Allen presents seven approaches, some of which have been tried here, some of which could be, and some which will never be.

First is the demand-side approach of making it more difficult to buy a home. South Korea, Israel, and elsewhere use this method to make life more miserable for wannabe owners; it does nothing to prevent stratification, because wealthier buyers have no problem clearing hurdles of low debt-to-income ratios or loan-to-value ratios.

Second is the supply side. In some places, land banks make land available for moderate-income housing, but as Allen notes, free-marketeers dislike this government involvement. San Francisco being a “fiscally liberal socialist” city, that’s probably not a problem, but our approach here has tended to focus on loosening development rules on city-owned land.

The third approach is to skip the market altogether and make it all state-owned. Even in San Francisco, that won’t fly.

Fourth is to expand into areas previously set aside, such as greenbelts. Considering that San Francisco’s “greenbelt” is water and Daly City, we can assume this is a no-go.

Fifth is to encourage renting, such as the rent-happy Germans do. This takes a real determination to go against the wishes of the people; homeownership is the one long-term investment that most Americans make. Besides, not everyone wants to rent all their lives; that might be why so many Germans moved to Milwaukee.

The sixth approach is to spread out and build outside of the city limits. That leads to ugly urban sprawl.

Finally, Allen offers the idea of subsidizing ownership. President George W. Bush made a big push to help lower-income people buy homes. (The lack of proper regulation of the financing schemes used to get them loans helped tank the world economy in the Great Recession, but the goal was laudable if the execution deplorable.) A year ago in these pages, affordable housing advocate Andre Shashaty argued that the federal government has largely pulled out of affordable housing enablement and financing, and there is no likelihood that that will change any time soon (see “We’ve written it off,” April 2014, Marina Times). In San Francisco, at least, the city does facilitate down-payment assistance for middle-income homebuyers. Mayor Ed Lee has recently announced an expansion of this effort, so we shall see how much this can helps stabilize San Francisco’s rich-poor housing divide.

Are there other approaches that could help us, or will they create unintended consequences of misery and market disruption like Le Corbusier bulldozing sleepy neighborhoods to make way for residential-only mega-‘hoods?

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