1. Drawn from Kaplan, Wheeler & Holloway, Chapter 9
Urban Housing Markets
Drawn from Kaplan, Wheeler & Holloway, Chapter 9

2. What is the importance of housing?
For households & individuals
Largest single expenditure for most people
Means of expressing personal and family identity
Fundamental expression of ethnic and class identity
Refuge from public life
Realm of private life protected by law

3. What is the importance of housing?
For society
Creates labor markets
Creates consumer markets
Creates demand for durable goods
Occupies space
Depends on various kinds of infrastructure
Depends on various kinds of services
Occupies the most carefully protected (restrictively zoned) spaces in the city

4. Housing Market Sectors
Non-market
Privately funded
Private market housing
90% of US hsg
Private non-market housing
Publicly funded (govt. subsid.)
Public market housing
Public non-market housing

5. Housing Market Sectors
"third sector housing"
market
Non-market
Privately funded
Private market housing
90% of US hsg
Private non-market housing
Publicly funded (govt. subsid.)
Public market housing
Public non-market housing
"public housing"

6. Private market housing
Like other goods
reflects many individual decisions about quality vs. affordability
varies in type to suit various lifestyles
Unlike other goods
is often rented rather than owned by the poor
a fundamental reason the poor get poorer and the rich get richer
cannot be moved so location is one of various aspects of its value

7. Housing supply Varies on several dimensions public vs. private housing
age
size
placement on lot
location and accessibility
architectural style
landscaping style & quality
other on-site improvements (e.g. pool)
adjacent functions--desirable & undesirable

8. Filtering Homer Hoyt vacancy chains & filtering
new unit at edge ultimately creates vacancy near center
each household occupies successively nicer housing (at least until children reach college)
each neighborhood slowly declines in terms of income relative to the rest of the urban system
implication: market’s tendency to build new housing for the wealthy ends up providing housing for all groups

9. Vacancy Chains

10. Hoover & Vernon initial urbanization transition (density increases)
downgrading (conversion from single family to multifamily use)
thinning (abandonment)
renewal (usu. with public sector (i.e. govt.) involvement)

11. few people can pay for their home outright--so it’s an unusual market
Home buying
few people can pay for their home outright--so it’s an unusual market

12. Home buying
before Great Depression banks required down payment greater than 30% of home cost and loan term 10 yrs. or less
few people could afford this
FDR created the HOLC to lend directly to homeowners, then the FHA to guarantee S&L mortgage loans
longer term loans 20+ years
lower down payments
lower interest (since Fed assumed the risk)
led to Post WWII suburbanization

13. Discrimination
may be given different information given to buyers/renters depending on their racial/ethnic background
told about fewer units
shown fewer units
may be directed (steered) toward units other than the advertised unit
may be offered less favorable lease or mortgage terms

14. Lending discrimination
redlining
refusal of lenders to finance mortgages in certain neighborhoods
refusal of federal government to guarantee home loans in certain neighborhoods (FHA)
prohibited in 1975, but it continued after that time
applicant-level discrimination
stills occurs in some cases
2%-12% depending on how you measure it

15. Predatory lending
Instead of denying loans to the poor the poor are sought out and offered loans
loans may have exploitative lending terms
Home Loan Refinancing can be “sold” aggressively, esp. to older or less educated people, then used to squeeze the equity out of their homes without paying the owners their due

16. Bottom line “Discrimination tax” (John Yinger)
costs of extra home-search time, worse lending terms, and reduced options
$3000-$4200 more will be paid by black homeowners for similar housing
$3300-$4400 more will be paid by Hispanic homeowners for similar housing
additional costs are imposed on a day-to-day basis by the restricted opportunities for people forced to live in sub-optimal housing

17. Fannie Mae & Freddie Mac
Government sponsored enterprises
Federal National Mortgage Association (Fannie Mae) & Federal Home Loan Mortgage Corporation (Freddie Mac)
Are allowed to purchase home loans from original lenders and bundle them for resale to investors
while people may default on loans, bundles of loans are seen as a secure investment
these enterprises free up loan money, making it easier for people to acquire loans
government regulation requires them to increase lending to “underserved markets” i.e. minorities & the low & lower middle classes

18. causes and attempted solutions
Urban Blight
causes and attempted solutions

19. Causes of “urban blight”
ageing housing stock
oldest housing stock is in need of repair
suburbanization
economy of older areas suffers from loss of middle and upper classes to suburbs
blight as self-fulfilling prophecy
growth machines (reflecting inner city business interests) lobby for federal redevelopment funds
city designates neighborhoods as “blighted”
maintenance by landlords in these areas has no more utility

20. Public housing Units built never matched units destroyed
Urban renewal money was spent on:
freeways & roads
hospitals
universities
government offices
sports facilities
middle and upper income housing

21. The new look of the 1960s

22. The new look of the 1960s

23. Public housing
Originally PH seen as temporary place of residence for the “deserving poor”
white families facing temporary misfortune
later, PH was used as essentially permanent housing for the poorest segments of the population
PH demonstrated the failure of the housing market to provide adequate range of housing through filtering
PH became stigmatized, hated, and shunted away to parts of the city least able to defend themselves, and also least able to offer opportunities to the residents
design flaws made PH dangerous & dehumanizing

24. Pruitt Igoe (the most infamous public housing project)
1971
1956

25. Pruitt Igoe (the most infamous public housing project)
1972

26. Gentrification old houses can be purchased cheaply
white, middle class buyers can take advantage of Fannie Mae & Freddie Mac targeted programs
input “sweat equity” (labor)
flocking (neighborhood “turns around”)
change economic conditions in city
become customers for certain inner city businesses (some old, most new)
drive up property tax assessments
pay higher taxes helping city out of financial woes
drive up rents and create economic incentive for the demolition of rental properties

27. Actual realtor’s listing (from Toronto)
Grand High Park residence.
“Diamond in the rough” with parking.
Awaits your touch.
Exceptionally high basement with separate entrance.
Easy access to High Park & subway.
Stroll to trendy Bloor Street shops & restaurants.