Equality as a driver of inequality? Universalistic welfare,generalised creditworthiness and financialised housing markets

Abstract

Scandinavian countries are known for their universalistic welfare states, corporatist coordination, strong economic performances and egalitarian outcomes, an institutional combination often referred to as the ‘Nordic model’. However, these countries also possess volatile and increasingly vulnerable housing markets characterised by periods of sharp increases in prices and rents and some of the highest debt to income ratios in the world. The combination of a universalistic welfare state and housing market dynamics sets off a self-reinforcing process of increased stratification and re-familialisation. How did these orderly, egalitarian and welfare-oriented societies end up with housing markets that expose their citizens to increasing risk while driving inequality? The key lies in the effect the Nordic welfare state has on financialised housing markets. Successful decommodification of human lives leads to generalised creditworthiness which stimulates asset price inflation and new wealth and risk inequalities.     

The Changing Relationship Between Housing and Inequality, 1980–2010

Inequality in both income and wealth has grown rapidly in the United States since the 1970s. Over the same period, homeownership rates increased in step with expansionist government policies and the development of subprime and other exotic loan products, and housing affordability challenges emerged as the most prevalent housing problem for owners and renters alike. The subprime lending and foreclosure crises of the 2000s stretched households financially, threatening the traditional economic benefits of homeownership, bringing into stark relief the ways in which housing and inequality mutually influence one another, and implicating homeownership, housing affordability, and subprime lending in the widening gap between the rich and the poor. This article examines the changing roles of homeownership, housing affordability, and subprime lending in contemporary U.S. inequality by, first, describing trends in county inequality and housing characteristics and, second, modeling inequality as a function of the previous decade's housing characteristics over the period of 1980–2010. We build upon past models of county inequality by more explicitly considering causal order, place characteristics, and state and regional fixed effects. The results confirm that homeownership, affordability, and subprime lending not only reflect existing inequalities but also perpetuate those inequalities over time. Homeownership promotes equality, affordability problems undermine it, and subprime lending has the potential to ameliorate inequality in certain contexts, but these effects shift significantly over time, particularly as a result of widespread foreclosures and economic recession. Our analysis establishes the importance of housing in explaining contemporary inequality, highlights how place characteristics and causal ordering may improve county inequality models, and provides a foundation for future studies examining inequality in light of the Great Recession and the foreclosure crisis.     

Housing and populism

Abstract

The recent success of populist candidates in the UK and Continental Europe has sparked a major debate between those who view populism as a reaction of the economically ‘left behind’ and those who view it as a cultural ‘backlash’ by groups with declining social status, pointing to stark divisions between urban and rural areas, core and periphery. This paper bridges the economic and values-based approaches to populism by arguing that the geography of wealth inequality offers a convincing explanation for the pattern of populist vote share. Drawing on fine-grained house price data in the UK and France, it is shown that the pattern of house prices ? even within small districts ? plays a major part in shaping support for Brexit and Marine Le Pen. The findings illustrate how longstanding variation in local wealth shapes the geography of discontent and drives populist appeal. Populism, the article concludes, is primarily a politics of place, and place is a product, in part, of the housing market.     

Economic inequality,winner-loser gap,and satisfaction with democracy

This study analyzes how economic inequality affects electoral winners and losers' satisfaction with democracy. We posit that both the poor and the rich have more at stake in elections when inequality is high. Electoral losers, whether they are the poor or the rich, are more likely to be dissatisfied with democratic systems when facing greater disparity in wealth. In contrast, electoral winners confronting higher inequality are more likely to express satisfaction with democracy. Employing a multilevel analysis of Comparative Study Electoral Systems (CSES) data, we find that the gap in satisfaction with democracy between electoral winners and losers widens as income inequality increases. Broadening the conventional wisdom that electoral systems mediate the effect of citizens' winner-loser status on their democratic attitudes, we demonstrate that the mediating effects of economic inequality are more critical than the institutional effects.     

Bricks in the wall: the politics of housing in Europe

Abstract

Housing has important economic, political, and social ramifications for Western Europe and beyond. Despite its importance in shaping economic and political outcomes, however, housing remains in the peripheral vision of major comparative political economy debates. This introduction to the special issue accomplishes four objectives. First it demonstrates how housing defies current political economy typologies by failing to conform to their theoretical and empirical predictions. Second it summarises the current state of housing research within political science, which still remains in its infancy. Third it highlights how the contributions in this special issue expand our understanding of how housing causes and is shaped by political and economic outcomes in Europe. Finally, this introduction concludes by outlining how the special issue contributions demonstrate housing’s importance for the welfare state, political preferences and electoral shifts, regulatory and redistributive policies, and financialisation and household indebtedness in Europe.     

Income inequality and voting for radical right-wing parties

Using a multilevel analysis method, this article tests different hypotheses for how income inequality affects voter support for radical right-wing parties (RRPs) in Western Europe. Specifically, the article shows how this ‘income inequality effect’ encourages poor people to vote for RRPs, while it concurrently discourages rich people from doing so. This finding supports the social identity hypothesis, which states that social identity (a micro-level factor) intermediates income inequality effect (a macro-level factor) on voter support for RRPs. The article's results suggest, further, that income inequality has different effects between the main supporters of RRPs with dissimilar occupations (e.g., manual workers and the petty bourgeoisie) because they belong to different income groups; and that country-level factors may have different effects on people regarding their support for RRPs.     

Regional inequality and institutional trust in Europe

Inequality is a central explanation of political distrust in democracies, but has so far rarely been considered a cause of (dis-)trust towards supranational governance. Moreover, while political scientists have extensively engaged with income inequality, other salient forms of inequality, such as the regional wealth distribution, have been sidelined. These issues point to a more general shortcoming in the literature. Determinants of trust in national and European institutions are often theorized independently, even though empirical studies have demonstrated large interdependence in citizens’ evaluations of national and supranational governance levels. In this paper, we argue that inequality has two salient dimensions: (1) income inequality and (2) regional inequality. Both dimensions are important antecedent causes of European Union (EU) trust, the effects of which are mediated by evaluations of national institutions. On the micro-level, we suggest that inequality decreases a person's trust in national institutions and thereby diminishes the positive effect of national trust on EU trust. On the macro-level, inequality decreases country averages of trust in national institutions. This, however, informs an individual's trust in the EU positively, compensating for the seemingly untrustworthiness of national institutions. Finally, we propose that residing in an economically declining region can depress institutional trust. We find empirical support for our arguments by analysing regional temporal change over four waves of the European Social Survey 2010–2016 with a sample of 209 regions nested in 24 EU member states. We show that changes in a member state's regional inequality have similarly strong effects on trust as changes in the Gini coefficient of income inequality. Applying causal mediation techniques, we can show that the effects of inequality on EU trust are largely mediated through citizens’ evaluations of national institutions. In contrast, residing in an economically declining region directly depresses EU trust, with economically lagging areas turning their back on European governance and resorting to the national level instead. Our findings highlight the relevance of regional inequality for refining our understanding of citizens’ support for Europe's multi-level governance system and the advantages of causal modelling for the analysis of political preferences in a multi-level governance system.     

Residential Segregation,Housing Submarkets,and Spatial Analysis: St. Louis and Cincinnati as a Case Study

This article considers how spatial analysis of housing submarkets can advance research into residential segregation. While an emphasis on housing submarkets has been proposed as a new construct for modeling housing prices, its use in analyzing residential segregation has been limited. Recent advances in spatial analysis and geographic information systems present new opportunities for researchers to exploit the potential of housing submarkets as constructs that offer a more precise way to examine residential segregation. The article synthesizes literature related to residential segregation and housing submarkets and demonstrates how to delineate housing submarkets using publicly available data. It examines the spatial distribution of housing submarkets and how the socially disadvantaged are represented across housing submarkets in St. Louis, Missouri, and Cincinnati, Ohio, to conclude that St. Louis's housing market is more polarized and racially segregated than Cincinnati's. Spatial analysis of housing submarkets, in conjunction with archival analysis, provides a promising avenue for identifying residential segregation as a multidimensional phenomenon, and a means to explore local processes of urban inequality.     

Can we explain the Santa Clara county housing market?

Abstract

Santa Clara County has recently had the highest house prices of any large housing market in the nation. Part of the explanation lies in the extraordinarily low user cost of housing caused by the interaction of high incomes and the tax deductions available to homeowners. But this article also evaluates whether changes in stock wealth have been responsible for the recent increase in housing prices in Santa Clara County.

Although three different stock market measures add explanatory power to a model of housing prices in the region, none of these indexes predicts the housing price increases seen in 1999 and 2000. In fact, the within‐sample models have .R‐squares of only 0.22, and even the best model (based on the Standard & Poor's 500) does not forecast well out of sample. Still, the market is unusual in that stock prices seem to have some impact on house prices.     

Global inequality as one of the root causes of the financial crisis: a suggested explanation

Abstract

The global financial crisis was caused because the volume of toxic assets in the financial system had grown to the point where the system could no longer cope. The dominant view among heterodox economists is that this point of critical mass was reached because of various failures in the financial system. This paper puts the accompanying view that the toxic assets were created largely in response to external pressures, a principle source of which was global inequality: while income inequality was an important factor behind the supply of those assets, wealth concentration was a major factor behind the demand for them. The policy implications of this analysis are that income distribution and wealth ownership have to be more equitably structured if global financial crises are to be avoided in the future. This is not to exclude other proposals for making the financial system more transparent and accountable. The point, rather, is that these proposals are insufficient on their own. No matter how radical the re-structuring of the financial system, as long as there remain external pressures on it to create products or to indulge in practices that are harmful to it, such products and practices will continue to be introduced and financial crises will continue to occur.     

Economic Inequality and Democratic Political Engagement

What effect, if any, does the extent of economic inequality in a country have upon the political engagement of its citizens? This study examines this question using data from multiple cross‐national surveys of the advanced industrial democracies. It tests the theory that greater inequality increases the relative power of the wealthy to shape politics in their own favor against rival arguments that focus on the effects of inequality on citizens' objective interests or the resources they have available for political engagement. The analysis demonstrates that higher levels of income inequality powerfully depress political interest, the frequency of political discussion, and participation in elections among all but the most affluent citizens, providing compelling evidence that greater economic inequality yields greater political inequality.     

Anti‐elite parties and political inequality: How challenges to the political mainstream reduce income gaps in internal efficacy

There is growing interest in political inequality across income groups. This article contributes to this debate with two arguments about political involvement: poverty depresses internal political efficacy by undermining cognitive and emotional resources; and dissent in the party system reduces the efficacy gap to higher incomes. Specifically, conflict is to be expected between anti‐elite and mainstream parties to simplify political decisions and stimulate political attention among poor voters. These arguments are supported with comparative and experimental analyses. Comparative survey data shows that the income gap in efficacy varies with a novel measure of the anti‐elite salience in the party system. The causal impact of anti‐elite rhetoric is established though a representative survey experiment. Finally, the article investigates how these mechanisms affect both electoral and other forms of political participation.     

Grey Power: Towards a Political Economy of Older Voters in the UK

The impact of age on voting behaviour and political outcomes has become an issue of increasing interest, particularly in the UK. Age divides in voter turnout and political preferences have led to claims that age is the ‘new class’. In this article, we contrast existing ‘cultural backlash’ and political economy explanations of the age divide in politics, and challenge the view that older people are predominantly ‘left behind’, culturally or economically. We show that older people have distinct material interests, related to housing wealth and pensions’ income, that are visible in their political preferences. We argue for the development of a new political economy of age.     

Housing Subsidies and Early Childhood Development: A Comprehensive Review of Policies and Demonstration Projects

ABSTRACT

In this article, we ask how housing subsidies might influence young children. We examine two national housing policies – public housing assistance and the Section 8 vouchers program – and two demonstration projects that aimed to improve the administration of providing housing subsidies – HOPE (Homeownership Opportunities for People Everywhere) VI and Moving to Opportunity. This article is a critical examination of these policies and demonstration projects in relation to the following housing dimensions that promote the healthy development of young children: income supplements residential stability, physical environment, access to services and amenities, housing choice, neighborhood safety, and social capital. We compared advantages and limitations of each of these national housing policies and demonstration projects and examined ways in which they might influence children in these housing dimensions. The article concludes with implications and future research directions for U.S. housing policy by discussing its most recent U.S. Department of Housing and Urban Development (HUD) initiative, Rental Assistance Demonstration, in addressing limitations of housing policies and demonstration projects we examined.     

Work,Leisure, and Care: A Gender Perspective on the Participation Income

In ‘The case for a participation income’, Anthony Atkinson identified unconditionality as an obstacle to support for a citizen's income. He advocated prioritising the universality and individuality of a citizen's income but replacing its unconditionality with a ‘participation’ requirement. At the time, Atkinson's critique read as political realism: to eliminate means‐testing, make a concession to the fear of free‐riding. Ironically, Atkinson remained opposed to unconditionality despite his own critical contributions to documenting the growing income and wealth inequality that have increased support for an unconditional basic income. In this article I consider the ‘participation’ requirement from a gender perspective in order to uncover the problematic notions of ‘dependence’, ‘independence’, reciprocity, and free‐riding that underlie normative arguments for conditional over unconditional benefits. Employing such a perspective demonstrates the superiority of unconditional benefits in achieving more efficient and effective income support and reducing inequality—Atkinson's core commitments throughout his distinguished career.     

The young and the restless: housing access in the critical years

Abstract

How do governmental housing policies affect the ability of young people to exit the parental home? This paper makes three claims. First and most important, governments that create accessible and liquid mortgage markets make it easier for young people to launch from the parental home. Second, even in those countries with more liquid housing markets, younger generations today still have an increasingly difficult time realising their preferences compared to prior generations. Third, increasing income and wealth inequality interacts with housing markets to create this uneven playing field both within and across generations. This paper examines these relationships in 20 high-income OECD countries. Fewer adult children live in the parental home in countries with deep mortgage markets, high levels of social rented housing, tax relief for ownership, low buyers' transaction costs and high residential mobility. These countries cut across the traditional housing regime typologies, highlighting the need for additional housing-specific theory building.     

Networks and nonprofits: Opportunities and challenges in an era of federal devolution

Abstract

Community development corporations and other nonprofit organizations are increasingly responsible for producing and managing low‐income housing in urban America. This article examines the network of governmental, philanthropic, educational, and other institutions that channel financial, technical, and political support to nonprofit housing sponsors. We analyze the relationships among these institutions and propose an explanation for their success. We then consider challenges the network must confront if the reinvention of federal housing policy is to succeed.

Block grants and rental vouchers, the dominant emphases of federal policy, present opportunities and constraints for nonprofit housing groups and their institutional networks. While states and municipalities are likely to continue to use block grants for nonprofit housing, the viability of this housing will be severely tested as project‐based operating subsidies are replaced by tenant‐based vouchers. We recommend ways that the federal, state, and local governments should help the institutional support network respond to this challenge.     

New economy housing markets: Fast and furious—but different?

Abstract

This article explores the effects of metropolitan industrial structure on housing market outcomes. Housing prices in new economy metropolitan areas are found to be higher, peakier, and more volatile than in old economy markets. Homeownership rates are found to be lower in new economy metropolitan areas, while crowding is higher. Although the distribution of housing values, costs, and rents was more equal in new economy markets, the cause would seem to be differences in area income levels, with poorer metropolitan statistical areas having greater inequalities.

Regression analysis is used to identify the contribution of traditional supply and demand factors, such as job growth, income, and residential construction, as well as new economy indicators, to housing market outcomes. Rather than being fundamentally different, new economy housing markets are found to be faster and more extreme versions of traditional housing markets.     

Comment on Sandra J. Newman and Ann B. Schnare's “'… And a suitable living environment’: The failure of housing programs to deliver on neighborhood quality”

Abstract

Newman and Schnare provide a useful portrait of where housing assistance ends up geographically. The evidence that certificate and voucher holders are less likely than public housing residents to live in the poorest neighborhoods is encouraging, as well as important for policy decisions. Unresolved in the article, and unresolvable with the data, as the authors themselves note, is the matter of how neighborhood quality is affected by housing assistance. The least popular housing developments have long been relegated to neighborhoods of least political resistance, a fact that constrains most local efforts to deconcentrate poverty. Futhermore, through the tax code, America spends about three times as much on housing assistance for middle‐ and upper‐income households as it does on assistance to low‐ and moderate‐income households. Thus far, we have not applied “fair share” principles either to the location of housing assistance or to its allocation across the income spectrum.     

Comment on Robert E. Lang,Katrin B. Anacker,and Steven Hornburg's “the new politics of affordable housing”

Abstract

In his thoughtful analysis, Joseph realistically points to what a mixed‐income housing development can and cannot offer its low‐income residents. Observed benefits include greater informal social controls over the development, likely proximal modeling opportunities for youth, and participation in a political‐economic subgroup that can demand more responsive public services. Yet without offering more comprehensive, structured supports to its residents, no form of housing alone can be an antidote to poverty.

However, if we expand Joseph's analysis to include the impact of large‐scale developments on distressed urban neighborhoods, we can see mixed‐income housing catalyzing other benefits for low‐income residents. These benefits include a reduced housing cost burden; more structured supportive services; dramatically improved surroundings; high‐quality housing and community design; faster‐paced complementary investments in public systems and amenities; and strategically restored market functioning that offers more choices, lower prices, new jobs, and additional tax revenues to support service delivery.