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I

 

FEDERAL HOUSING POLICIES, SUBSIDIZED PRODUCTION,
'FILTRATION AND HOUSING POLICY OBJECTIVES

Frank S. Kristof

April 28, 1972

y. ,-.

.. _,_w..-'o u»

FEDERAL HOUSING POLICIES, SUBSIDIZED PRODUCTION,
FILTRATION AND HOUSING POLICY OBJECTIVES

I
Introduction

 

Over the two years 1970-1971 the level of federally subsidized new housing
production--the Nation's latest growth industry--has reached and exceeded
a level of.500,000 units annually. Simultaneouslyq with an achievement
that nearly doubled the quantity of subsidized housing produced in the

_ there has "'
first 35 years (1934-68) of federal aid/’ grown a host of questions
about the costs and effectiveness of this output in meeting the Nation's
housing goal ofafldecent home and suitable living environment for every
American family." The breadth and depth of these expressed concerns
creates fundamental issues about Federal housing policies.
Between April 1950 and April 1970. some 96 percent of the Nation's total
housing production was provided by;;::;ate sector. Substantial improvement
in the Nation's housing status was recorded during this period even
though only a small proportion of total production was oriented toward

the housing needy. This leads to basic questions that will be considered

in this paper. How great was the heusing progress recorded during the

‘1950-1970 period? To what was this progress attributable? To what

I
extent did housing filtrationisuccessfully operate to improve the Nation's
I '3 o. 1

housing statuszyamyf

A second article will consider the effects of housing turnover

. generated through new construction and through other means. Another

A

question is whether the "housing shortage“ implicit in the production goals
of the Housing Act of 1968 constitutes a major problem or can the
housing problem be more precisely defined. Finally. are there alternative

policies that should be considered to realize the Nation's housing

Ak-‘--‘.'--A‘ ”A“- 1.“: ‘: ‘_L‘--q

Development of Federal Housinngolicic; '
The history of.Fedcral.influence upon housing policy in the United~
States conceptually may be divided into three periods-~1934 to 1961;
1961-1968; and 1968 to date. The initial period was characterized

by the first groping efforts toward realization of a national housing
policy of a "decent home...for every American family." Except during
World War II controls, the tools used essentially took the form of
indirect intervention in the housing market--the creation of conditions
that would encourage private new hovsi j constrhction. Theseincluded

the FHA mortgage insurance system {National Housing Act of 1934),

liberalized mortgage terms, slum clearancU and urban renewal, initial

attempts to*createma”seCOHGEYY“morlqufi “marker”and”a modestly frhafiéed’
low-rent public housing program. Unit LWO percent of total housi g
output was directly supported by :“‘rt;l funds in this period.

The second period was characterized by: iii growing disaffection with

the rate of improvement in housing conditions in the Nation's urban
centers as contrasted with the subur 3; (2) new experiments with

direct Federal assistance to housing pcoirction;f(3) substantial increase
in efforts to create a secondary mvrtwngw finance system; and (4)

initial experiments in family rent a! LWd es that could be used in
existing as well as new housing. Dtr.n~ this period national housing

starts aided by direct Federal aSbJSLuQCe rose from 3 percent in 1961

to 12 percent in 1968.

43-!

-3-

The third period was marked by passage of the Housing Act of 1968,
which established a5"a'national housing goal the.producti0n of 26
million hou:ing units in ten years, of which six million would be
Federally subsidized. Passage of the 1968 Housing Act represented the
culmination of disaffection with progress made in achieving the Nation's
housing policy. Again, this disaffecriog was rooted in urban centers,

particularly the nation's older contral cities.

 

Costs and Effects of Subsidized Housiflgwgrgducgipn Since 1968

The 1968 Act created formidable housing programs to implement subsicizod
housing output. These, in essence, embodied the principle that the
Fsésral.99vs§nee9§ Wgfllgrépéfiifiize_ths cost ofwnew or-rehabilitated
housing for moderate-income families 50Wu to a mortgage interest rate

of one percent, effectively cutting housing costs by oneethird to nearly
one-half when partial tax exemption from real estate taxes under

state and local programs is included.

As indicated earlier, in 1970 and 1971 nearly one million federally
assisted housing units were placed in construction.l/ This startling
performance placed the housing goals effort called for in the Housing
Act of 1968 virtually on target. Even more startling is the bill this
effort thus far entails: some thirty bi'iion dollars over the next

30 or 40 years.&/ At this rate, the "edey.l Government's total annual
commitment will grow to $7.5 billiov annually for the forty-year
mortgage life of housing being aid' b; :al programs.§/ In terms
of legal eligibility for housing assistant", nearly half of the

Nation's population can qualify undo .-» _. arocher of the direct

housing asristance program .

—..._— c . r‘ i - ~7-< . ' .‘ pr .W—a --..—-~ v-«

IJ.

'With the tr nsfor ation of Federally assists; F an mg output from about

six percent of total starts in the early 1960's to one-quarter in 1971

have come alarmed reactions about both the certs avd the effectiveness of

this housing production. The complaints r' 7% wiw Ly. The housing is
being built in the wrong places for the wrong prfsqu. Much of.it

is shoddily built and over-priced, enriching c-: l»: or unscrupulous
builders and real estate dealers at the eypqur'af buyers or renters and

winds up repossessed by HUD through mortgage dnf‘wl-s. It is being
produced in poor quality locations or deteriorativ' central city areas

-~- where the”customerS"obtained“are"tbo'pcor”fd”pay rt: neEéSSary rents:

E3 vacancies, rent delinquencies and mortgage d Taul‘~ follow.
At the other extreme are charges, when such "on.? is develOped in better
neighborhoods, that families of substantia ', r; ’lur incomes on the

.0

one hand are paying full housing costs w1;; RE.

i'}

peers receive the benefits of Federal sub idits. This raises political

as well as equity questions about the allocatir: of housing assistance.

A different expression of concern about :he location of new subsidized

housing production is that it is not going L: ,?.~.r where it is most
needed--suburban areas of employment gow~ti wi' unployees in
intermediate pay scales ($3.00-$4.50 pea L: a} : handed in large
‘i. numbers but cannot afford new housi w . “rial rents or
prices. It is in such growth areas th y xv .21» mousing at modest

costs also tends to ba in short suppl; a . . i that some aided

more fortunate economic

{a dousing would provide a needed balance to these locations where higher-

...od- w,“" m—-' .., "

‘ I‘ .o I . ,.

cost conventionally financed new housing normally represents the only
additions to supply.(QOn the cost side, the annual direct and indirect
subsidies per family for housing produced under the 1968 Housing Act
rang: from $500 up to $5,000 per family per year depending upon
location, programs involved, and whether low— or moderate-income

families are being aided. §/\
I”. ,l- ... _ ,,L/

Another serious charge is that a large proportion of these high costs
do not go to the intended beneficiaries but are lost to private and
governmental intermediaries in the assisted Housing production process.
‘Theseinclude'”promOEers7“Bfiilders3“rhaTtoTsy InvestOrs, lecal housing
:9 authorities, other local government.‘ agenc u.- -, and Ht One estimate,
dealing with the Federal public housing and rant.supplement programs,is
that between one—fifth and one—half of the tetal Federal subsidies do
not reach the residents but are lost in the form of "federal and local
administrative expenses and for tax brnefits to investors." é/ Another
contribution to subsidy waste is the padding of cost bids by developers
of government subsidized housing. This is attributed to the higher costs
of construction experienced by developers in contending with the
inefficiencies and delays in dealing with government agencies. These
excess costs are borne both by the tquEJEI through unnecessarily

higher subsidies and by the occupants in the form of higher rents.

cl! I
3"Possibly the most serious criticism<<£ - w , subsidized housing production

is that most of it is not reaching bot~ ‘ ’.ur families-~those living

in substandard or otherwise inadequate housing and whose incomes are too

- - up" -- ~— an- r —-

low to afford even existing standard housing.

Finally, basic questions are being raised about the Nation's housing
production goals. Is too much emphasis being placed upon production
of new housing to the neglect of maintenance of existing housing and
neighborhoods? This question has come to the fore since the latter.
part of the 1960's as a wave of housing abandonments has hit virtually
every major city in the Nation as well as hundreds of sma”1er
communities. For the first time, cc tern with housing standards has
shifted from concentration upon the provision of the capital good
(the house or apar-tinentrton‘c-ods’ideattonfioflf‘the flow of services

from that good and what it is that keeps it flowing to provide

___....

satisfactory services to the consumer.'§/

The critical question for national housing policy is

how the most rapid and efficient fate of improvement in the Nation's
housing standards may be achieved within a defined level of allocation
of national resources. The latter requirement is a crucial component
of the discussion since, if resourc: allocations are pushed sharply
upward as in 1970-1971, we are faced with an additional question: what
sacrifices have to be made to achieve a given improvement in houSing

standards and are the benefits gained worth the costs incurred?

The Nation's_progress in improving hogsipg standards—~1950-l970

 

Framed in the context outlinedmabove, the experience of theitwohdecades'

1950 to 1970 becomes highly relevant. Early 1970 Housing Census data

prc ide a bewildering disparity between usual perceptions of the Nation's
la 2 of housing progress and the facts. After five years of soaring

construction costs, rising interest rat 5 and a dampened level of

conventional new construction, the salient conclusion that emerges from

examination of the 1970 Housing Census results is that the Nation

largely has maintained the rate of pfihg‘ufi tralized since 1950.
With only minor shifts, the 1970 houcinj rt.”s of the nation.as defined
in the Douglas Commission-Research Report '3 ,rdeelined virtually as

£9 projected in December 1967:

3 intervention of two influences. Tin-so u.

Since the goals established by the iousing Act of 1949 were

set, the Nation has n de steady and «uremitting progress in
meeting its housing needs in thr «on..<t of commonly accepted
criteria of that day. In it. e tr no, housing needs were
reduced from a 1950 level of $0.7 w'ltion units, or 44 percent
of the total housing supply_ to 12.4 million units in 1960,

or 26 percent of the total in 4i * :upply; and to a projected
total of 10.8 million units in I“.., which will constitute about

16 percent of the housing SUppiy at the time. 1/
As shown in Table 1 (line 26), prelL4iuarv i970 Census data indicate that
housing needs in 1970 declined virtuaigy on target--to about 10.4 million
units or 15.1 percent of the Nation 5 lQ/u Housing inventory.§/ Despite
the fall-off of private new construction during the latter years of the

decade, overall housing progess neverth 13's was maintained by the

y

8-.
*1)

CI

 

 

 

 

 

 

Table 1. t.l.nA2ts or conruuxuws 0F 1u1'niuxr tnnmss A10
Luausii 1” HOtSIxu areas tux ; u UXITtu SlAIQS: 19Su~1969
(in 4.1.1.3111 C-flJ-nu-s>_-__- ._-------_- -..--.--.-.-
Dec. 1967
_;ctu.fl estimate Actual
— «m» ~ _- 1229-19. 1:35:59 1960-69
2: .5 c
1. Total housing inventory at ‘-
.12.;311.2215:.-3:=.€--i.?1:;...‘.’23:.9_»°-‘le {18-4-31 58 .--.- _ Ma

"'\T"‘

C \.'h \\' r?‘ "*f‘
1‘ cul|

Us; H.144. L.)

O? lORY CHA} GE

. 2. U;;;;_5;fi:d.igvl usinv in‘ontoux
3. Low Ctlb triction
4. Units adnxd'by Conversion
5. Units added threuth other sources
6 - £315.31 $.20. -- 1.119.325.1113 .- 5-3-11 -. 2-n 1'. 5' -.--'~:
7. Units fedOYCd throlgh CthliC ion
8. [nits lest thrzaig gh mergers
9. Units 10 tLLOuZh other means

10. 3.11:: LC“ '. {.11. 3731-3112-1t33-1'x

accounted {or b':

11. Inc r a: l. numtur of hOUSuholds
12. (711' 1‘23! 111 \".C(‘,0Cf1:3:

l3. Avn'lnt' for svle or rent

l":. 0131' 1‘ $2.1. “If. 10‘;

CLAXG.S IN n0“8 N10 Titus

15. NoHOir‘ u+~ds e”
v.7-.-*f2_2fl—H .u

160 OK; ‘;)'-3Jt€\och\l

17. Crortisnfi. 1:11"!

heeinuine of due
‘fiOV2O

be It

‘q‘31,!q in Stfi.lr’dl..1

.. '5 .
\JIJ. LI)

uni

18. Increase in Stanrhard avai.1a ble vac
19 £2 “”‘L.*“ hCU".123_Q£ZA-iEfiflZ_§
20. Chm21Le in hunter of subsxnndard unii
21. Dewraliticus. mergers, other lOSSe
22. S lbs tma :110 units added during doc
23. ‘8 , mdinp in QXlSLing inventory
24. Chan;c in crowding in Standard unit;

25. Change in standard available vacanci-s

26. n1s1n -L"¥1{”_ end of deCujvl

27. Suostznéerd anits to be re mode

28. Crowied households in standard units
29. Increase in standard available vacant'

Sources: Cols. A & B: Frank S. Kri.
the 1980's, The National 6
U.S. Bureau of the Census,
U.S. Summary.

b/ Estimated.

Sum of 1960—69 Housing St»
Construction Reports, (C—'
homes reported in 1960 un.

definition may understate u .
‘ng, adjusted to include an estimn:

1960 & 1970 Census of Hour
for dilanidated units (non

' ' b
125851 lfiszD 17,114

15,653 13,3615 15,514C
807 (ac-0 soob

1,050 1,000 1,0001)

'b

2:12.299 225.999 —6.761 0

4,933 —2,7oo n.a.
-1,783 72,500 n.a.

1711-3-31 11 09.4.). 10,353a

,Fl

9, 98 ‘6 9 400 10,42b_i
2 :32; 1.31.999. .__......- 2,3. ‘

1,419 300 lSU"

9:13 1,300 - 231a

2.0-1 33.0. l-
17,t07 11
2,632 . 3 957

841 w

,.~4 15 3C4
7' 11,407
3,957

-4,998

25122 "4 ______
-5,334

45,tuo

~3,L:46 ~3,885 n.a.
1,886 1,551 11.a.
41,040 -2,190 n.a.b
1,275 ~53 312

-8-’11 - 24b
12-122. 10 12.2-29.9

11,007 b 6,073
3,957 3,9C+ 4, 269
’ - 24

 

j, Urban Housing Needs Through
mission on Urban Problems,l968,p.6.
1-60 and 1970 Census of Housing,

, U.S. Bureau of the Census,
nries) plus increase in mobile
30 Census of utusing. This

a construction total.

enumerated‘ in 1970.

1. Persistent increases in Federally—financed or assisted

-new hausing output overwthe~lsGO's—~particularly FHA Section

221(d)(3) and its successor programs, Sections 235oand 236.
new '

Approximately 300,000/units enumerated in the 1970 Census

were contributed by Federal programs in the two years prior to

the Census. The decade total from this source (including the

low-rent public housing programs) was slightly in excess of

one million units.

2. A sharp upwa 1 jump in occupant! of mobile units. The

inventory of this form of occupied housing more than doubled

in the 1960's, contributing 1.1 million units toward the

.a-‘o_ —. ._n 1"" "9". ' '

decade's net increase of 10.4 milizoi noising units.
These two influences prevented the E:“’zn'. lcédwl970 rate of progress

from falling off relative to the rate of impxtvement recorded during

the years 1950—1960.

It is worth tracing the components of chawge 'hown in Table l to
note the similarities in housing trends of tie 1950's and 1960's deepite

the above-noted mixture of positive :nd new‘tive influences during

.the pest decade. The relatively low rate of household formation in the

early 1960's was abruptly and sharply rev rsrfl in 1968 and 1969
when persons from age groups wit? a high propensity to form

households (the baby boom of the late ?“40‘s) entered the housing

D market in large numbers. A nearly do‘vljir': r'- of household formation

-10-

«33 in these two years contributed to an increase of a million more

as .9 _, - 4n. --.-- . - . . ' -- .r ‘ -' a.- — - -—"

households than were projected for the decade in Table 1 (line 11).

Nevertheless, the gross addition of 17.1 million housing units estimated
for the 1960's (line 2) appeared sufficient to absorb a high rate of
housing losses (6.8 million units««line 6) while still taking care of
total household formation exceeding that of the 1950's. The decade—end
surge of household formation created pressures upon the vacant housing
supply—~the overall available vacancy rate in 1570 fell relative to

that in 1960 (3.1 percent versus 3.0 percent). On.balance, the Nation's
housing status dmiing the 1960's rep teed at reasonable equilibrium

even with the appearance Sf'néG Efiefias—~a'hi§fi“rAté of héfiéing additions.”
contributed by mobile units and publicly assisted housing as well as

an acceleration of housing losses. *

Advances in the Nation's houSing status in the 1960's
matched or exceeded those of the previous decade. The overall decrease
in "housing need" in the 1960's (line 19, Table 1) was almost as great
as that projected in l967. The decrease in substandard units was (3
18 percent greater than projected (line 20) but this partially was
offset by slight increases in crowding in standard units (line 24) {j
and in vacancy "requirements" (line 25). On balance, the improvement()

in housing conditions over the decades 1950—1970 has been impressive.

3

-11-

Specific aspects of the 1950-1970 improvements may be traced in data

J

W . -1.'"’ v.,‘..- .-

of Table 2. Average number of persons per household fell from

3.39 to 3.11 while the median number of rooms per housing unit ”
increased from 4.7 to 5.0. As a result, the Nation's households in
1970 occupied more space per person than ever in the history of the

country-~an average of 1.65 rooms per person compared to the 1950

figure of 1.42.

Another contribution to housing improvtmen; was the do rease in l- and
2~room units while increases were reco Wed i. each category of housing
units with 3 to 8+ rooms. Since most older L- .nd 2—room units are

conversions With Sharedbathroom facilities, their decrease correlates
closely with the reduction in substandard unt‘: (dilapidated or lacking
plumbing facilities). The latter cat Isry exjncienCed sharp decreases

of 49 and 44 percent over the past two decades.

Another reflection of improvement in housin; standards over the two
decades was the ability of individuals to establish or maintain
households. One—person households increaSed'by 7.1 million, nearly
trebling between 1950 and 1970. In the short timeeperiod of two decades
such households increased from 9.7 percent to 17.6 percent of households—-

the fastest growinv category in the Nation. At the other extreme,

households of 8 persons or more decreased from 2.8 to 2.5 percent of

the total while 6 and 7 person househ-‘fis Fell from 9.4 to 8 percent.
The combination of smaller householl. 9h H'ijhtly more rooms per unit
also led to a decrease in crowding: . ‘i 2w households had more than

1 n1 hnrcnnc #an Ynnm in 107“ {Q 9 Hr. .ww «war-13,4 1.1;F11 (—2 '7 m4111’nn

-12-

TYHJIG 2.--GENERAL HOUSING AND OCCUP.JCY CEXRACTERISTICS, UNITED STATES,
l9SQL_196O AND 1970

51

-w _ _ _-, I» . . __ __.'-_-,..

Subject

Tenure! race and
vacancy status

 

,All housing units

Occupied
Vacant
Available (year~round)
For sale
For rent
Hot availabiofi

Owner occupied
W. ‘1 J- 111’}
Non —wh i f: e
Renter occupied
Wil- ‘L ta

No a -wh i te

(Conditions and plumbing
‘3 fatilitz.,s .
" Occupied units
Not dilapidated, with all
plumbing facilities
White ‘
l.Ol+ persons per roor
Non-white
1.0l+ person; per room
Dilapidated or lacking
plumbinj facilities
White
Non—white

 

 

Rooms (occupied)

 

Total

(DNO1U'IrbL/JNH
+

"Oedian

M' _ f

1970_ 196Q_
.ééiélé. 2&1329.
63,450 53,024

5,225 5,302
2,133 1,975
477 522
1,655 1,453
3,096 3,327
39,885 32,797
36,979 30,823
2,906 1,974
23,565 20,227
19,551 17,057

, 9.914;. __ 3-.. 17,1...
63,451". 3,024
59’15‘.‘1 ’ 44,550
54,220?“ 41,438

3,979L/ 4,658.-
4,939E{ 3,112
1,2325. 1,456
4,291h. 8,474
3,05015 6,442
1,2412/ 2,032
63,450 53,024
1,108 1,22
2,132 2,1 6
6,758 6,007

12,977 11,162
16,007 13,355
13,008 10,578

6,185 4,749
5,276 3,805
5.0 4.9

.q.

1950

45,983
42,826
3,157
732
215
517
2,425

23,560
22,241

1,319
19,266
16,803

1212631

42,826

27,632

11.3.
n.a.
11.3.
11.3.

15,194
n.a.
n.a.

£21829
1,103
2,997
6,205
9,304
9,258
7,435
3,226
3.295

4.7

Percent change

 

1960-70

 

1222:22.

23.8

61.2
n.a.
n.a.
n.a.
n.a.

-44.2

-13..

4:}

TTable 2. -—(continued) GENERAL HOUSING A 1D OCCUPANCY CHARACTERISTICS,
UNITED S'lATESL 1950 1960 AND 1°70 . .

.fl' "fi— _...--1‘.~’ If 0".“ .p- ’

Percent change

 

 

 

 

Subject 1970 1960 1950 1960-70 1950—60
Persons
Occupied housing units' 63,450 53,024 42,826 19.7 23.8
1 11,146 7,075 3,993 57.5 77.2
2 18,781 14,859 12,023 26.4 23.6
3 10,909 10,008 9,763 9.0 2.5
4 9,803 9,130 7,878 7.4 15.9
5 6,199 5,873 4,466 5.5 32.2
6 3,360 3,129 2,258 7.4 38.6
7+ 3,252 2,945 2,445 10.4 20.4
,Mcdian 2.7 3.0 3.1 -l0.0 —3._
SEEHT? utiliiations
Tota11persons in*' ' '1". ‘m"”““~"‘*”1"W .--. "“'fl’ ' J ‘—
. housing units 197,400 '173,25? 145,031 12.6 20.8
Qfiotal occupied rooms 325,376 26 ,913 205,612 22.4 29.3
Total recta per person 1.65 1.52 1.42 8.6 7.0
Total persons per occupied ' '
housing u. it ‘ 3.11 3.31 3.39 -6.1 -2.1
Persons per room

1.00 or less 58,238 46,910 36,092 24.1 30.0

1.01 to 1.50 3,802 4,211 4,084 “-9.7 3.1
Financial
Median value (occupied

one-farily units) $17,000 $11,900 $ 7,354 42.9 61.8
Median contract rent '

(occupied units) $89 $58 $36“ 53.4 61.1
Median income (families) $9,856 . $5,500 $3,073 74.1 84.2
Median gross rent as a ‘

percent of income ° n.a. 19.2 17.4 n.a. 10.3

 

 

Sourrts:' US Bureau of the Census, 1950, 1960 and 1970 Census of Housing.

“1%/ Includes vtcant season:l and migratory
awaiting occupancy, held for occasional

Units, units rented or sold,

and other vacant.
b/ To permit comparability an estimate was made Lmr dilapidated units (not
enwmer:ied in 1970) using 1968 data of hp war n~ Inn Census' Housinq
Qigryactcristicr; report, Series H-121, l.-... ‘zé’, 1."¢.".:.‘uc.u‘y 1970.

 

4' .‘1

‘V [o

.1

. —14-

The housing gains described above were accompanied by, and in large part
inere attributable to, advanCes in family income. Only rising incomes
‘whose rate of increase equaled or exceeded rent and houue price rises
could sustain the high volume of new construction experienced over most
of the past two decades. Median family income rose 84 percent between
1949 and 1959 and 74 percent in the follnw'ng decade. Rents and prices
of single-family homes increased.at a slower rate (Table 2). Rent-income
ratios increased only slightly indicating that the improvements in

housing standards purchased over the past twenty years did not create

excessive drains on consumer budgets.

The Nation's improvement in housing Eénéfier73~§¥d the Filtration Process

_-__Ji

 

I I ' I . L‘. ‘ V‘ l
Up to this pelnt we have defined the nr;n ~ a? Jfiprecedented progress in

housing standards over the two decades 3953~1J70 which produced the

most sustained period of high-level hcuulrg construction in the Nation's
\ ,

history—-30.5 million new housing units vhf?“ the net addition of
households numbered 20.4 million. The age cgite number of substandard
units fell by 70 percent—-from 17 million to 5 million. Space standards<D
per person reached new highs while crowdfig reached new lows. t)

4

Given the fact that increased Federal housing assistance has become
effective only in recent years, the oucsyion arises about the extent
to which the observed improvement wa» traclihle to the effective

functioning of the filtration process.

What are the requirements for ascertaining th- effecti/e functioning of

the filtration process? A search 0; Lb. lé (.ture permits some

' r
5
ci-

e:

-1%»

parameters to be described that are accepted by most analysts:

1. New construction beyond the rate necessary to house
normal growth, i.e. an excess of housing supply over demand

at the point from which filtering is to originate.

2. New construction exerts a downward pressure on rents
and prices of existing housing, permitting lower income

families to obtain better housina bargains relative to their

\

existing quarters. :

3. Exogenous factors are F;1d constant, including the
general level of incomes and :w«e~; come ratios. 2/

4. Decline in quality is p”? r'r.ssarily forced by reduction

in maintenance and repair exgcnditu gs to the extent that

rents and prices are forced downwa"d.

5. A mechanism must exist in rcxave the worst housing from
the market without adversely affecting rents and prices of

housing at the lowest level.

The above basically represents Richard Batcliff‘s exposition with
modifications suggested by Grebler, Winniek and Fisher to permit more

precise meawurement of the process as distinct from its effects.

-15-

IKatcliff, and subsequently, Ira Lowry, concluded that, as a means of

a..- _-. ‘p - ,l‘n— -" _ -..- p Q — -.__ .. n - III“ I... w »

ianroving housing quality, filtering essentially is a self defeating

’

parocess. Ratcliff puts it as follows:

Filtering...is not a controllable device. The end product of
filtering, at the bottom of the chain reaction, is substandard
housin'; thus filtering produces the very blight which we seek
to remedy. Filtering cannot increase in effectiveness without
the removal of housing as it sinks below minimum standards.
And if by some drastic change in conditions the rate of
filtering were accelerated to the point of adequacy, the cost
to property owners through the concomitant depreciation in the
value of their preperties would be tremendous.10/
'Thns a loss in value sufficient to drive rents and prices to such a low
le"ol that only standard quality housing can be found at the bottom
of the rent-pricefiladder~mightwhavewthewpervef§5"effect of driving
rents and prices of the entire'housing spectrum to the point that new
construction would come to a halt prices and-rents would againrise
and doubling up or excessive conversion of housing at the low end

of the scale would once again dilute housing quality as well as

occupancy standards.

Not only would the process be unsrccessful in the end but there would
be great costs on the way. If market price were to decline so that
successively lower-income groups car afford thy hou ing while remOVing
substandard housing within a reasonable time period, society would have

to pay a high price in accelerated loss in value of the housing stock.

-17-

.. . . . . F
Tnis pOSition is strongly supported by Ira Lowry who demonstrates,vin

'his filtering modelj'that the actual“and logical reSponse of property

owners to declines in value 06 rent will be a policy of under-

I

maintenanc- of property so that, in addition to normal deterioration //

that occurs over time, the deteriorttion caused by disinvestment will
lead to far more rapid declines in quality of housing than otherwise
might occur. As a result, it is extremely unlikely that downward
filtered dwellings will, in fact, provide satisfactory housing to
occupants who obtain them at low rents cr prices. ll/

Only one question remains Open in this exp= "ion: if value decline is
accelerated through a large and con iste‘t trflux of new construction
that persistently clears the market 2:1: iH and year out, is it not

possible for the rate of value-decline to outstrip quality decline,

0

with a resulting improvement in housing st;ndards? Lowry would argue
that this is not possible within the frane-whrk of the "pure"
filtering theory and that the 1950»/O improvement in housing standards

in the Nation occurred within a framewo k of filtration reinforced

\

by exogenous variables such as rising incomes. To put it in his

own words:

"The reason why it is importAnt to distinguish the effects

on housing standards produced by 'exonenous' factors such as
rising real incomes frtm the effects produced by new
construction through filtering (as I have defined it) is that
confusing the two can lead to mistwken policies. Thus, if

it were strictly true that quality of a housing unit changed

promptly and preportionately ix '~.".3e to changes in its

market rent (because the owrzr a , vuinge his maintenance
policy), the special public me- : 1ch as subsidies) to
encourage new construction aiihz -. h in a chain of moves,

but would not result in bett“ Tit . at the bottom of the

is»

-18-

chain—~unless the families last in line paid higher rents
to support better maintenance than pro eviousli. On the

' other hand, if measures (such as rent assistance) were
taken to increase the real incomes of these families, thus
enal Tnt them to Spend more for housing, its quality would

A

.J

rise wi t1 out the need for special encouragrm nt of new
construction. 12/

The discussion can at this point be summer: zed. When fil ration is
defined in the manner posited by Lowry, ”a change in the real value
(price in consiant dollars) of an existing dwelling unit“ for the purpose
of ascertaining whether the value declines of housing that occur; in the

filtering proce.:s can result in providing sound hous’ng for lon—incoue

families, it remains seriously questj(nable who u“: th; filtering process

by itself or .1 "t. credited with the observed imer 9* in l'xousing
”~r4"l. that occurred in the deeades'ibSO—lovn. mything in the

pos it- on t ltr n by others. who have discussed fili lira the. :y (Grebler,

winnick, Fisher, Grigsby) necessarily contradicla Inxry' 5 position
since the only difference in their position is to allow the influence
of exogenous variables to be incorporated in analysis of the effruts of
filtration, a position that Lowry explicitly reflects. Thus, whether

filtration works or does not work to improve the housing supply depends

upon whose definition is used.

Some empirical evidence on the subject may be gleaned from information
made available by the Census Bureau's 1950—1959 components of

inventory change which permits analysis of the path by which substandard
housing left the housing inventory during tkat period (Table 3). This
inf rmation provides little support for the traditional conception of

filtration. The first point of note is that eight percent of the new

-19-

‘ _, 'A -
Table 3, )3ZtLELE‘L-ZJEL 711 SL' S :'.I(D1‘-.Ill) 1'0'31218

( of

in thousgnr’s

 

 

 

\ I

( v I“ , 1 .- ‘.
35‘. 1 . 'l ' 1 ‘1 ‘
”~c—c—cc-_-cc .. —.——.--p-o~

'
‘fi f')

c.—.

C. .
’ 7' H "It
[NHL/£4“
Armor; :;
' Q's" 7

x... ..,

unit:

(1“

.. I
.u_ “’f 1““ C

\r-Hwt—n.’ '
;_.-1Lcc.-\---c~’.-J.

Ml‘n

‘1- ln'fl

. .~-.-'I-I-

. ,1, VJ

- l

1nnn

Q p "(1.
.‘J o

—« “cc

1‘1"“
..'_-.'-.....'.l-_'. ...c...

I , l ‘

1.1..11. {.QJ'It'tl 113‘” 1'13 x.- :5-
‘ ‘ r, ‘1 ,.. ‘ u .7 ' ' v
'31 1; '1. 1.11“‘..h Lu..»:"-‘w';)
, ll “ ‘ ' ' - ~-
;’~ 2' 1‘.‘.')‘.t 1. H1!-: :»"::“-
,4 .'4 -,.A, .. c v .'
\‘ JVQJ:.;§.J,‘\-'£‘ Ud.l5211-—-'1C 1111‘ | .|

I ?()fh;()" 1‘.

dc. O—.M.--- .—

I O
‘t'i: I ‘.
. , ._ ~,: , 3‘ '
.1 \.‘... w; J ,, .1'..L.

have; ’Lhrou;h merflv”
.cd th1ough oL

-

l‘( L ‘ul'.:ul~

'Ih1ougi r E'3;tation or improvc.on1
of “Sc e“ uni:
$‘11,"°7"“1’ 1321“." 1959

Sourctq .QLS.

C(IWF‘IS

of Homsinur 19C:

1}

1’91 -

10<'3H‘

(111118)

b

w:

Ulll'l'iii) 81.311118:

Percent (f
1

 

N‘JTIli‘JF’Y' 1050 'I‘p
5,60q

25375 3
1,235.
234.
417’
1,003

,8_,-436,1'JJ
1, 3:311, ' _ i

. 790
1,27"¢,(',

($.CéO-f

511

 

Coxqmwh’uits 1»f 111Y=WTTQISi

 

C1m_l_z;g_: flint. 1:..1' 1 1.“: NO. 1.

 

a

housing added (:ring the 1950's was classifj"d uS substandard-~it had
11c.)'v.71.rsr..:: to filter (but up). In fa act, the a» :~'L..:L’ation of the substandard
supply from new construction (1,235,100 units} was even greater than

the one million substandard units added by detrrioration in the

\ u

units . In the "awe time oeriod,
1 .1

existing housing supply (“same
5 million substandacwl units of 1950 had legit newgnied to standard
status by 1959. The res ult was a net inyrnrtnent of 4 million unit;

L

in the existing housing inventory that sub: .1ailllv ex cc c-de d the ,

2.65 million substandard units that we“: dam i"rd or oitei ”is e
remove“ by “other means." It it impgri wt to 1ote the outcc=e

of the e rwrp‘:x changes: despite tic a41fh . .L 1.2 million

snflasuaz- :5 units tiuxxxjra new cons+ firm. 1 2,5‘peretnt annual
rate of dete:ioration in the «:{istiLg hone;ag ». -ntory that crea ; tel

an add ti (M111 one miliion substandara 1nits P‘s upgr ling of 5 million

1

existing sunz3tandard units to standa.’ statue ox rwholmed the negative

influences on the housing inventory.

Other changes in quality of housing ex sting in 1930 through
conversions and mergers, resulted in a further net reduction of more
than one-half million substandard units. Tue foregoing leaves large

questions about whether the housing inVGHtOI- r.T‘=red up, down

D'-
‘4

or in both directions and whether traditional vi:»n of:filtering are
either useful or re elevant in attempt nr 1» :x31~ln the link between

111114 (:(1:1;31‘ ':n(?l j (111 c111r1 t11<3 Lirn£31f<)1!1srnc1111 «. 1 1 1.1.‘. . .‘1 i-11\”Lfllllk‘l”l'o

-21...

It is abundantly clear that no explanation for the marked improvor-nts
in the Nation's ”ousing status can be ascertained without examinatiww
of the factors referred to by Lowry as exogenous variables. Once

this course is undertaken another major re5ponsibility must be
assumed. Only glancing reference so far has been made about

dissident trends in the Nation's cwntral cities that cast a clorC

over the bright historic housing progress that has bflen made on a

national level. The last four years have been difficult onus ca

the housing front in many ways. For example, an advancing ra'A

of deterioration and widespread abandonment of housing in the

“ '- "N. . '-; ' ~ -'~ —-\-\L- 'v.‘ I ‘07 < '<'. _: ~~ '1 V ““r‘ ‘1' ~
centre- Ciuupc nas Cieat l wholly new se‘s or pionleus. Thu.. no

concl”sion about the larger picture \ill be warranted until the
relevant exogenous factors are tho nughly explored.

FOOTJ'TO'FES

 

_l/ The President's Third Anlu3}_§jpgyt_3p fiationnl Housing Q2;ifi'
June, 1971, Table 2, p. 8.

 

 

id., p. 22. This figure incluls: financing of 113,000
ab il-itated units in addition to P45,000 new units.

 

 

 

re
-§/ Ibid.
:l/ A single housing unit concr‘a.’.'.'.‘zl..-ly can be aided by some or a ill _ of

.——.—-

the following programs, cacu of which has a specific measur ah
cost; urban renewal land wii1edow-, VMA Soc ti.on 2 36 l- ~perc:.nt

subsidy, rent supplements, irul es: .4 tax exemption, lost
Federal (ant. Sta *) taxes on tux-t 1:. bones (for State and
Municipally financed progrars) an! * L:H‘jh tux belafits to

limited partner equity investors.
EU Bernard J. Frieden, "IMprou7 7 Fe; 1 1 Housing Subsidies: Surtgry
Report,” Papers submitted to Liixyiththee on Haus ing Panels,

Part 2, Committee on Banking an? Currctey, House of Representat'v«s,

92nd Congi ress, First Session, p. Q.s.

2/ ~ ~ This distinction.was made era nylv o3 Lorton L- Isler in ”Th1
Goals of Housing Subsidy leqraus” 3; Part 2, Papers submitted
to Subcommittee on Housing Panels 3.;1ittee on Banking and

Currency, House of Repres whathu , “3nd Cougress, First Senslob,
June 1371, pp. 419 ff.

 

7/ F. S. Kristof, Urban Housine_N~¢dnuxfr 1gh the 1050.5: an Annlvs‘"
and Projection, Research Report 1.», .He National COUmuuuLOh on

 

Urban Probl ms, Washington, D.C , 1‘13. p xi.

g/ Because the ”condition of h1gsi.ng” 'Cvm was droy ed from the 1970
Census enumeration, a small (on; i - of the 1970 needs figure
(about 10 percent) had to LL estiu ted. When the 1970 components
of change data become available, this figure can be confirmed
or corrected. The margin Cf errOi is likely to be under 500,000.

2/ There is some question abou“ tnis p int William Grigsby would
incorporate exogenous factc-= as a . -t of the filtering process

1
whereas Ira Lowry bars such an apytca h as analytically confusing.

10/ R.U. Ratcliff, Urban Lanfiwfi~n34yjp', New York, McGraw Hill Book
Co., Inc., 1949, pp. 333, 34+.

 

ll/ Cf. Ira S. Lowry, Filtering mum 'n't.gv Standards", Land Economics,

 

Vol. XXXVI, November 1960, r. 1’) -’.

12/ Letter, Ira S. Lowry to F.L. .rl- 5. I April 1971.

FEDERAL HOUSING POLICIES, SUBSIDIZED PRODUCTION,
FILTRATION AND HOUSING POLICY OBJECTIVES

II
ZIntroduction
£3erious questions have been raised about the efficacy and equity of the
Efiederal Government's housing subsidy programs in achieving the Nation's
<goal of a "decent home and a suitable living environment for every
ZUnerican family." These questions in.turn lead to analysis of the extent
and path by which the Nation's observed housing progress was realized
in the period 1950—1970 when the overwhelming proportion of new housing
produced (96 percent) came via the private sector--in contrast to the
rnost recent experience of the past three years (1969-71) when the
preportion of total new residential starts directly aided by Federal
subsidies climbed from 11 to 23 percent through implementation of

subsidy programs of the Housing Act of 1968.

One conclusion that emerged from this analysis is that the Observed

improvements could not be attributed to the operation of the filtration
process '

xfinless it was defined to take into account exogenous factors, such as

change in incomes, even though it was evident that housing filtration did

£
occur during the past twenty years of extensive new residential production

accompanied byhmajor declines in substandard housing. l/

A review of the effects of housing turnover generated by new construction

as well as by other means is undertaken in this paper. Some distressing
from housing abandonment '

side-effects/are considered. Another question discussed is whether the

"housing shortage" implicit in the production goals of the Housing Act

of 1968 addresses the real problem or whether the housing problem may be

Inore precisely defined. Finally, some alternative policies to realize

a the Nation's housing objectives more efficiently are considered.

NeW'Construction, Housing Turnover and the Improvement of Housing
Louis Winnick preposed that empirical studies should zero in on the

relationship between new construction, housing turnover and the improvement

of housing. This could be done by tracing directly the turnover of
housing that ensued from new construction and by studying the changes in
rents (or prices), incomes, rent-income ratios, space, housing quality.

and housing satisfactions of the participants in the chain of moves.

From a theoretical standpoint this no longer can be defined as a discussion

of the filtration process unless one accepts the broader definition of

this term which incorporates exogenous factors as part of the process.

'a' l

J The writer worked closely with Winnick in developing such a study:

I

In the summer of 1963, a project was completed that illustrated
the chain of housing turnover generated by pe0ple moving into
newly constructed units. Starting with an interview sample of
64 initially-occupied new units, the survey required a visit

to each housing unit left vacant by the household that occupied
the new unit. The successor household (if there was one) was
interviewed, and-the characteristics of its present as well as "
that of its previous housing unit was obtained. Its previous
housing unit was thsivisited and the new household occupying
that unit was interyiewed in the same manner. The chain was
followedfluntil it’was broken. This occurred when a household

in the sample had not left a unit vacant in the City or when the
unit in the sample was found to have remained vacant, was
demolished, or had been otherwise removed from the market.

Although no claims are made about the representativeness of the
sample, the implications that could be drawn from the survey
data were quite dramatic. It was found, for every 10 rewly
constructed units in the sample, 24 families were able to make
4 voluntary and presumably more satisfactory adjustments in their
housing circumstances - 10 by moving into the new units and 14

by moving into existing units made vacan; by the.housing turnover J
that ensued.

- . -3..'.

The data further indicated that the chain of housing moves

. generated through new construction resulted in an improvement
of the housing status of nearly all the families involved.
Only 6 of the 154 housing units visited in the survey were
substandard, and each was at the end of its respective chain.
The data thus indicated that the turnover which follows the
occupancy of newly constructed units contributed to improvement
in housing status by (1) allowing at least some families to move
from substandard to standard housing (none moved in reverseL and
(2) allowing an even larger number of families who already were
in standard housing to make fayorable readjustments with reSpect
to housing Space, quality and location...‘

Another notable finding was that, at each successive link in the
chain, families with generally lower incomes than that of their
predecessors moved into turnover units.. r

In general, households in the turnover survey were found to be
upgrading the space and quality of their accommodations-~a fact
that is most obvious with respect to families moving into
new units, shown by the finding that the median gross rent becomes
lower in moving down the successive links of the turnover chain.
In addition, analysis of present and previous rents of families
involved in the turnover process showed that they more often than
55? assumed a‘higher rent“burden as a result of their move. This.
is true even though some moves were made—by families for the
purpose of reducing housing costs by trading larger quarters for
smaller ones. The present median rent of A link households

(those that moved into new units) was $138 compared to $85 in
their previous unit. For B link households (those who moved into
units left vacant by families moving into the new units in the
sample) the median was $109 compared to $80. For the successive
links, 17 households had a higher rent compared with their
previous rent, while 5 households reduced their rent.

 

 

 

 

 

 

 

Even though most families in the thrnover survey increased their
rent bill as a result of their move, this did not appear to
seriouslygaffect’rent-income ratios, which remained close to an
estimated City-wide average of 19 percent. 3/

Only months after publication of the results of the New York City pilot
turnover'study,.the Ford Foundation undertook to finance a nationwide
study of housing turnover generated by new construction by the Survey
Research Center of the University of Michigan. Whereas, in the New York

City study, a chain of turnover was regarded as broken if a housing vacancy

was left outside of the City's boundaries, the Michigan study of John B.

«ii-P

-q-

Lansing, Charles W. Clifton and James N. Morgan would follow the chains

wherever they led, from one end of the country to the other if necessary.

The new construction studied by the authors included a probability sample
of dwellings in 17 standard metropolitan statistical areas. Ihterviews
‘were successfully completed at 1,133 newly occupied homes with the final
results of the study based upon 3,039,interviews. Eighty—six percent of
all the families in the sequence begun.by the 1,133 homes were interviewed.
Chains of moves come to an end when the last persons in a sequence leave
no vacancy behind or if the last house or apartment in a sequence is
removed from the housing stock physically or in terms of residential use.
Compared with the New York City survey which showed an average of 2.4
moves within the City's boundaries, the Michigan study showed an average
of 3.5 moves for each new unit without regard to distances covered by

the chain of moves: In terms of percentages, chain lengths were as

 

follows:

Sequencefends Percent

after lst move 23.8

after 2nd move 20.8

after 3rd move 18:2

'after 4th move 11.2

, after 5th move 7.8

_A&m,,. after 6th to 19th move 18.2

Over the course of sequences, average value of homes fell from a median
‘value of $25,900 for new homes to a median of $17,300 for the sixth or
later sequence. Forty-two percent of the chains started with a new rental

unit . The median rent of $135 for new units declined to a median of

$100 for the sixth or later sequence. By and large, the higher the value of

the new house, the longer the average length of chain of moves; this held

51"- “At-\‘nfl A: L AAAAA "IL. -L

nan-II: nI-AH4-1ur 4-v-11A n1r-A

-5-

that begariwith owner-occupied new units was one full position longer
than for rental homes.

a
In the aggregate, 55 percent of the families who movedout of/unit- had an

income that was higher than that of the successor family while the
reverse held true for 25 percent of the cases. The general tendency

thus was in the expected direction. On the average, poor families
participated in the chains of moves started by new construction in roughly
about the same preportion that they occurred in the general pepulation.

‘

The poor were under—represented in positions one (the new house) and two,

but over-represented in positions three and beyond. ‘«

Negro families were under-represented in the occupancy of new homes;
they represented about 50 percent of the rate of expected occurrence
relative to their-preportion of the total population in the metropolitan
areas sampled. Negroes represented about 61 percent of their expected
rate of occurrence taking into,account their income levels relative to
the income levels occurring among new owners or renters. The authors
concluded that "The fact that-Negroes occupy only .61 of the homes that

v, . 0
one would expect on the basis of their incomes isthe combined result of

’2

discriminationwlfijthe housing market and Negroes' low average assets."§/
This observation tended to be supported by the observation: "When
Negroes do move into new housing, they are more likely to move into

new apartment houses than into new single-family homes." 5/ Finally,
Negroes were under-represented in the chains of moves; they occurred

at only 70 percent of the expected rate in terms of their income levels

'-

-5-

and proportion of the population in the areas sampled. In only three
percent of all moves did Negroes supplant white-occupancy‘while in one

percent of the cases the reverse occurred.

Possibly the most important estimates relevant for public policy that

emerge from this study are:

l. About one out of four sequences begun by new construction
ends in a demolition or other permanent withdrawal from the

4

housing stock.

2. The sequence of moves begun by new construction in the
total housing market account for the initiation of roughly

half of the moves in the nation as a whole.

3. Although the poor were preportionately represented in
the sequence of moves begun.by new construction, this was not
true for Negroes, poorfor nonepoor. Negroes constituted only
61 percent of the expectedfirate of occupancy of new construCtion

and 70 percent of the expected rate in the subsequent sequence

Q

of moves. f5, '

I ' f o
1' I ‘
O
, ‘n'
e i... vl" ":

In short, call it what one will-~filtration, turnover, or chains of moves--
new construction accounts far about one—half of the annual movement

of families in America; it is linked withthree-fifths of the housing .
removed annually from the inventory through demolition or "other losses"

(not including changes such as conversions or mergers). On these grounds

alone, a significant linkage can be made between new construction activity

L_f

and the improvement of the housing stock. Finally, the failure of Negroes

to participate fully in the upgrading of housing status generated by new

construction has other consequences that must be addressed.

Turnover of housing not associated with new construction

Given the estimate that one-half of the movement of American households

arises from the chain of turnover arising from new construction, what

sparks the remaining moves? Conceptually, these would arise from vacancies

in existing housing created by both demographic and supply factors:

1.

Demographic-u-throxgh dissolution of existing households by:
a. death, divorce, separation and doubling.

b. Outmigration. This is a mixed concept; household
dissolution through out-migration for one community may
become new household formation for another. In the latter
community, the migrating household is as likely to become
part of a chain of turnover generated by new construction

as.not.

Supply changes other than new construction.

R

.a. ,The placement on the market of units (unchanged,

. .I
— {Zlyc""":

remodeled, rehabilitated or rebuilt) that previously

had been vacant and off the market.

b. Conversions: although they usually do not add more
space, conversions of larger residential units into a

greater number of smaller units add to the usable supply.

-8-

Chains of turnover generated from supply changes are more likely to

occur in the renter sector. This type of turnover therefore would occur'
more frequently in the central cities where such housing is concentrated.
Aggregate turnover in metrOpolitan areas is slightly greater outside

than inside central cities possibly because the volume of'now construction
1(and the consequent turnover generated) on the average is 2.0 to 2.5

times greater outside central cities than inside. Using the lower end

of the above range, new construction would account for two-thirds of

the chains of moves originating outside of central cities but only one-
third of those inside central cities. Conversely, the ratio of chains

of moves occurring through the demographic-supply factors cited above
initiates two-thirds of the moves inside central cities of SMSA's

and only one-third outside central cities. In 1970, four times as

many Negro households in SMSA's resided inside central cities as

outside. The foregoing provides additional confirmation of the likelihood
that the housing becoming available to Negroes will originate from

turnover in the existing stock notfigenerated by new construction. What

have been the consequences of-these facts?

' C
I

Housing_Abandonment in the3central Cities

The subject ofwhousing abandonment has become a major issue across the
Nation over the past five years. In city after city, neighborhoods that
have become inundated by this unprecendented phenomenon have become

household words in the housing world--Brownsville-East New York in

Brooklyn, East Harlem in Manhattan, the South Bronx, Pruit Igoe in St.

and
Louis, Hough in Cleveland /Lawndale in Chicago are familiar names.

The Cities of Baltimore, Boston, Detroit, Los Angeles, Milwaukee

-J

,
tau"

-9-

Philadelphia, Pittsburgh and Washington,D.C. may be added to this
undistinguished list. To be sure, countless smaller communities that
have experienced serious chronic declines in their economic base have
‘been experiencing this phenomenon for many years. But not until the
latter 1960's did the Nation become aware of the fact that_hcusing
abandonment had become endemic to most major older central cities as

*well as some newer ones.

Some examples of the extent of losses experienced through abandonment
are indicated for .data for New fork City and Cleveland. Within a
framework of 337,500 new houses and apartments added during the 1960's
New York City showed a net gain of only 165,000 units. Aside from
substantial demolitions, some'89;000 units are estimated to have been
abandoned during the decade, of which some 74,000 units were still
standing at the time of the 1970 Census. The estimated loss through

abandonments equalled three percent of the City's 1960 inventory. The

City of Cleveland, on the other hand, suffered a net loss of 19,000

-‘housing units during the decade although building permit data indicated

construction of some 14,000 units. The indicated gross loss of 33,000
housing units, including demolitions and abandonments, equalled 12

percent of the City's 1960 housing inventory.

Housing losses comparable to those of Cleveland and New Yerk City were
experienced by at least ten of the 25 largest cities in the Nation.
For most of these cities the magnitude of losses was influenced by
abandonment of housing. Finally, all except one of these cities

experienced absolute pepulation losses between 1960 and 1970.

'What the Nation's older central cities appear to be experiencing is

the culmination of a demographic trend of more than a quarter of a
century-~the thinning out of central city pOpulation densities through
the persistent migration of middle-class families to the surrounding
suburbs. .This movement has left behind large masses of older and
obsolete housing that no longer is reoccupied by European immigrants as
fast as it is emptied. The only new occupants available for this
housing have been Negroes moving from rural to urban areas and the urban
migration of Spanish speaking populations from.Puerto Rico, the West
Indies, Mexico and Cuba. This migration has not been sufficient to

offset fully the continued out-migration of the white middle-class

pepulation.

The second aspect of this phenomenon is economic. Normally, the
increasing availability of older housing, should lead to a (relative
even if not absolute) drop in its price and its readier availability
to low-income families. But fragmentary evidence suggests that the
price drOp in the housing occupied by low-income minority in-migrants,_
to the extent that it occurred, in many areas has led to disinvestment
and deterioration throughfideéreased maintenance by owners of rental
preperties aldhg the lines of the Lowry model. As a consequence,large
quantities of central cities' housing stock not only filtered down but
filtered out of the housing market because owners cut their losses by

O

ceasing to Operate their properties-~in short, abandonment.

Recent field studies illustrate many of the complex factors that enter

the picture. The Urban League's survey of houSing abandonment provides

QJraphic descriptions of abandonment in seven cities:

St. Louis is farther down the road to total abandonment of
the central city than any other city in our sample....In the
two neighborhoods included in our survey there are thousands
of abandoned buildings and no public actions in sight to
improve the situation.

The process of ethnic change, over exploitation of property,
withdrawal of mortgage financing, deepening poverty and final
abandonment is most fully played out in St. Louis. Mortgage
lenders freely admit having cut off all funds for the entire
city with the exception of one alldwhite neighborhood...§/

The ownership history of the inner core is one in which there
was a substantial degree of white owner-occupancy. Blacks, in
significant numbers, had occupied these.areas for upwards of
twenty-five years, but they never established themselves as
homeowners. The urban renewal process, according to brokers
and property owners, had a dual effect on these areas. First,
it caused a significant number of those displaced by the
bulldozer to seek accomodations in the area. And secondly, it
prompted landlords to forestall and eventually forget about
maintenance. .-.

Indeed, speculators purchased parcels from whites migrating to
the suburbs, but the dominant pattern of ownership was one that
was characterized by unprofessional, small-holders. ‘White
owners found that the market for their homes was next to non—
existent after the onset of urban renewal. Therefore, they
opted to finance their move to the suburbs by enting out their
homes to blacks. This process proved to be most profitable,
but only for a short period of time.

In the mid-1960's the market collapsed in both the inner core
areas and the West End. Middle class blacks; in response to
the declining quality of the structures they occupied and the
increasing incidence.of violent crime, deserted the areas. The
residualwpopulation was comprised of either the desperately
poor, or the socially maladjusted. In either case, landlords
found that mounting capital and operational costs increased
rents to the point where there was no market for their units.
In those units where maintenance disinvestment had occurred

for some time, basic plant facilities collapsed. Tenants
naturally refused to-pay rent for such accomodations, and

some simple arithmetic revealed to the landlords that the costs
of repair and rehabilitation would place rents far beyond the
means of that segment of the black sub-market in the area..

-..'4"'

Even those owners not faced with extraordinary maintenance
expenditures found their position becoming increasingly
untenable. PrOperty taxes, water rates, labor and materials
costs, and the entire expenditure side of the ledger rose
faster than the incomes of tenants...Maintenance expenditures
were cut, property taxes became delinquent, and eventually the
mortgage (if there was one) was defaulted. The inevitable
result was abandonment of the investment.§/

The description of Cleveland, Chicago, Hoboken and New York City follow

the pattern described for St. Louis with only minor variations on the

theme. Invariably, the racial aspect emerges as a predominant factor.

.A.concentration of low-income, high pathology black families is identified
in each of the cities where the abandonment process has reached

significant levels. The symptoms are, almost uniformly, that of high
unemployment and high welfare’ratios, dominance of female headed households.
high ratios of dependent children, problems in schools, including

conflicts, disorder, high truancy and drop-out rates. Finally, drug
addiction, crime and vandalism are at high levels. The concentration

of such problems among a significant proportion of the pepulation of

..any given neighborhood has become fhe identifying mark of collapsed

neighborhoods from which black as well as white families with children
‘ i

G

have fled or will refuse voluntarily to seek living quarters. These
concomitantlyfhave been areas in which public serviceshave deteriorated
or vanished, whether as a precursor or as a consequence of the foregoing
deve10pments. A significant proportion of the newer residents of these
neighborhoods neither understand or accept'the middle-class moresand

values of the predominant culture in U.S. metropolitan areas. Within

this context, the difficulty seems to be less one of race than of class

or culture differences. The high visibility concentration and multi-
tudinous difficulties of this population have created problems for which

answers have not yet been found.

The combination of loosening housing markets, outflow of white middle-
class population, the inadequate incomes of nonwhite succeSsors with
‘which to pay rents that would permit-effective maintenance of the older
stock being deserted resulted in deterioration and ultimately abandonment.
Finally, racial fears accelerated movement out of some neighborhoods

at a rate that did not permit the orderly absorption of the released

housing under any circumstances.

Response on the public side has been uniformly ineffectual except for
large—scale removal of abandoned units. To the extent that significant
proportions of the older abandoned housing was substandard or dilapidated,
its disappearance resulted in improvement in quality of the housing stock.
Thus, cities such as New Yorkfand Cleveland, both of which have
experienced extensive abandonment, show improvement in housing conditions 0:
a number of counts--substa1tial decrease in units lacking or sharing
plumbing facilities: decrease in l- and é-room units, and, despite

the loss ofuhitsfthnaugh abandonment, declining household size,

increase in rooms per person, decrease in crowding and an increase in
vacancy rate in the case of Cleveland. Superficially favorable

in terms of costs to rental‘occupants, median contract rent in

Cleveland went up minimally-l6 percent over the decade. In fact,

however, this was an indication of the extent of collapse of

this City's rental market. New York City's median rent, on the other
hand, increased at nearly the same rate as that for the U.S.--48

percent compared to the Nation's 55 percent.

Housing conditions in the Nation's Central Cities, 1960-1970

 

Despite all the prOblems of abandonment, examination of early 1970

Census data show overall housing progress in central cities.' The
traditional indicators show improvements for the central cities comparable
to those recorded for the Nation--even though the effects of turnover

‘

attributable to new construction do not occur to the same extent
experienced outside of central cities. These improvements have flowed
through to the minority households of these communities (Table 1).
Even in a city as heavily affected by abandonment as New York, the

housing status of its nonwhite pOpulation has materially improved over

the past decade.

The significance of these observations is to place the abandonment
phenomenon in prOper perspectiVeQ: Although the problem has serious

implications for the ultimate well—being of central cities, it cannot
'- . ‘
be generalized into a statement that central city housing conditions

I ' I.
I

in the overalI’have deteriorated.

On the other hand, the traditional housing indicators may largely be
irrelevant given other observations about neighborhood conditions
in central cities. For example, Census statistics record the existence

of plumbing facilities for a housing unit without ascertaining whether the:

are in working order. At a time when the provision of such facilities is

-‘J.'dJ.).LB i.--btiolu nuuolms' PARAMETER: r'UR NON—WHITE HOUSEHOLDS, FOR
CENTRAL CITIES OF UNITED STATES AND FOR NEW YORK CITY,
1960-1970 (in thousands)!

Change 1960-1970
Item 1970 1960 Number Percent
Central Cities, United States

 

 

Plumbing facilities

Occupied housing units 3,838 2,844 994 34.9

With all plumbing facilities 3,609 2,140 1,469 ' 68.6

Dilapidated and lacking some 1

'or all plumbing facilities ‘ 229 704 -475 —67.5
' a 7. 30%

Space utilization

Total number of persons in

housing units 12,891 9,849 3,042 30.9
Total number of rooms 17,628 12,173 5,455 44.8
Number of rooms per person 1.37 1.24 .13 10.5
Crowding
Total occupied units 3,838 2,844 994 34.9
1.01 persons per room or , ,h. '
more 657 668 —12 ~l.7
. ‘ --’ 51' I707: 33};
Rent , ‘
\/

Median contract rent ‘ $ 76 $ 53 $ 23 43.4

New Ybrk City

 

Plumbing facilities

Occupied housing units 580 353 227 64.5

With all plumbing facilities' 547 276 271 98.2
Dilapidated and laoking some ‘
or all plumbing facilities 3 33 77 ~44 -57.l

’ .

Space Utilization ”

Total number of persons in

housing units 1,836 1,099 736 67.0
Total number of rooms 2,385 1,348 1,037 76.9
Number of rooms per person 1,30 1,23 .07 5.7
. . .7
Crowding

Total occupied units 580 353 227 64.5
' 1 1.01 persons per room or more 103 79 , 24 30.5

Rent . '
Median contract rent $87 $59 $28 ‘47.5

 

Source: 1960 and 1970 Census of Housing, U.S. General Characteristics.

taken for granted (in itself reflecting major progress), the question
(of whether they function prOperly becomes more relevant. Experience
\Mith tenant-landlord relations in rent-controlled New York City, for
example, does not permit answers to this question to be assumed.
Ihirthermore, it is of little consequence that the physical conditions
<of a given structure are standard in every reSpect if its inhabitants
fear'to walk in the streets day or night, if drug addicts pose a
(nonstant threat of burglary, robbery and assault, if streets and
sidewalks are broken, littered and filthy, if neighbor fears neighbor,
and if parents daily send their children to school with fears about what
mishap will befall them. In short, if a neighborhood no longer is
regarded as a good place to live, the conditions and quality of its
'housing becomes almost irrelevant to families seeking a home. They will
not consider such.a neighborhood unless their freedom of choice is non—

existent.

TWo conclusions emerge from the foregoing:
1. By and large, the turnover of housing generated in
central cities has permitted lower.income segments of the

I

community to inherit-better housing, as shown in Table l.

. .0
. '. n,/$' c:

2. The consequences of two decades of high-level output
at,a rate of 1.5 units of new construction for each net
addition to households has become clearly visible in the urban
centers of the Nation-~through the filtration of large segments

of their housing right out of the housing supply through

abandonment and subsequent demolition.

\fiewed in this light, the extensive filtering out of housing in the
<:entral cities of the Nation presents a mixed bag of results. In terms'
<>f obtaining standard housing at lower relative prices, residents of
Iaeighborhoods not excessively affected by racial transition have been
loeneficiaries of housing turnover in the 1960's.’ Large numbers of
Inoderate-income minority families also have benefitted. The experience
caf low—income minority families has been mixed. Although large numbers
caf the latter have succeeded to better housing, it is likely that

rents were higher and that much of this housing is in process of
deterioration in services and'quality. Although it is difficult to

conclude whether the functioning of the turnover process has served

low—income families well, there is little doubt that it has functioned.

Some things can be said definitely. Relative tothe essential

requirement of meeting the recordébreaking rate of new household formation
of the 1960's, the data show that any talk of housing shortage in America
constitutes one of the great mythologies of housing discussion.However,that
the need has not been met for many low-income households for qualitatively
satisfactory housing within their ability to pay equally can be flatly

asserted with little prospect of refutation.

/ '5 5"" II:

The Nation's housingyproblem redefined

The assumption of housing shortages in America appears to be part of

the concept behind the housing goals objective of the Housing Act of

1968. Such shortages do exist but only in a qualitative and distributional
sense. Recognition of this aspect of the problem is critical for any

set of prOposals designed to deal with the problem which readily breaks

un into two geographical comoonents--(l) the Nation's central cities

and (2) the outlying suburban or exurban growth areas.

Central cities

 

The prdblem here is not one of shortage of housing. It is the
qualitative decline of life in the cities that has in turn accelerated
-the suburban outmigration of middle class families with children just
as cities have been the magnet fiar the rural poor seeking economic
betterment. The qualitative decline of life in the cities has two
components-~racial and economic. When the racial aspects (earlier
discussed) are combined with the declining ecohomies of central cities
that no longer can employ profitably poorly educated, unskilled labor,
then more serious difficulties surface. These prdblems are not eased
‘by newer attitudes toward the'available undkilled service jdbs that
Vcomprise a large component of cities' functions as a service center.
Such jobs, termed Tdead—end , are increasingly avoided by even
unskilled able-bodied young males who find it as profitable to have
their wives (and nonwives) gofon welfare as it is for them to work.
Meanwhile they pursue a shadowy ahd frequently illegitimate existence“
that makes life in many neighborhoods untenable for'normal working
families. It was estimatedfin 1968, a prosperous year, that on any

one day 30,000 low-paying service jobs were going begging in New York

City while the welfare rolls neared a million.

In many respects, the central cities have become an entrapment for
large numbensof low-income minority families as employment
opportunities decline or provide only a low level of sustenance. It

is in this context that the housing problem of these cities must be

viewed. By and large, the housing market has become too weak to support

-19-

new
much more than heavily subsidized/housing (Section 236 one-percent

rental housing plus rent supplements for public housing—eligible
families). Moreover, incomes of a large prOportion of these families (
are too low to pay rents sufficient to permit older but habitable
'existing housing to be kept at a reasonable level of maintenance and
repair. The problem in the central Eities is less one of housing
shortage than of restoring the livability of neighborhoods that have
lost this quality and of maintaining or rehabilitating housing in
essentially sound structures. The low incomes of its inhabitants is
reflected in reduced income for public services in these cities at a
time when the maintenance of services has become more important than
ever. Many cities have been,pushed to the brink of bankruptcy with
their abnormal load of dependent pOpulation in the face of weakening
economies. The definition of the housing problem of such cities

lies in the fact that the household budgets of one—quarter to one-third
of the households of many cities, whether derivable from welfare or
from low-paid employment, does not permit these households to pay the‘

full costs of proper maintenance of older existing housing. Given

\

such conditions, continued abandonment of housing that could provide.

I

many years of”useful service becomes inevitable.

The housing problem of the Nation's outer areas

The outward flow of jobs to‘today's new urban centers that yesterday
were the cities' bedroom suburbs has created a different set of
problems. Most of theseland areasauxadeveloped at low residential
densities. Remaining vacant land almost invariably is locked in

similarly low-density zoning. The residential construction that does

take place is conventional development at going market rates which, by
ciefinition, provides housing for the upper 30 or 40 percent of the

income groups of'UNBmetrOpolitan area.

lflith cities less able to support their population growth because of
static or declining job opportunities, it becomes important to permit
excess pOpulation of these cities tofbe drained off to follow the
growth of job opportunities. Historically, employment growth occurred
'within central cities with an existing supply of housing continually
fbeing augmented by the movement of the middle and upper classes to new
housing in an ever outward push. With the leap-frogging of new
employment growth into suburban and exurban areas, however, severe
problems of access and housing have'been created for the low-income,
less mobile segments of our society. ‘While housing surpluses (and

abandonment) deve10p in the cities, new housing requirements are

created in the outer areas to a greater extent than ever.

‘
'-

The foregoing defines the housing prdblem outside the central cities.
The Nation needs new ground rules, in the most literal sense, to c0pe

.. ' l . ___,../
with the problem. A primary requirement is that national houSing ]

, I
' 0
.’

policy must accommodate to this change by encouraging the provision
of new housing at a wide array of prices and rents and at rational #/
densities in the new areas of economic develOpment. Only in this
manner will the shift of workers into these growth areas become.
possible. Although many workers today are reverse commuting to these

jobs from the cities, probably many more are precluded from Obtaining

employment because of inability to find housing in areas of new jdb

Opportunities.

A housing program forugne Nationis central cities

It is beyond the scope of this paper to deal with the larger problem of

the ultimate economic viability of the Nation‘s Older central cities.

It is a truism that the viability of these areas hinges upon the
development of adequate levels of employment for their pOpulations. A
second crucial requirement for the survival of central cities is substantiai
reinforcement of the flow of municipal Operating revenues to revitalize
services in~declining neighborhoods. Conceptually, a fully Pederally
funded, well admimstered Model Cities type of approach has potentials

for success in this direction.

Much has been written and discussed about direct housing assistance for
low—income (non-welfare) families.as a means of supplementing the
ability of such families to afford existing housing at rents that permit
this housing to be properly maintained. Not only does such a program

differ from the emphasis on new construction contained in existing

Federal programs, the family housing assistance approach has been prOposcd

 

as a replacement for these programs in Older cities with surplus housing
' . a
that is experiencing deterioration and abandonment. 'Ira S. Lowry‘s

o J
I

exposition of such a program is summarized as follows:

'
c 5 . .
. J ls'l'.‘ I"

1. It is designed to promote modest improvements in the
housing conditions of low—income families, depending for this
'purpose on the existing.housing inventory rather than on new
construction. .4- g

2. It provides for assistance on equal terms for all
eligible families rather than limiting benefits to a small
fraction Of those who are nominally eligible.

3. It Offers a new device-—rent certificates--for
delivering assistance directly to low-income families,

requiring them in turn to find their own housing on the
private rental market and to negotiate rents and conditions
of occupancy directly with the landlord.

4. It provides for a continuous check on the quality of

the housing occupied by assisted families, prohibits the use

of public funds to subsidize occupancy of substandard units,

and creates incentives for both landlords and tenants to

COOperate in housing maintenance and improvement. 1/.
Lowry aims the program at "the critical housing problem of most central
cities today: not a shortage of housihg units, but too little effective
demand to support adequate maintenance of older buildings. These
buildings could provide decent, safe, and sanitary accomodations for

low-income families but are now being lost at an unprecendented rate

though deterioration and abandonment.“

. o
' o

”The propesal is...specifically addressed to a situation that is
characteristic of most of the Nation's large central cities and many

of the smaller ones: they have large inventories of old housing suitable
for renter occupancy and their populations are shrinking."§/ The basis
of Lowry's proposalsstem from measures of the cost of moderate
rehabilitation in New York City that indicate 750,000 apartments could
be upgraded to comfortable livinggstandards at an incremental annual

rent of$4ll to $690 per yearfover a rent base averaging $909 per annum.

I

_".,'...a
0-

The alternative is the continued deterioratiOn and eventual abandonment
of much of this essentially sound housing supply. Although the cost of
this assistance is not cheap,_it is minute compared with the capital

costs of replacing this housing. .Lowry estimated that 38 percent of

all New York City's renter households (799,000) were eligible for, but

not receiving, public housing (or welfare) assistance. :Although this

I

does not imply that all eligible families require rent assistance, it
does suggest the potential magnitude of this type of housing aid-~a
figure approaching $400,000,000 annually for New York City families
alone. If New York City's low-income families constitute one-eighth
of those in the Nation's central cities, the foregoing discussion
suggests a potential cost Of 3 billion dollars annually simply for

the central cities of the Nation.

n

An essential cOrollary to the foregoing proposal is the strehgthening
of the mortgage finance system for the central cities' Older housing
stock. If the experience of New York City is any guide, mortgage
financing institutions have been withdrawing their.resources from this
sector of the real estate market'as rapidly as feasible. George
Sternlieb, whose monumental study of New York City's rental housing
supply in 1970 extensively documents this fact, comments as follows:
”The significance of these findings to the vigor of the residential

real estate market in New York City is beyond doubt. The largest single
- source of funds typically used by owners to rehabilitate their buildings

[1
involves the refinancing of paid down montgages. For example, the

fim' U
I

.'¢.'

relative unwillingness ofébahksf{}hat presently hold such mortgages]
to extend financing means that this significant_source Of improvement
money is substantially'blocked Off." 2/

I
‘ 1'

Restoration of this source Of mortgage financing would be enormously
enhanced by extension of the Federal Housing Administration's mortgage
insurance system to mortgage extension and rehabilitation loans on

older buildings that under present statutes do not qualify for mortgage

insuirance. Without a dollar's worth of direct outlays (except for
adnuinistrative costs and defaults) such a step would enormously accelerate
the: flow of institutional lender's funds into existing housing that

today has reached a low ebb in mOst older central cities.

The: foregoing prOposals do not necessarily preclude aided new construction
frtnn being undertaken in the central cities. New construction is essential

tc>:renew abandonment areas that are beyond rehabilitation and to replace

O.

encisting Obsolete and deteriorated housing that does not warrant

xxflnabilitation. Some flow of new construction also is required to prevent

time creation of excessive inflation in rents and costs of existing housing

.1x3 the extent that household growth oCcurs in cities: The Federal Section

236 program may have to be liberalized to make°this possible in high

cost central city areas.

A housing program for outlying areas

It is in the outlying growth areas of the Nation that the hOusing programs
created in the Housing Act of 1968 and subsequently could realize their
brightest potential. Beth the.See¢ion 235 (one percent mortgage) home

9
ownership program as'well as the Section 236 (one percent mortgage) rental

' f

housing program used in tandem could aid enormously in leavening the
higher-cost conventional housing customarily constructed in growth areas.

This type of programming Of moderate income housing (together with some

4‘

.’i' '

low-income rent supplement assistance piggy-backed on the rental program)
would permit the entry Of moderate-income and lower-income families

into outlying employment growth areas. As a matter of public policy,

§

§

the:Congress could authorize the use of rent supplement housing, in
(addition to present eligibility requirements, for potential movers into
‘areas of new employment growth upon the showing that they (a) were

(offered employment in the area and (b) fell within eligible income limits.

The problem of local zoning and code restrictions, if not finally dealt
\uith by the courts, might conceivably.be approached by state or federal
legislation as one possible means of dealing with restrictions against

Section 236~and other multi-family housing.

New'York State has contributed the Urban DevelOpment Corporation, with its
State-wide outlook on the distribution of housing in the direction of new
economic growth. The Corporation, with its power to override local

codes and zoning, is breaking new ground in moving toward such a broad

conceptual approach.

Thus, for the outlying areas of the Nation,.existing tools are fully
sufficient to deal with the need for new housing. It remains only a

matter of sufficiency of funding and effective administration to see'

_ II
that the funds are properly targeted to growth areas where the encouragemcn

of migration would be economically fruitful in terms of meeting the

demand for an expanded labor supply beyond that which the area currently

'

can supply.

.
’1

If the foregoing prOposals for meeting the housing problems of the 1970's
are sound, and are implemented, it will mean that the filtration or

turnover process will be supplemented by measures to make its effects

more constructive than has been the experience of the 1960's.

.I.' ug LLLU cco

 

0

EL/

Q R

we

ER

QB

K.

G-

Frank S. Kristof, "Federal Housing Policies, Subsidized Production,

Filtration and Housing Policy Objectives," Dhnd Economics.... ‘

F.S. Kristof, “Housing Policy Goals and the Turnover of Housing",
Journal of the American Institute of Planners, August 1965,
pp. 241-242.

J.B.°Lansing, C.W. Clifton and J.N. Morgan, New Homes and Poor
People. Survey Research Center, Institute for Social Research,
University of Michigan, Ann Arbor, 1969, p. 49. ‘

 

Ibid., p. 49. -

 

Center for Community Change and the Urban League, National Survey
of Housing Abandonment, April 1971, p.6. '

Ibid.. pp. 27-28. ‘

Ira S. Lowry, "Housing Assistance for Low-Income Families: A
Fresh Approach", Papers submitted to Housing Subcommitte, Committee
on Banking and Currency, Housing of Representatives, 92nd Congress

First Session, June.l97l, p. 489.The author spells o t in dftai the
agministrative requirements necessary to accomplish t e out ine
o jectives.

Ibid.

I 0...

George Sternlieb, The Urban Housing Dilemma; New York City
Department of Rent and Housing Maintenance, 1970, p. 645.

‘

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