When the Market Built Housing for the Low Income

In a recent post, Daniel Kay Hertz examines residential filtering, the process by which housing units depreciate and therefore become available to lower-income buyers or renters over time.  In particular, Hertz examines a Stuart Rosenthal article on the phenomenon which I have examined critically here and here. Although he makes the very good point that the filtering process is not operating in unhindered fashion in many large American metros, he also makes the claim, which I have seen in many other contexts and by other authors, that "very little private housing in the United States was originally built for low-income people."

Although this may be somewhat accurate so far as it only applies to formal housing developers, throughout the history of American cities and indeed most other cities in the world, a large portion of the housing stock came from the informal economy, most of it purpose-built for indigent migrants or very poor laborers.  This was the case even in some of the largest and wealthiest cities in the Western world until fairly recently.

In the typical city, such housing would (and is) either be found on the outskirts or on very low-value urban sites, such as floodplains, rocky ground or steep slopes.  Infrastructure was poor and public services were minimal or nonexistent.

American Favela: The "Dutch Hill" area of midtown Manhattan in 1863.  Source here.

Rather than filtering down, these rudimentary settlements had and have a tendency to "filter up" internally, as residents gained a foothold economically and improved their dwellings.  For most Americans, the best-known of these types of areas are the so-called "Hoovervilles" of the Depression era, when the unemployed and rural migrants occupied low-value or underused land near city centers:

Seattle, WA in the 1930s. Source.

These crude shacks offered little more than shelter from the elements, but they were the result of people in dire situations doing the best they could with what they had available.  Governments then and now refused to accept this reality and, rather than trying to improve the conditions within these settlements, generally favored mass eviction and demolition.  In an interesting twist, this style of development has been rediscovered by contemporary American cities (particularly Seattle), and, without apparent irony, has been rebranded as the "tiny house village."

Beyond housing for the very poorest of the poor, American cities through at least the 1920s built in bulk for the lower end of the income scale.  This housing took several forms:

• As noted above, shanty housing built by those with little or no experience in construction.
• Small, temporary and/or transient housing, such as flophouses, boarding houses and other manner of SRO rentals.
• Small multifamily housing wherein a person of some means would build a home with one or two attached apartments which could be let out at low cost.  Often these apartments would be sub-let to boarders who might occupy a single bedroom.
• Self-built housing of a higher quality, which might be built from a Sears housing kit, or by a person with some background in construction.  One study estimates as many as 1 in 5 American homes were self-built in the 1920s.
• As noted in the comments, company towns and other housing built by large businesses for their workers to inhabit. 

The first, second and third of these options were virtually outlawed starting in the 1920s and in the decades following.  What changed during and after the 1920s was not the market's willingness or ability to continue constructing such housing, but society's tolerance for housing of perceived low quality or of profitable use.   The Housing Act of 1937, for instance, was not so much concerned with ensuring affordable housing for the poor, but rather with "the provision of decent, safe and sanitary dwellings for families of low income and the eradication of slums."  Single-room rentals did not fit into this well-meaning but upper middle-class vision.

The "eradication of slums" element of this strategy was more faithfully carried out then the provision of dwellings, and in the process much of the evidence of the low-income neighborhoods of the pre-1950 period was obliterated.  Municipal archives may contain photographic documentation of the condemned neighborhoods, as in the case of Nashville, below, showing a street of tin-roofed shotgun houses and very modest bungalows built in the early 20th century for lower-income tenants.  All were "eradicated" in the 1960s along with much of the surrounding neighborhood and their residents dispersed elsewhere.  That many of these neighborhoods were demolished or saw demand for them fall to near zero, with resultant abandonment, should not cause us to forget they ever existed.

Nashville houses circa 1960; all demolished in urban renewal.  Courtesy MDHA.

It might not be going to far to say that the traumatic process of urban renewal instigated an involuntary filtering, as residents of the poorest areas were literally displaced -- cast out of condemned homes -- and forced to seek new housing from among a diminished housing stock.  These people probably did move into somewhat higher-quality housing, but at higher cost and possibly in more crowded conditions as well.

But what of the fourth type of housing, the proper self-built house?  As it turns out, there was a crackdown on this type of housing as well for reasons that seem to have had less to do with ensuring decent and sanitary housing and more to do with disreputable and exclusionary motives.  The impetus for these changes may have been the mobility provided by the automobile.  I'll quote from one book at length which describes one town's legislative action against black self-builders in Ohio, including one Eddie Strickland:

"In 1946 ... in a series of irregular meetings, the council [of the town of Woodmere, Ohio] passed a building code aimed at restricting do-it-yourself builders, among whom blacks were a prominent group. The code mandated a maximum one-year time limit for the construction of new homes, forbade secession of work for any period longer than forty-eight hours, and prohibited the use of secondhand building materials. Finally, the code required builders to post a $1,000 bond to ensure compliance..... 

"By lifting construction standards (and allegedly enforcing regulations in a discriminatory manner), Woodmere officials raised the cost of home building in the village and substantially limited settlement by working-class blacks. Moreover, the passage of similar building restrictions throughout the county helped limit the number of African American suburbanites in the Cleveland area. The trend had an apparently chilling effect on the attendance of blacks at the weekly land auction in Cleveland, where a number of families had formerly purchased suburban land for delinquent taxes.... 

"Far from being an isolated event, Strickland's confrontation with authorities in Woodmere reflected a national trend toward regulation of the suburban fringe that hastened the decline of working-class suburbanization in the postwar decades. In Cleveland and other metropolitan areas, the proliferation of suburban municipalities led to the extension of land-use regulations to formerly unregulated areas. Zoning and building codes curtailed informal home building and inflated the cost of a suburban home. Racist application of these regulations closed the door on development for blacks, and the enforcement of sanitary regulations led to the demolition of existing black housing and restrictions on domestic production. 

Excerpt from Places of Their Own: African American Suburbanization in the Twentieth Century by Andrew Wiese

Disputes over self-built homes continue to arise today in remoter regions, as seen in the recent lawsuit brought on behalf of Amish homebuilders in upstate New York who were being required by local codes to submit architectural plans and install other expensive features in their self-built farmhouses.  The elimination of the self-built home as an affordable option in much of the country, in conjunction with zoning regulations limiting small multifamily housing, setting minimum lot sizes and imposing other similar restrictions, completed the elimination of the lower rung of prior housing options.  Left were only the newer mobile/prefab home, which partly stepped in to fill the gap that had been left, and the filtering process, which though demonstrably effective was not always rapid enough to insure a sufficient quantity of housing nor sufficiently cheap housing, especially in cities with high residential demand.

Of these two options, mobile homes were heavily restricted in where they could be located, and urban renewal destroyed huge quantities of filtered housing, i.e., "blighted" homes.  The result is a market which appears, artificially, not to create low-income housing options.

Is this article a call for the return of flophouses, then?  Not in the sense of the negative and unsanitary associations of that term and other like it, but in the sense of a government which recognizes that these older types of housing represent the market's effort to meet vital needs, and that regulation can help meet these needs in a safe and sanitary way without taking an adversarial approach toward them.  These market approaches can be complementary to public housing investments and other public assistance programs, as well, rather than being seen as inferior alternatives.  The tiny house village movement mentioned earlier is one such manifestation of this approach, and shows that the political obstacles need not be insurmountable.

Other and related reading:

• Daniel Kay Hertz, The immaculate conception theory of your neighborhood’s origins
• Friday Read: Affordable Housing, Filtered, not Subsidized
• Note on Gentrification and Preservation
• Tiny house village for homeless taking shape in Seattle, 12/24/15

Note on Gentrification and Preservation

There have been several great pieces on the dynamics of gentrification over the past several days. Market Urbanism's Stephen Smith, who is now writing at Forbes, observes how permitting more development in desirable areas will help "soften the blow of gentrification." Alon Levy theorizes about the causes of central city revitalization. Emily Washington, in response, considers the time preferences of the upper and middle-classes. At the City Paper, Lydia DePillis discusses the relationship between historic preservation and gentrification, among other things.

In DePillis' article, in particular, there is this observation linking preservation and neighborhood revitalization:

"The thing is, preserving distinguished architecture and well-constructed neighborhoods can be one of the best ways for real estate to hold its value. Places that look like they were once prosperous send a message that they could be again."

However, one can argue that it is well-constructed buildings and distinguished architecture which attracts gentrifiers long before historic districts are contemplated.  The following chart was put together some years ago for a project looking at four southern cities (Nashville, Atlanta, Memphis and Savannah) in which all census tracts in 1940 were grouped into quartiles based on housing value in that year.  The tracts were then revisited in the 1970 and 2000 census years, keeping the groupings the same (the numbers show quartile housing value divided by the median housing value for the city in a given census year):

The pattern over time distinctly shows the operation of residential "filtering" from 1940 to 1970, as homes in wealthier neighborhoods came to be occuped by those from poorer neighborhoods, and an almost mirror-image reversal of this trend from 1970 to 2000 (intervening census years show that the turning point is in fact around 1970).  The middle class was simply returning to the same homes that their parents' generation had abandoned some twenty to thirty years before.  In 1970, moreover, one could purchase a home built by, say, an upper middle-class family of the 1920s, for what was essentially a 50 percent discount – a house that went for four times the price of those in the poorest quartile in 1940 was, in 1970, selling for only twice that, even though these were in most cases the very same houses. 

This is different result than some other studies (see e.g. Old Homes, Externalities, and Poor Neighborhoods: A Model of Urban Decline and Renewal) which find that neighborhoods should cycle over time as housing stock ages, deteriorates and ultimately becomes ripe for redevelopment.  Yet the poorest two quartiles have not cycled at all in 60 years, while the housing in the first quartile was not actually redeveloped, but only renovated by new buyers (that is, its age was an amenity, perhaps the primary amenity, rather than a liability).  The hidden factor is the quality of the housing stock, which overwhelms the effects of aging and deterioration.

This can help explain the perceived attitudes of preservationists toward neighborhood change that DePillis discusses in her article.  It also suggests an explanation for the suburbanization of those with low incomes: as the better urban housing is gentrified, the former occupants may have two choices: move back into impoverished central city neighborhoods or move out into the aging suburban housing vacated by the gentrifiers or those moving to newer suburban houses. If costs are roughly comparable, the decision is easy. 

This type of gentrification is different from the the arrival of residents back into a formely commercial or industrial urban core, where the pattern is much more analagous to greenfield development (as Alon mentions in his post).  This is occurring simultaneously with gentrification of existing neighborhoods in Nashville and other cities, but takes a very different form. 

Related Posts: A Preservationist's Dilemma