Friday, March 26, 2010

State Should Resist the 'Housing Cult'

[Shigley's the co-editor/founder of a respected planning journal, the California Planning and Development Report]

18 March 2010

Gov. Schwarzenegger is going around the state urging lawmakers to approve a measure that would provide $200 million in tax credits for homebuyers. The governor claims the measure will save or add thousands of construction jobs.

His claim is hardly new. But is there any real basis for it?

Earlier this month, The Wall Street Journal’s Evan Newmark posted a blog with the headline, “Don’t Be Brainwashed by the Housing Cult” in which he questioned the assumption that homebuilding is a pillar of the economy. If Newmark is right, it demands a reconsideration of how the government subsidizes home construction.

Specifically, Newmark challenged the statement by Toll Brothers CEO Bob Toll that new home construction directly or indirectly provides one-fifth to one-quarter of all jobs in this country. It was the sort of boast that we hear frequently from the industry. Newmark, however, noted that homebuilding accounted for only 2.5% of GDP last year. Even in early 2006, when homebuilding was booming (and, as it turns out, we were overbuilding by a large amount) the industry amounted to 8% of GDP.

Newmark doesn’t think much of the homebuilding industry’s ongoing demand that the federal government provide subsidies to new home buyers, or of the industry’s pressure on Fannie Mae, Freddie Mac and the FHA to continue supplying taxpayer-guaranteed mortgages to new home buyers. He notes that 14.5% of housing units in the country are sitting vacant, and he concludes, “It seems that the only Americans who really need more new houses are the American home builders.”

I might expect this sort of commentary from an environmentalist or a greenie masquerading as an academic. But Newmark, although a contrarian and a shit-disturber, is no tree-hugger or slow-growther seeking additional government regulation. He’s an unapologetic capitalist, and he has actual facts behind his argument here.

We Californians like to think our state is different. After all, California reliably adds about 500,000 new residents every year. Even last year, when the California economy was in worse shape than at any time since the Depression, the state population grew by 367,000 people, according to Department of Finance. California, the argument goes, will always need additional housing units.

I tend to accept that argument. But if Newmark’s economic analysis is to be believed, the home construction imperative is social, not economic. We should build housing because people need shelter, not in order to employ people.

One year ago, the California Building Industry Association convinced state lawmakers to provide a tax credit of up to $10,000 to buyers of new homes. About 10,000 buyers took advantage of the program, getting themselves an average credit of about $7,000. The CBIA, state lawmakers and Schwarzenegger touted the program as a job-booster. Heck, even I offered a qualified endorsement. Now the CBIA and Schwarzenegger are calling for $200 million of tax credits for the buyers of any home, new or not.

--------Update--------

The governor signed AB 183, the $200 million tax credit, into law on March 25.

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However, all of the evidence says that last year’s program did nothing more than permit homebuilders to unload inventory. According to the Economic Development Agency, construction jobs fell by 18% to 570,000 in 2009. The CBIA itself bemoans that housing starts remained at the lowest level ever recorded in 2009.

I’m going to suggest that if the government wants to subsidize new housing, it should fund the units Californians actually need – and not simply toss money untargeted into the market.

And what we need are not the three- and four-bedroom single-family houses that are the specialty of the CBIA’s members. The average household size has been decreasing for years, and the fastest-growing household segment is one- and two-person households: seniors (by 2030, 20% of Californians will be at least 65 years old), singles, childless couples and single people sharing quarters. What these smaller households want are – this is not a big surprise – smaller housing units in convenient locations.

About 57% of California’s housing units are detached single-family houses, according to the Department of Finance’s 2008 California Statistical Abstract. It’s safe to assume that most of these are suburban-style houses that were originally designed for mom, dad and their two or three kids. But this sort of nuclear family will account for only about 25% of California households by 2020. The one- and two-person household is replacing the Leave It To Beaver family. Give these small households 800 to 1,000 square feet of well-designed living space (or un-designed living space, as in a loft), preferably within walking distance of the grocery, a coffee house, the library, a cinema and a park, and these people are as happy as clams.

If the government wants to subsidize new housing, it should aim squarely at the units that we truly need. And it should do so because people need decent shelter, not for any other reason.

– Paul Shigley

Thursday, March 11, 2010

City redresses past discrimination - NY Times


With New Homes, Town Makes Amends for Its Bias

By SUSAN SAULNY NY Times - March 10, 2010
HAMTRAMCK, Mich. — Even though more than 50 years have passed since Sallie Sanders was a confused little girl wondering why her family was kicked out of their house for being on the wrong side of the color line here, the pain seems fresh.

“Just abruptly, we had to end up staying with relatives and friends,” said Ms. Sanders, a retired state worker who is black and who, at age 60, still has trouble recounting the ordeal without breaking into tears. “It was kind of devastating. My parents tried to protect us quite a bit, but I knew something was wrong.”

And something was. In 1971, a federal judge found that this old manufacturing town, five miles from downtown Detroit, had deliberately used urban renewal projects throughout the 1950s and ’60s to obliterate black areas from its two square miles, displacing hundreds of families.

Although the judge, Damon J. Keith, ordered a remedy, and Hamtramck agreed to build new housing, it did not. For decades.

Now, though, in a time of deep recession and a housing slump in one of the most economically depressed states in the country, Hamtramck (pronounced ham-TRAM-eck) is at last fulfilling its legal — and what officials now call moral — obligation to provide affordable housing to the mostly poor families who were dislodged generations ago. And if the plaintiffs in the original class-action lawsuit are no longer living, as in Ms. Sanders’s case, children and grandchildren are eligible.

About 100 houses have been completed for rent or sale, and another 100 are on the way, paid for by a mix of local and state money.

In the last five years, the town began building the new houses, but the project stalled because of the recession. It is only now approaching the final stages of construction, thanks to a recent increase in federal stimulus money. The homes, mostly two- and three-bedroom models, cost $140,000 to $160,000, and subsidies can reduce the price to $100,000; most rentals are in the $400-a-month range, after government assistance.

But beyond the building, Hamtramck has changed in another way, too. According to the Census Bureau, it is now Michigan’s most international and diverse city, having evolved from a town that was 90 percent Polish just 40 years ago. With the changes came new attitudes about how to deal with the past.

Just weeks ago, Ms. Sanders moved into a new ranch-style house on the same street where her family once lived, and Gov. Jennifer M. Granholm personally handed over the keys. As a young lawyer, Ms. Granholm was a clerk to Judge Keith in the late 1980s.

“We went full circle, and it’s pretty wonderful,” said Ms. Sanders, whose parents, now dead, were among the 250 plaintiffs who sued the city. “To acknowledge that, O.K., they were wrong, that gives me a little satisfaction because my parents were mistreated so. I just wish they were here to see it.”

The home building is also what experts call a bittersweet finale to one of the longest-running housing discrimination suits to weave its way through court, having begun in the civil rights era. Beyond its age, the case is also distinctive in that it happened at all. While Hamtramck may be an extreme example, experts said housing discrimination against blacks in the mid-1900s was common, but class-action lawsuits were rare because of their expense and complexity.

Some contend that urban renewal projects were routinely used to demolish black areas, and that most of the housing was never replaced.

“This case is unusual in a good way,” said Victor Goode, a lawyer with the National Association for the Advancement of Colored People.

Michael Barnhart, an expert on fair-housing law and the lead lawyer in the Hamtramck case, agreed. “This kind of discrimination happened all over the country,” Mr. Barnhart said, citing Chicago, Detroit and other cities.

Over the last 10 years, as the settlement appeared to be coming to fruition, Mr. Barnhart and a local minister, the Rev. Joseph R. Jordan, met with surviving plaintiffs and their families just about weekly, spending hours trying to work out the details of moving hundreds of families back to town, most from Detroit.

“We had tried several times over the years to get something started, but really couldn’t find the funding,” Mr. Barnhart said.

Judge Keith, who now sits on the United States Court of Appeals for the Sixth Circuit, called the case “difficult” and “depressing” in an interview. But, he added: “I was there to see Sallie Sanders get the keys. It was meaningful to me as a human being.”

Charnita Monday, 64, is renting one of the new houses. She moved to Hamtramck from Bessemer, Ala., looking for factory work in the late 1960s. The home she bought was among those condemned.

“The judge just kept hammering on the case, and all those years, they wouldn’t let it go,” said Ms. Monday, who is black. “I think an injustice has been righted.”

“I had gotten physically tired, mentally tired and even tired of praying,” she said. “But now, it’s like you got a new life, you know?”

In his 1971 opinion, Judge Keith wrote that testimony showed that Hamtramck officials were well aware of the difficulties their actions caused for blacks, but that they “ignored their requests for assistance, failed to investigate complaints and in no way compensated such displacees for the loss suffered.”

He also chastised the federal Department of Housing and Urban Development for approving Hamtramck’s plans and failing to protect the plaintiffs’ rights.

After decades, Hamtramck has an opportunity, however painful, to come to terms with itself.

“Nobody with a conscience wants the burden of this enormous charge of racial discrimination to be hanging over them and who they are,” said Mayor Karen Majewski. “It’s important that we do whatever we can to redeem ourselves, our history and reputation.”

“And it’s been very hard to find a way to do that,” Ms. Majewski said, “because you know what this economy is like.”

Hamtramck, despite its size, has always had a large sense of self and pride — so much so that it refused to be annexed by Detroit like so many other small towns were in the early 1900s, forcing the city to grow around it. As a result, Hamtramck, originally a homogenous village, is now a city within a city, and in the last few decades it has become a first stop for immigrants from Bangladesh, Yemen, Albania and Lebanon, among a host of other countries. As of the 2000 census, 41 percent of Hamtramck’s population of 23,000 was foreign-born.

Alongside church bells, the Muslim call to prayer is broadcast by loudspeakers every day. Twenty-five languages are spoken in the public schools.

To Mr. Jordan, the minister, Hamtramck is almost unrecognizable as the same place that tore down his friends’ neighborhoods. “We have made tremendous progress,” he said.

Ms. Monday said she had been distraught after her house was demolished and she had to move her five young children into a small apartment in Detroit, where she lived until her new home became available in 2008.

“When I left, I was bitter,” she said. “It’s a different place now. It’s been good to me, and I’m happy.”

Monday, March 1, 2010

HUD Will Enforce Obligation to Affirmatively Further Fair Housing!

Cities and counties that receive federal funding for housing and community development activities are required to sign a pledge to "affirmatively further fair housing." But that pledge has rarely been enforced by HUD in the roughly 40 years that it's been required. Recently, in a case brought by a fair housing enforcement group, a court found that wealthy Westchester County outside of NY city violated its pledge by allowing areas within the county to restrict development of affordable housing. The court ordered the county to develop a plan to build affordable housing in some of its more exclusive areas like Scarsdale, and to set aside $70 million in funding to assist with the development. The plan proposed late last year by the county provided for 750 units of affordable housing, but was unclear about where the housing would be located, and advocates feared that the county would continue to exclude affordable housing from wealthier neighborhoods, and that HUD would continue to look the other way.

But in a remarkable op ed piece in today's Westchester Journal News, Assistant HUD Secretary John TrasviƱa slammed the county for continuing to try to evade its affirmative housing pledge. This is a big step forward for HUD. From the op-ed:

"Our nation's commitment to equality can be found in many places in our society — in our history books, in our polling places and our places of employment. Among the most important places it can be found are our homes and neighborhoods, the latter of which fundamentally shape our futures by determining where our children go to school and what jobs are nearby.

"Diverse, inclusive communities offer the most educational, economic and employment opportunities to their residents. They cultivate the kind of social networks our communities and our country need to compete in today's increasingly diverse and competitive global economy. Indeed, studies have proved that students of all races and backgrounds are better prepared for the work force and engage in more complex and creative thinking when they learn in a diverse environment.
"Despite these documented benefits, we know that racially segregated neighborhoods of concentrated poverty resulted not in spite of government — but in many cases because of it. And not just at the federal level. That is why in order to receive federal funds local jurisdictions must analyze and take action to address residential segregation and discrimination. It is this obligation that the court found Westchester County failed to fulfill in a recent case brought by a civil rights organization. To ensure the county did not lose access to millions of federal dollars, the U.S. Department of Housing and Urban Development brought the parties together to reach an agreement in which Westchester would provide 750 affordable, accessible homes over the next seven years in neighborhoods with little racial diversity.

"In the settlement, Westchester agreed to use its legal and financial resources to end practices, such as exclusionary zoning, that limit diversity and follow through on its commitment to promote stable, inclusive communities. HUD expects the county to carry out the letter and the spirit of the settlement."

That's progress!