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.     

Evictions: The hidden housing problem

Abstract

Although evictions are a major housing problem that disproportionately affects lower‐income and minority tenants, no systematic data about evictions are collected on a local or national level. This article presents the scattered available data on the magnitude and impact of the problem, along with existing model efforts to reduce its incidence and impact.

Creating a national database on evictions—how many, where, who, why, and what happens to evictees—would be an important first step in focusing attention on this neglected issue. Definitional questions must be resolved as an initial step. In an effort to launch such a project, suggestions are offered on how to begin creating such a database.     

FHA in the Great Recession: Rebalancing Its Role

The Federal Housing Administration's (FHA) Mutual Mortgage Insurance Fund has a negative net worth as of FY2012, partly because of the weak economic recovery and partly because its policy has been directed to supporting homeownership at the risk of incurring more defaults. Although recently announced reforms should reduce losses, higher insurance premiums and lower loan-to-value ratios will still be necessary. But FHA faced and survived similar situations before, and should be able to do so again, without draconian limitations on its authority.     

Financing multifamily rental housing: The changing role of lenders and investors

Abstract

A broad consensus exists that there are significant barriers to accessing capital markets for multifamily rental housing, particularly for housing targeted at low‐and moderate‐income households. While there is a growing secondary market for multifamily mortgages, the market is in the early stages of development and remains quite small. Expanding this market requires increasing standardization of mortgages, increasing credit quality with better underwriting and credit enhancement, and educating investors as to the risks and returns of multifamily investments. In addition, dramatically improved data collection on the performance of multifamily investments and analysis on the determinants of success are needed.     

Segregation and the Geography of Creditworthiness: Racial Inequality in a Recovered Mortgage Market

The subprime boom and subsequent foreclosure crisis highlighted risk associated with pursuit of the American Dream of homeownership. People of color and those living in segregated areas were particularly harmed by the dramatic rise and fall of the housing market. Almost a decade after the economy’s collapse, questions remain about racial and spatial disparities in access to mortgage credit. I leverage Home Mortgage Disclosure Act data to explore mortgage application outcomes in 2014. Well into the economy’s recovery, minority borrowers remained at a disadvantage in the mortgage approval process. Whereas 71% of White applicants were approved for home loans, approval rates were lower for Asians (68%), Latinos (63%), and Blacks (54%). Black and Latino borrowers were also significantly more likely to receive higher cost loans than Whites, a practice that has accelerated since the foreclosure crisis. Results suggest that segregation exacerbated racial disparities as lenders funneled expensive credit into isolated minority communities. Furthermore, the differences between White and minority outcomes were largest in census tracts where subprime lending was common in 2006 and foreclosures accumulated during the Great Recession. Together, these findings indicate how spatially organized markets have racialized consequences in a highly segregated society.     

Inclusionary housing in California and New Jersey: A comparative analysis

Abstract

Many people have argued that inclusionary housing (IH) is a desirable land use strategy to address lower‐income housing needs and to further the geographic dispersal of the lower‐income population. In an attempt to evaluate the effectiveness of IH, this article examines the experiences of New Jersey and California, two states where IH has been applied frequently over an extended period.

While the concept of regional “fair share” is central to both states’ experiences, the origins of the programs, their applications, and their evolutions are quite dissimilar. IH originated in New Jersey from the famous Mount Laurel cases and in California from housing affordability crises and a legislatively mandated housing element. The experiences of both states indicate that IH can and should be part of an overall affordable housing strategy but that it is unlikely to become the core of such a strategy.     

No Home for Housing: The Situation of the Commonwealth's Housing Policy Advisory Function

The Commonwealth's policy capacity with regard to housing policy and provision has been erratic and patchy. Partly this is because housing was not traditionally a formal Commonwealth responsibility but something in which Commonwealth governments episodically intervened, and partly it was because Commonwealth ministers often did not exercise demand for policy advice in this area. When policy capacity was exercised it tended to define housing narrowly as a welfare initiative, thereby limiting its conception and excluding other important questions and problems involved with housing as a policy domain. This trajectory meant that the advisory deficiencies of the Commonwealth were often exposed at exactly those times when they were most needed. It also meant that the Commonwealth lacked the detailed knowledge and understanding of housing issues when it was called upon to deliver various programs. The article argues that the Commonwealth needs to adopt a more strategic housing policy that addresses longer term needs as well as the economic, social and environmental consequences of its housing policy.     

Retracting suburbia: Smart growth and the future of housing

Abstract

Metropolitan areas throughout the United States increasingly experience sprawl development. States such as Oregon and Maryland have enacted land use legislation that curbs sprawl by promoting denser urban growth. Smart growth, a new method of metropolitan development leading to more compact regions, offers an alternative to sprawl. Given that housing comprises a major share of the built environment, policies that promote denser residential development form a key component of smart growth.

This article provides an analytic review of the ways housing can be used to support successful smart growth policies. It focuses on three areas: the market for higher density housing, land use issues associated with denser housing development, and methods for financing higher density and mixed‐use housing. The literature on the link between smart growth and housing remains underdeveloped. We offer this synthesis as a way to advance the state of knowledge on smart growth's housing dimension.     

Introduction to session 2: Magnitude of the crisis: The fiscal and human costs

Abstract

Many are looking to California and its state housing law for advice on how to deal with the affordability challenges affecting many metropolitan areas throughout the nation. It is thus critically important to go beyond the laws themselves and examine how state and municipal governance structure affects affordability, supply, and production. Some states give broad freedom to localities to develop policies that can potentially meet a range of goals and objectives. Others directly undermine those efforts by limiting local ability to pursue policy reforms while simultaneously failing to engage on the state level.

The redefinition of federalism on the national level, coupled with continued resistance to growth from some localities, establishes the state as at least an equal partner in dealing with housing supply and affordability issues. Understanding these distinctions is important, and the housing community needs to take them into account as it moves on the state front.     

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.     

Mitigating apprehension about section 8 vouchers: The positive role of housing specialists in search and placement

Abstract

The U.S. Department of Housing and Urban Development has found that Section 8 voucher recipients are often unable to secure apartments outside of high‐poverty areas in tight urban rental markets. However, intensive housing placement services greatly improve the success and mobility of voucher holders. Drawing on ethnographic research in the housing placement department of a private, nonprofit community‐based organization, I first describe how fundamental problems in implementing the public subsidy program in a tight private rental market generate apprehension among landlords and voucher recipients that can prevent the successful use of vouchers. Second, I demonstrate how housing placement specialists can dispel and overcome this apprehension through a variety of tactics that require extensive soft skills and a deep commitment to the mission of housing poor families.

These findings provide support for the increased use of housing placement services to improve success and mobility rates for Section 8 vouchers.     

The Financial Crisis Hits Home: Foreclosures and Asset Exhaustion in Boston

This article reviews the depletion of financial assets that families in foreclosure experienced in Boston, Massachusetts. Drawing on 37 interviews with predominantly families of color in foreclosure around the City of Boston between 2007 and 2008, this article suggests that a critical process on the path to foreclosure is asset depletion that leads to asset exhaustion. Asset depletion is the process of using up savings and other liquid and nonliquid investment vehicles to cover day-to-day expenses when income is not enough to do so. In the case of foreclosure, asset depletion to the point of asset exhaustion is motivated by the significance of the home for the family. Even when a family does not lose its home to foreclosure, it loses critical stabilizing financial assets, leaving the family vulnerable to further economic shocks and less likely to achieve upward social mobility. This article explores the process of asset depletion that leads to asset exhaustion in foreclosure and the motivations that drive a family to deplete its assets to the point of exhaustion in foreclosure, providing key insights for policymakers considering the implications of foreclosure for affected families' economic security and social mobility.     

Spatializing the future: financial expectations,EU convergence and the Eastern European Forex mortgage crisis

Existing accounts of failure to predict the financial crisis focus on the complexity of the financial system, and are less useful for understanding crises in non-securitized markets. We examine the roots of optimism leading up to the Eastern European mortgage crisis through the case of Hungary, and use recent theories of expectations, which understand them as both pragmatic and fictional practices that commonly incorporate narratives. Based on archival research and interviews with bankers, regulators and legislators, we demonstrate how the EU convergence narrative was central in forming optimistic expectations. Fusing the underspecified convergence process with an orientalist geographical imaginary, this narrative and its associated measures translated growing indebtedness as ‘catching up’ with Europe, de-emphasized exchange rate risk through a belief in European convergence and precluded crisis scenarios originating in the European Union. Our findings contribute to theories of how economic expectations are formed, stabilized and maintained by developing the concept of ‘spatializing the future’, denoting practices that handle uncertainty by charting the future as movement in concrete geographical or abstract space, along externally verifiable pathways.     

Local response to federal changes in the housing voucher program: A case study of intraregional cooperation

Abstract

The desire to increase residential choice for Section 8 voucher clients resulted in the adoption of portability by the U.S. Department of Housing and Urban Development. Portability allows voucher holders to move between the jurisdictions of local housing authorities (HAs). InterHA cooperation could ease the administrative and financial burdens imposed by portability and improve service to voucher recipients. However, voluntary regional cooperation is rare.

This article presents a case study of a successful, voluntary, intraregional cooperative agreement among HAs. Theoretical and empirical analyses suggest that a cooperative agreement is more likely to develop voluntarily if two conditions are present: rational self‐interest and shared norms and trust among the managers. Agreements can ease the burdens associated with portability, but it is important for the parties to regularly assess implementation issues to ensure the agreement's continuing effectiveness. The article concludes with policy implications based on the findings from this research.     

Housing vouchers in the United States,great Britain,and the Netherlands: Current issues and future perspectives

Abstract

We compare the current U.S. housing voucher program with the British housing benefit and the Dutch housing allowance programs. After presenting the theory behind income‐related housing support, which underpins both the U.S. and European systems, we compare the three programs with respect to their scope (the budgeted versus the entitlement approach), the relationship between housing support and rent levels, the poverty trap, moral hazards, and administrative problems.

The United States can learn from Great Britain and the Netherlands that a full entitlement program can best promote equity, but given the present political and economic climate, it is unlikely that Congress will adopt such a program anytime soon. Great Britain and the Netherlands can learn from the United States how to design a more efficient tenant subsidy program, one that provides incentives to find less expensive units and promotes family self‐sufficiency through enhanced job‐seeking behavior.     

The resurgence of denial rates for home loans: an examination of disparate effects on groups of applicants in the upper Midwest

Mortgage application denial rates have increased since 2002, but it is unclear to what extent this increase in denials has differentially affected “non-traditional” mortgage applicants that do not resemble “traditional” white, non-Hispanic opposite-sex couple applicants. This article uses augmented Home Mortgage Disclosure Act (HMDA) data to investigate disparities in denial rates between traditional and non-traditional mortgage applicants between 2004 and 2008 in the Federal Reserve Bank's ninth district. We find evidence that lenders became more cautious in lending decisions between 2004 and 2008, treating applicants with the same incomes and requested loan amounts differently over time. After accounting for a variety of loan, applicant, lender, and environmental characteristics, we find that many “non-traditional” applicant groups across the ninth district experienced persistently higher mortgage application denial rates when compared to white, non-Hispanic opposite-sex couples. In some cases, the gap in the mortgage application denial rates between non-traditional and traditional applicants has actually increased over time.     

Struggling to stay out of high-poverty neighborhoods: housing choice and locations in moving to opportunity's first decade

Improving locational outcomes emerged as a major policy hope for the nation's largest low-income housing program over the past two decades, but a host of supply and demand-side barriers confront rental voucher users, leading to heated debate over the importance of choice versus constraint. In this context, we examine the Moving to Opportunity experiment's first decade, using a mixed-method approach.

MTO families faced major barriers in tightening markets, yet diverse housing trajectories emerged, reflecting variation in: (a) willingness to trade location – in particular, safety and avoidance of “ghetto” behavior – to get larger, better housing units after initial relocation; (b) the distribution of neighborhood types in different metro areas; and (c) circumstances that produced many involuntary moves. Access to social networks or services “left behind” in poorer neighborhoods seldom drove moving decisions. Numerous moves were brokered by rental agents who provided shortcuts to willing landlords but thereby steered participants to particular neighborhoods.     

Urban Pressures and Innovations: Sustainability Commitment in the Face of Fragmentation and Inequality

Local government innovations occur within environments characterized by high service‐need complexity and risk. The question of how broader environmental conditions influence governmental willingness or ability to innovate has been a long‐standing concern within organizational, management, and policy scholarship. Although wealth and education are robust predictors of the propensity to engage in a wide range of local sustainability activities, the linkages among governmental fragmentation, social inequality, and sustainability policies are not well understood. This study focuses on the conditions both within and across city boundaries in urban regions which inhibit adoption of sustainable development innovations. We utilize a Bayesian item response theory approach to create a new scale measuring sustainability commitment by local governments in the United States. The analysis finds service‐need complexity and capacity within local governments' organizational task environments have nonlinear influences on innovation in terms of both green building and social inclusion policy tools.     

Beyond NIMBY and poverty deconcentration: reframing the outcomes of affordable rental housing development

Policies and research around affordable rental housing remain stuck between the “rock” of not-in-my-backyard (NIMBY) fears and the “hard place” of deconcentrating poverty goals, leading to fragmented outcome measurement in contemporary project-based affordable rental housing programs. This article compares the motivations and results of existing research focused on NIMBY concerns around place to that of programs that promote the deconcentration of poor people. We suggest reframing the argument for project-based affordable rental housing by bolstering outcome measurement on neighborhoods and developments and expanding it to include tenants. Building upon current evaluation practices of mobility studies and the Low Income Housing Tax Credit program, we present a comprehensive framework for evaluating outcomes of project-based rental housing developments within their local context at three relevant scales: project, household, and community. We present an array of indicators and examine data collection needs and limitations, acknowledging the political and financial obstacles to comprehensive evaluation but arguing for the need to justify expenditures and prove results to the public. We recommend that government agencies stretch beyond NIMBY arguments and deconcentration of poverty goals to be proactive in targeting, measuring, publicizing, and redressing an expanded set of outcomes through better comprehensive planning for affordable housing. Through more rigorous and comprehensive evaluation of outcomes at all scales, it may be shown that affordable housing development yields a broad range of benefits for the people housed, projects financed, and the communities where it is built.     

Breaking the Double Impasse: Securing and Supporting Diverse Housing Tenures in the United States

What might be described as a double impasse characterizes debate on U.S. housing tenure with advocates fighting for rental or ownership housing on one side and Third Way or mixed-tenure solutions on the other. Breaking this impasse requires disengaging from conceptions of an idealized form of tenure and instead advocating making virtually all tenures as secure and supported as possible, so that diverse households are able to live in homes that best fit their changing needs over their life cycles. This essay (a) presents data on the variety of tenures in the United States; (b) conveys a new two-dimensional map of tenure according to their degrees of control and potential for wealth-building; and (c) shows how U.S. institutions shape their risks and subsidies. Most U.S. tenures are at least somewhat risky, including those that receive the greatest federal subsidies. A new housing system is needed to secure and support as many tenures as possible.