Housing and Poverty
I should read more about this, but here are a few speculative (HA!) thoughts on the housing market and its relation to poverty.
I spent the weekend in Peoria celebrating my birthday. To get to Peoria, I took a city bus to Midway and then a commercial bus to Peoria. On the bus to Midway, there was a lot of passenger turnover, and two of the people who sat next to me smelled strongly of urine. It was unpleasant.
When I got to Midway, I couldn't help thinking about how unlikely it is to fly next to someone who smells like urine. True, passengers sometimes don't smell entirely pleasant, but it's just much less likely to sit next to someone reeking of urine.
The difference, I would imagine, is the kind of person who flies versus the kind of person who rides a city bus. The average flier (I'm guessing) is richer and better educated. There's nothing the matter with riding a bus, it's just that airlines inadvertently screen out poor people by charging prices that are high relative to a bus fare. They also give discounts if you buy your ticket online, but that's a secondary factor.
Anyway, all of this plays into how housing works, I think. Of course, everyone wants a nice house or apartment with lots of space and whatnot. Another thing that people want, though, is to avoid unpleasant neighbors. You could achieve this several ways, but one way is to price them out. Some suburbs require that every house sit on a 4-acre plot. No poor person could afford such a house, so they are effectively barred from living there.
It's not that all poor people make bad neighbors, it's just that statistically they're more likely to. This is called statistical discrimination. It occurs when the cheapest way to sort people is by some factor other than the relevant one. This can be odious, as when race or gender is used as a proxy for something else. If you could come up with a better-tailored test for good neighbors, you could avoid screening out teachers, policemen, and other (relatively) poor people who make good neighbors. One big factor for parents is finding a neighborhood with other children so their kids will have friends. The nightmare, of course, is that your kids will fall in with the wrong crowd, which is a very strong motivator to move somewhere without a lot of bad influences.
So I think people buy housing that is more expensive than they would otherwise prefer to avoid poor neighbors. This results in a misallocation of resouces. In short, the market is somewhat competitive. If I'm going to pay 20% extra for my house, this won't just make the builder richer. Builders will compete away the extra price by installing (inefficiently) expensive features. Society thus squanders some of its resources on housing that no one would pay for if the neighbor problem didn't exist.
Another problem (probably the more important one) is that poor people end up living in areas of concentrated poverty. They suffer higher crime, more pollution, worse access to jobs and government services, and lower property tax revenue for their schools. All of this is because the price of housing is artificially inflated.
I don't know a good solution, and I haven't read very much on the subject. There might be some offsetting advantages of our system, but I can't think of any. As boring and empty as many suburbs are, they exist for perfectly rational reasons, and their anti-poor policies are not accidental. I'll ask Professor Strahilevitz what ought to be done.
I spent the weekend in Peoria celebrating my birthday. To get to Peoria, I took a city bus to Midway and then a commercial bus to Peoria. On the bus to Midway, there was a lot of passenger turnover, and two of the people who sat next to me smelled strongly of urine. It was unpleasant.
When I got to Midway, I couldn't help thinking about how unlikely it is to fly next to someone who smells like urine. True, passengers sometimes don't smell entirely pleasant, but it's just much less likely to sit next to someone reeking of urine.
The difference, I would imagine, is the kind of person who flies versus the kind of person who rides a city bus. The average flier (I'm guessing) is richer and better educated. There's nothing the matter with riding a bus, it's just that airlines inadvertently screen out poor people by charging prices that are high relative to a bus fare. They also give discounts if you buy your ticket online, but that's a secondary factor.
Anyway, all of this plays into how housing works, I think. Of course, everyone wants a nice house or apartment with lots of space and whatnot. Another thing that people want, though, is to avoid unpleasant neighbors. You could achieve this several ways, but one way is to price them out. Some suburbs require that every house sit on a 4-acre plot. No poor person could afford such a house, so they are effectively barred from living there.
It's not that all poor people make bad neighbors, it's just that statistically they're more likely to. This is called statistical discrimination. It occurs when the cheapest way to sort people is by some factor other than the relevant one. This can be odious, as when race or gender is used as a proxy for something else. If you could come up with a better-tailored test for good neighbors, you could avoid screening out teachers, policemen, and other (relatively) poor people who make good neighbors. One big factor for parents is finding a neighborhood with other children so their kids will have friends. The nightmare, of course, is that your kids will fall in with the wrong crowd, which is a very strong motivator to move somewhere without a lot of bad influences.
So I think people buy housing that is more expensive than they would otherwise prefer to avoid poor neighbors. This results in a misallocation of resouces. In short, the market is somewhat competitive. If I'm going to pay 20% extra for my house, this won't just make the builder richer. Builders will compete away the extra price by installing (inefficiently) expensive features. Society thus squanders some of its resources on housing that no one would pay for if the neighbor problem didn't exist.
Another problem (probably the more important one) is that poor people end up living in areas of concentrated poverty. They suffer higher crime, more pollution, worse access to jobs and government services, and lower property tax revenue for their schools. All of this is because the price of housing is artificially inflated.
I don't know a good solution, and I haven't read very much on the subject. There might be some offsetting advantages of our system, but I can't think of any. As boring and empty as many suburbs are, they exist for perfectly rational reasons, and their anti-poor policies are not accidental. I'll ask Professor Strahilevitz what ought to be done.
posted by James | 11:47 AM
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