Demographical Characteristics of Social Housing in the United States

Table of Contents

1 Theory of Housing Market and Social Housing
1.1 Meaning of Housing Market
1.1.1 Actors of the Housing Market and Their Interactions
1.1.2 Processes of Housing Market
1.1.3 Market Behaviour
1.2 Social Housing
1.2.1 Defining Social Housing
1.2.2 Supply Side of the Social Housing Market
1.2.3 Demand Side of the Social Housing Market
1.3 Role of Social Housing in Europe and the United States

2 Development of Social Housing in the United States
2.1 Summary of the Historical Development
2.1.1 Period Before World War I
2.1.2 Interwar Period
2.1.3 Post World War II
2.1.4 Reagan Period
2.1.5 Current Situation
2.2 The Current Social Housing System of the United States
2.2.1 Institutions
2.2.2 Non-Profit Organizations
2.2.3 Housing Eligibility and Accessibility
2.3 Demographics of Social Housing Residents in the USA
2.3.1 Migration and Diversity
2.3.2 Current Situation of Social Rent Household
2.3.3 Householder Characteristics
2.3.4 Household Characteristics

3 Case Study New York City
3.1 Current Structure of the City
3.1.1 Variation of Economical Data
3.1.2 Variation of Demographical Data
3.2 Situation of Social Housing in New York City
3.2.1 The New York City Housing Authority
3.2.2 The New York Department of Housing Preservation and Development
3.3 Demographics of Social Housing Residents in New York City
3.3.1 Ethnic Origin
3.3.2 Household Composition
3.3.3 Distribution of Age
3.3.4 Socio-Economic Status
3.4 Second Generation in New York City
3.4.1 Demographic Overview of the Second Generation
3.4.2 Geographic Characteristics of the Second Generation in New York
3.5 Housing Accessibility and Affordability in New York City
3.6 Future Challenges of Social Housing in New York City
3.6.1 Crisis of New York City Housing Authority
3.6.2 Financial Crisis of the United States

4 Critical Evaluation of the Social Housing System of the United States and its Residents
4.1 Social Housing in the United States
4.2 Demographical Characteristics: Social Housing Only for Marginalized Population?
4.3 Future Prospects

Bibliography

List of Abbreviations

Table of Figures

1 Theory of Housing Market and Social Housing

Housing is one of the basic needs of human beings and the fundament of a free development of the individual, irrespective of a possible migration background. Even the European Union recently recognized the importance of an adequate fulfillment of this need and decided for the first time to integrate social housing into EU cohesion policy (CLIP, 2007, p. 3).

Although housing can be understood as some sort of basic commodity, it is also characteristic that the property ‘habitation’ differs from other economic commodities. Jenkis (2004, pp. 52) pointed out that habitation can be classified into the economic commodity ‘tenement’ and the social commodity ‘use of the tenement’. According to that it is important to understand in a first step the functionality of housing in general. Only then a comprehensive understanding of social housing is possible. Chapter 2 shapes the theoretical basis of the housing market and after that elaborates a deeper introduction into the characteristics of social housing renters.

1.1 Meaning of Housing Market

A very superficial observation shows that housing markets basically connect buyers and sellers of housing, whereby “[…] buyers offer demand and sellers offer supply […]” (Oxley, 2004, p. 16). The U.S. Department of Housing and Urban Development (HUD) states that the housing market differs from the market for other necessities such as food or clothing. The main difference is “[…] that supply does not respond to demand quickly” (www.huduser.org) and the complexity of housing markets can be found in the strong connectivity to economic conditions.

Abele and Winckler (1976, p. 3) went one step further and emphasized that the concept of housing market includes two different core themes, in particular the change of domicile and the building activity. Both categories are very complex and amount to a “[…] multi-dimensional social field of interaction […]” (Abele and Winckler, 1976, p. 3) which is influenced by different actors, information patterns, decision-making processes, activities, institutional conditions and so on. Over the course of their study they describe the housing market as a place where information pass on and where interactions and communication take place. The housing market is generally characterized by processes which concentrate on the objective ‘habitation’ (Abele and Winckler, 1976, p. 66).

This explanation of the housing market coincide with Mayer’s (1998, p. 42) more recent definition which describes the housing market as an economical place where processes of exchange regarding the commodity ‘habitation’ take place. Mayer (1998, p. 42) also pointed out that there is no one single housing market. The market is to a rather degree divided into several submarkets which are connected on the supply and demand side.

Very generally spoken, similar to economic markets the housing market is also divided into a supply and demand side. According to Oxley (2004, p. 16), housing demand depends on preferences and financial resources and can be divided into an individual demand which represents a single person and an aggregated demand which summarize a set of individual demands. On the other hand, housing supply has to be differentiated between “[…] supply from the existing stock and supply from house-building […]” which includes new construction as well as additional housing because of conversion of existing properties (Oxley, 2004, pp. 22). Both, supply and demand depend on a variety of external factors which influence the housing market behaviour. This will be observed more detailed in Section 1.1.3.

For the sake of completeness it is important to underline that a housing market is no market in terms of a traditional economical theory. Because every market needs some sort of standardization, it would be necessary to build homogenous submarkets for housing relevant criteria like price, size, location or facilities. However, the concerned parties of the housing market are able to switch between the submarkets as often as they like. A housing demander is able to interact for instance first on the submarket of two-room apartments in city-location for 500 EUR rent per month and change then to the submarket of two-room apartment in suburban region for 400 EUR rent per month. The more homogenous and precise the submarkets are, the easier it is to change between the submarkets. According to Abele and Winckler (1976, p. 3) the standardization by using submarkets gets lost with the increasing possibilities of changing between the submarkets. This basic problem shows already the complexity of housing markets and the challenge to include all important parameters.

1.1.1 Actors of the Housing Market and Their Interactions

The involved parties of housing market can be found both on the supply and on the demand side. In the course of this, actors can act on two different levels: a direct and an indirect involvement into the market conditions (Abele and Winckler, 1976, p. 7 and 67). Directly involved participants on the housing market are homeowners – private-owned or governmental-owned –, tenants, subtenants or superintendents. Indirectly involved actors are real estate developers, architects, brokerage firms or letting agencies (Abele and Winckler, 1976, p. 7).

The interactions between the actors are embedded into an institutional general framework that is principally set by the lawmaker. In this context it is important to make a difference between constitutional lawmakers and ordinary lawmakers. The variable levels of legislation, such as federal, provincial and municipal government, have to be considered, too. In addition, the administration completes the general framework (Abele and Winckler, 1976, p. 6).

The lawmaker takes a special position in the setting of housing market’s actors and influences the housing market with a wide range of governmental interventions. Blaas (1991, pp. 23) differentiated between governmental interventions on the supply and the demand side. On the supply side the lawmaker acts either as a housing provider or as a supporter of non-profit-making and public housing. As a result the lawmaker enlarges the housing supply and influences the housing prices of the whole housing market. On the demand side the lawmaker influences the housing market by supporting the purchasing power of the housing demander. A possibility is to benefit saving behavior by payment of bonuses or tax concessions (Blaas, 1991, pp. 23)

It is also necessary to observe the frequency of interaction between the various actors to project the interactions in a time scale. Due to the large amount of actors and their activities a complex variety occurs. This complexity can be simplified by a segmentation of the actors regarding the behavior on the housing market. The typical sequence of decision-making and the typical resting time of housing market’s participants finally lead to the assumption that the housing market is a process characterized by diverse intensities of activity (Abele and Winckler, 1976, p. 9).

1.1.2 Processes of Housing Market

Housing markets are not only influenced by the interactions between the market actors, but also by processes which can be described by the help of three theories: filtering theory, trickle theory and socio-spatial theory (Jenkis, 2004, pp. 346).

The filtering theory states that the use of a tenement increases the quality by renovation or improvement of infrastructure, such as the expansion of public transport systems for instance. This kind of improvement is called ‘filtering up’ (Jenkis, 2004, pp. 346). The quality of habitation can also decrease by usual usage and is called ‘filtering down’ (Jenkis, 2004, pp. 346).

The trickle theory connects the new construction of tenements with household income. It is assumed that newly constructed habitation always implies a higher quality standard. If the household income increases the households will move into these more luxurious habitations. Their former tenement will become available and occupied by moving up households with a lower income. According to the theory, a chain of removals is developing with low quality tenements at its end. As a consequence, these habitations can be demolished and substituted by new higher quality tenements. Theoretically, there is a filtering up process possible, if the demand for new building of the middle and high income households is encouraged enough (Jenkis, 2004, pp. 349).

The third market process that is pointed out by Jenkis (2004, pp. 351) is the theory of socio-spatial processes. This theory is based on the arbitrage pricing theory and describes a tenement as a bundle of services within its social and technical environment. As a consequence, tenements located in regions with high-income households create more proceeds than tenements located within low-income households. The borderlines are characterized by agio or disagio, depending on the particular location (Jenkis, 2004, pp. 351).

1.1.3 Market Behaviour

As already mentioned, housing markets can be influenced by actors, their interactions and several processes. Explaining the behaviour of the housing market seems impossible. At the time this thesis was written current studies regarding the rent housing market were not available. So I will try to give an insight into the market behavior in general with the help of a real estate study made by Robert Shiller.

Shiller (2005, p. 11) observed the ups and downs of the stock and real estate market in a historical context. Although he focused on the stock market, he also tried to describe the market behaviour of the real estate market. He pointed out that the driving forces of market fluctuation and bubbles are “[…] events outside the markets, such as politics, technology and demography […]”. However, real estate booms are predominately “[…] mysterious and hard to understand […]”. With this, the market behavior of real estate is similar to the stock market. If market booms or crashes happen “[…] there are always popular explanations for them […]”, but not always correct ones.

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Figure 1: U.S. Home Prices, Building Costs, Population, and Interest Rates, 1890-2004

(Source: SHILLER, p.13)

As one can see in Figure 1 the market for home prices of the United States is very volatile with numerous of increase and decrease phases over the years. It is remarkable that home prices are increasing dramatically since 1997. Shiller (2005, p. 13) explains that a 52 percent increase between 1997 and 2004 for the United States has taken place. The reason for this development cannot be population growth alone, which was quite steady over the years. Building costs were not the reason for increased home prices either, because construction costs varied in the last years and have been even higher in the 1980ies. Obviously, the factors building costs, population and interest rates aren’t able to explain the “[…] ‘rocket-taking-off’ effect starting after 1997 […]” (SHILLER, 2005, p. 14). At the end the author concludes his study with the argument that ‘irrational exuberance’, a term invented by Alan Greenspan in 1996, includes psychological and cultural factors and shows a large complexity. Although irrational exuberance in a whole is quite unobservable, it is the driving force for the ups and downs of the real estate market (SHILLER, 2005, p. 173).

To conclude, it is important to point out again that the housing market itself and its behaviour are very complex and communicate with current economic conditions. Even if there is no clear ‘cause-and-effect relationship’ between housing market and economic conditions, the situation in one of these parts influences the other part, and vice versa. For this reason the housing market reflects obviously the situation of the economy in general and should not be observed isolated.

1.2 Social Housing

Social Housing can be found in most of the Western European countries, as well as in industrialized countries, like the United States, Canada or Australia. They have in common that each of their housing systems have a diverse “[…] character, reflecting local historical circumstances [...]” (Malpass et al., nr, p. 1), so social housing is a complex topic with diverse characteristics.

According to Cowan and McDermont (2006, p. 2) the term ‘social housing’ evolved quite recently and, in the case of Great Britain, came up in the 1990ies. The new creation should describe the state’s intervention in housing provision and was used by professionals and academics without any discussion. The authors pointed out that we all “[…] instinctively think we know what it is […]” (Cowan and McDermont, 2006, p.2). But in reality the opposite is true. Therefore Chapter 2.2 gives a brief overview about meaning and concept of social housing.

1.2.1 Defining Social Housing

One can find various efforts of characterizing social housing. First of all, a differentiation between social and public housing is necessary to understand specialized literature correctly. Social housing is sometimes also called subsidized housing and means supported accommodation for low-income households by the government. Subsidizing instruments are generally direct housing subsidies, non-profit housing, public housing, rent supplements and some forms of co-operative and private sector housing. In contrast, public housing means real property owned and managed by government and is characterized by specific eligibility requirements (www.answers.com). As John Mollenkopf cut it right to the chase of the matter during our discussion, public housing means real property owned by the government to provide affordable and decent housing for low and middle income households, whereby social housing is ‘everything else’.

But social housing is about much more than these characterizations. Ball and Harloe (1988, p. 13) for instance, described social housing as a strong form of liberal-interventionism, “[…] where the state overrides the interests of specific private agents by imposing strict controls, such as rent controls, or takes one aspect of provision out of the market altogether […]”.

In a more current publication, Harloe (1993, p. 3) argued that the term ‘social housing’ can be used equally as a short-term for ‘social rented housing’. Although ‘social housing’ has a variety of meanings, Harloe pointed out that it consists of three major characteristics. “First, it is provided by landlords at a price which is not primarily determined by considerations of profit. Second, it is administratively allocated according to some conception of ‘need’. Third, government control over social rented housing is extensive and has become more so over time […].“ (Harloe and Ball, 1988, pp. 42).

Harloe’s first criterion, that social housing is non-profit-making, is supported by other researchers. Cowan and McDermont (2006, pp. 4) citied Peter Malpass who explained the principles of social housing as “[…] decisions […] [which] are determined on the basis of some judgment of need rather than profit; that rents are set on a non-profit basis, and the distribution of dwellings to individual households is on the basis of need rather than ability to pay and first come first served [...]”. Interestingly, this kind of definition excludes ownership, although Cowan and McDermont (2006, p. 5) emphasized that “[…] both the private rented sector and ownership play an important role in social housing policy.”

The concept of ‘need’ that is mentioned by Harloe as a second criterion of social housing, is the most commonly considered characteristic among experts and researchers (Cowan and McDermont, 2006, p. 3). “Need has become the defining tool of social housing […], [it defines] who gets in, and who doesn’t […]” (Cowan and McDermont, 2006, p. 59). Compared to economic markets, social housing allocates dwellings according to need, not according to demand (Oxley, 2004, p. 19). Going one step further, “[…] need for housing is a socially determined requirement for accommodation […]” (Oxley, 2004, p. 19). But the term ‘need’ contains also causes for conflict, because it could be classed with being in poverty, what would not always be correct and convenient (Cowan and McDermont, 2006, p. 4).

The most controversial discussed characteristic of social housing is Harloe’s third criterion ‘regulated housing’. The definition can be understood in the way that “[…] government exercises control through social housing […]” (Cowan and McDermont, 2006, p. 6). History shows that social housing is often taken to mean some sort of improvement “[…] in […] morals and […] daily practices” (Cowan and McDermont, 2006, p. 6) for the tenants. This kind of governmental improvement is also called ‘moral regulation’ (Cowan and McDermont, 2006, p. 6), but not only for the occupiers of social housing, but also for the providers. Social housing organizations have always been intensely controlled by the government. Repeating public discussions about low-quality social housing and grievances show that this kind of control seems to be necessary (Cowan and McDermont, 2006, p. 6).

Although it is difficult and nearly impossible to find a comprehensive and accepted definition of social housing, the main objective of social housing is clear: providing affordable and decent housing. As mentioned at the beginning of Chapter 2 housing is one of the most basic human needs. Therefore a welfare state has to ensure “[…] that affordable access to housing is possible to all citizens.” (Ditch et al, 2001, p. 20). But ensuring housing affordability is not as easy as it seems to be. For instance in 2002, Cox observed housing affordability in the United States and made clear that “[…] there are indications of a housing affordability problem in the United States […]”, primarily caused by exclusionary zoning (Cox, 2002, p. 5). In the following Section 2.2.2 I will elaborate on the topic who will be affected by less affordable housing and what additional social housing actors can be found.

1.2.2 Supply Side of the Social Housing Market

Harloe (Harloe and Ball, 1988, pp. 43) tried to summarize the principle social housing landlords, meaning the supply side of social housing, for Britain, the United States, the Netherlands, Denmark, France and West Germany. Table 1 gives an overview of the most relevant actors on the supply side of the market. Harloe mentions that in every observed country “[…] have been periods when some housing has been directly provided by central or, more normally, local government […]” (Harloe and Ball, 1988, p. 43). The provision is nowadays supplied by other bodies which “[…] have close, although sometimes conflict-ridden, links with local government [...]” (Harloe and Ball, 1988, p. 43).

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Table 1: Principal Social Housing Provider

(Source: Harloe and Ball, 1988, pp. 44. Own illustration)

There is another more important aspect, regarding the difference between the institutional structures of social housing, the role of the state, in the form of central or local government, and its political role that is carried out differently. While in the European countries a resistance to political control over social housing providers is noticeable, the situation in the United States and Britain differs. The reason can be found in the institutional structure. Because in the United States public housing authorities “[…] are created by local government, and in Britain […] the local authorities […] [are] themselves the landlords […]” (Harloe and Ball, 1988, pp. 43).

The state also has several methods of regulating the social housing market. Either the object is subsidized in form of supporting the construction or rehabilitation of social housing. This object oriented subsidy – also called ‘bricks and mortar’ (Ditch et al, 2001, p. 9) – can also include special incentives for investors provided by the state. Or the state acts with the help of personal consumer subsidies, which is usually realized in the form of housing allowances (Ditch et al, 2001, p. 9).

It is clear that the supply of affordable housing needs in every state some sort of “[…] cross-subsidy from private-sector developers or landowners […]” (Oxley, 2004, p. 151). Especially in the United States, developers are motivated by the government to contribute to the affordable housing stock by providing “[…] enhanced development rights, including the opportunity to develop at higher than normal densities […]” (Oxley, 2004, p. 151).

1.2.3 Demand Side of the Social Housing Market

Interestingly, according to researchers the social rented sector is on the defensive and Harloe (1988, p. 47) pointed out that in his opinion social rented housing “[…] is by no means the dominant tenure” he had observed in most countries. He emphasizes his statement by showing the percentage of social rented housing in relation to the stock, as can be seen in Table 2.

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Table 2: Social Rented Housing as a Percentage of the Stock around 1989

(Source: Harloe and Ball, 1988, p. 48. Own illustration)

But even if social rented housing plays a subordinate role on the total housing market, it is interesting and important to have a look at the demand side of the social housing market. Who are the target groups of social housing? Are they the “[…] least well off in society, those for whom the market never provides decent affordable housing?” (Malpass et al, nr, p. 3). Or does the middle-income mass demand affordable housing as well, as it has been tried to achieve by the government in the Netherlands, Germany or Denmark (Harloe and Ball, 1988, p. 51)?

The answer to this question seems to be provided by observing the accessibility to social housing. Indeed, the “[…] access to social housing is most commonly linked to low income […]” (Ditch et al, 2001, p. 9). Although low-income is the main criterion regarding accessibility to social housing, it is by no means always a guarantee for getting a subsidized tenement effectively. Every country and sometimes even every federal state target their social housing supply differently.

There can be differences in thresholds which measure and decide about being a low-income household or not. Kinds of thresholds can be income between nationally set limits, net income or the relation between rent and household income. Even if a household is under the required thresholds, social housing support is sometimes only possible for households living in a private rented accommodation. In Germany, for instance, low income households get “[…] certificates of qualification for social housing, but landlords may then choose whichever tenants they prefer from those so qualified […]” (Ditch et al, 2001, p. 11). The final decision in this case is made by the landlords.

The decision-making process regarding social housing eligibility can also depend on the number of dependent children in the household or the supposed vulnerability because of unemployment, disability or homelessness. The quality of the current accommodation regarding sanitariness and crowdedness is in some countries a further criterion for social housing eligibility (Ditch et al, 2001, p. 11).

The question, what kinds of offer people on the demand side of social housing are looking for is quite easy to answer. Affordable and decent housing is in general the fulfillment of one of the basic human needs. Housing gets affordable by rent controls (Hendershott and White, 2000, p. 3), subsidized rents below market levels (Ditch et al, 2001, p. 9) or by supporting the affected people with rent supplements or housing allowances. Finally, a further sort of subsidy is a low taxation of rental income (Hendershott and White, 2000, p. 3). Decent housing on the other hand can only be guaranteed by federal government who controls physical conditions and sets quality standards.

1.3 Role of Social Housing in Europe and the United States

After explaining the theory of housing market and social housing in particular, Chapter 1 ends with an observation regarding the role of social housing. How is the situation of social housing in Europe, vice versa the United States? The focus on the current situation will lead to a detailed explanation of the development of social housing in the United States in Chapter 2.

After times of limited social housing in Europe between the 1920s and 1930s, social housing is now accepted “[…] as a permanent component of national systems of housing provision [...]” (Harloe, 1995, p. 365). The discussion about social housing in Europe recently gets more and more important, whereby the topic of social housing appears mostly in the context of “[…] Europe’s increasing demographic and labour supply challenge […]” (CLIP, 2007, p. 2). Europe has to face its role as an aging and by immigration severely influenced continent and the challenges which are connected with this matter of fact. In the last two years, Europe recognized more and more “[…] the importance of a successful economic migration and social integration policy for migrants […]” (CLIP, 2007, p. 2). ‘Social cohesion’ and ‘integration of migrants’ have become the new keywords of European policies at least since “[…] emerging ‘parallel societies’ of migrants and social unrest within migrant communities […]” (CLIP, 2007, p. 2) became severe problems of the daily life of Europe.

As one can see in the history of publications and decisions, the EU takes these topics seriously. In September 2005 the Commission already “[…] stated a need at EU level to foster the better integration of present and future immigrants into the host societies” (CLIP, 2007, p. 2). Among others the Commission targeted the issue of housing for migrants in the ‘European handbook on integration for policymakers and practitioners’ in May 2007 (CLIP, 2007, p. 2).

Besides the ‘European Network of Cities for Local Integration Policies for Migrants’ (CLIP) which targets the support of social and economic integration, there are many other projects and efforts to observe and increase the housing situation of the vulnerable and the well-off population in Europe. The project ‘Social Cohesion and Housing’ (SOCOHO), for instance, started an international comparison how far the EU’s housing supply system has to deal with challenges in times of crisis in social cohesion (Czasny, 2004, p. 3).

At least since these efforts in the European Union’s policy are made, it is unquestioned that social cohesion and successful integration of migrants is strongly connected to affordable and decent housing. A requirement, which should be fulfilled by social housing. However, it is dangerous to connect social housing in Europe automatically with integration of migrants. It is important to emphasize that social housing in Europe is not only demanded by migrants, but also by a low-income and vulnerable population without migration background or even a broader population like the mainstream ‘working class’ (Karn and Wolman, 1992, p. 164).

Having a look at the United States’ social housing situation, the social housing stock is, as already mentioned in Section 1.2.3, quite small in relation to the whole housing stock. This situation is caused by a large and powerful rental industry in the United States, which “[…] effectively prevented the growth of substantial social housing industry […]” (Stone, 2003, p. 1). Since the 1960s housing subsidies have been target at private and for-profit organizations (Stone, 2003, p. 1).

In the United States, subsidy of low-income housing has always been remarkably lower than in Europe (Harloe, 1995, p. 421). Since the 1980s subsidy consists more and more of housing vouchers which reduce the rents of existing privately owned units rather than subsidy of new construction (Harloe, 1995, p. 421). Harloe emphasized that public housing in the United States is still a residualized sector that has to cope with increasing low-income housing needs and expanding waiting lists on the one hand and federal cuts in housing on the other hand. The current situation gets worse by reducing, demolishing and conversion of public housing stock (Stone, 2003, p. 1). Poverty, crime, drug addiction and trafficking have become severe problems, too (Harloe, 1995, pp. 446).

These aspects give a first impression of social housing issues in the United States. In the following Chapter 3 the social housing situation in the United States will be observed in more detail. The questions, how social housing in the United States did develop over the years and how the current system does look like will be tried to answer as comprehensive as possible.

2 Development of Social Housing in the United States

Housing in the United States is characterized by an idealization and ideology of private speculative homeownership (Stone, 2003, p. 1). This kind of ‘US-style’ leaves its marks also in the social housing market. Social housing in the United States is not truly social, meaning it is rather owned by profit-making companies and individuals. They gain a variety of public subsidies “[…] that reduce rents for residents, while assuring profits for investors […]” (Stone, 2003, p. 1). Contrary to other countries, social housing in the United States “[…] has always been “residual” and served a predominantly low-income population […]” (Stone, 2003, p. 1). The following sections give an overview of historical development and current situation of social housing in the United States. Therefore not only public housing issues, but also privately owned and homeownership programs will be observed to explain how and why the current social housing system in the United States could be established.

2.1 Summary of the Historical Development

Researchers differentiated in their elaborations between several periods of social housing development. Most of them observed the era before World War I, followed by the Interwar and the Post-War Period and finally concluded by the Reagan Period and the current situation. This structure should provide clarity of these developments, so it will be adopted for the following considerations. Before going into detail, I have to point out that my research is primarily based on elaborations made by Michael Stone. He contributed important observations regarding social housing in the United States.

2.1.1 Period Before World War I

Even this period was characterized by very limited housing efforts, the Civil Rights Act of 1866 has to be mentioned here just for the sake of completeness. Besides first actions to ensure African Americans an equal political and legal status, the freedom of real and personal property for all citizens of the United States has been registered in the Civil Rights Act of 1866 (www.teachingamericanhistory.com):

“Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, [t]hat all persons born in the United States […] of every race and color […] shall have the same right, in every State and Territory in the United States, to make and enforce contracts, to sue, be parties, and give evidence, to inherit, purchase, lease, sell, hold, and convey real and personal property […]” (www.teachingamericanhistory.com).

To give a social-political impression of the Pre-World War Period, Stone (2003, p. 3) pointed out that the origins of social housing are rooted in the cooperative movement and so-called ‘philanthropic’ housing in the late 19th century. Especially Melusina Fay Pierce, a social theorist, pursued the idea of a “[…] seamless connection between the public and private […] realms […]” (Stone, 2003, p. 3) and was very active in establishing cooperative residential neighborhoods in 1869. However, most of the earliest coops in the United States were more of a form of homeownership.

In context with the movement of a ‘philanthropic’ housing in the beginning of the 20th century, non-profit and limited dividend projects can be noticed in several US-American cities. Several thousand less expensive units had been on the market. Despite profit restrictions these housing were “[…] more expensive than the tenements occupied by poor and working-class people […]” (Stone, 2003, p. 4), because costs for construction had to be financed out of rents. As a consequence “[…] residents were mostly moderate to middle income […]” (Stone, 2003, p. 4).

The history of housing and social reform of the United States in the era before World War I is characterized by rapid immigration and urbanization because of an expanding economy and by high limitations in housing issues in comparison to developments in Europe. Housing reforms were initiated by the bourgeoisie which was afraid of “[…] destabilizing consequences of the new, alien mass working class” (Harloe, 1995, p. 61). This fear appeared to be groundless, because destabilizing “[…] pressures were relieved by […] upward mobility in an expanding urban and industrial system” (Harloe, 1995, p. 61).

But from where did the increasing fear of destabilization, as well as a strong dismissal and fear of slum arise? The reasons can be found in the 18th and 19th century. At this time an explosion of immigration in cities like New York, Chicago or Boston occurred. This enormous growth and concentration of population led to an unstructured urban growth accompanied by insanitary housing conditions and insufficient infrastructure. Fears arose, because high criminality and epidemics threatened the social stability (Fassmann, 2006, p. 2). In times of extensive urban development, these fears were completed with economical self-interest of the real estate industry. In the broadest sense government got involved too, because they “[…] worr[y] that the slums [could] spread and might take the cities down with them [...]” (Von Hoffmann, 2008, p. 8).

Interestingly, the first housing and planning actions were taken in New York and had a severe influence on many other cities in the United States (Harloe, 1995, p. 55). In the beginning of the 19th century New York was already a major urban centre, but took off in urban and industrial growth after the 1860s. Because of the booming economy urban population grew explosively in the second half of the 19th century. New York’s population grew from about 60.000 in 1800 to 2.7 million in 1890. The rapid increase was concentrated in the North Atlantic and North Central states and was fed by immigration. As a consequence and because of missing housing regulations, New York had to face a growing slum population and fear by the middle class (Harloe, 1995, pp. 55).

These effects of an unregulated liberalism led to several actions. Chicago and Boston were among the first innovators that provided a new social organization. In 1901, the City of New York established the ‘New Law’ which included a building permission and its control, as well as an eventual punishment because of noncompliance. Basic standards, for instance areaways, running water and sanitary facilities were set in the New Law. In 1913, Edward Basset constructed a common scheme to regulate land utilization by implementing building and usage utilizations. Thereby, Basset developed the first zoning code which had been adopted as the ‘New York City Zoning’ in 1916 (Fassmann, 2006, p. 3)

Although a “[…] great distaste for anything that would involve more than a very limited regulative role for the state” characterized this period, the government of New York recognized the necessity of a regulative instrument to solve the social and urban crisis in the city. In 1900 the Tenement House Commission was established. This institution was led by secretary Veiller who played an important role in positioning the Tenement House Commission as the basis for a housing reform. Veiller distinguished himself as a pragmatic and realistic actor who “[…] concentrated on what was immediately possible. This was regulation […].” (Harloe, 1995, pp. 58). Over the course of time more innovative improvements in regulation have been made, such as land use zoning that was first instituted in New York City in 1916 (Harloe, 1995, p. 59). The main objective of zoning was improving the affordability of housing by controlling land values. Reality looked differently, because zoning was used “[…] by business and the middle class as a way of preserving high land values and protecting their own residential and commercial areas from […] housing for the poor” (Harloe, 1995, p. 59).

To conclude the pre-war period, tenement house reform and improvement of housing in the pre-war era took a very low position of the policies in the United States and was at best a marginal aspect. Social rented housing was not seen as a potential solution to the mass housing of the working class (Harloe, 1995, p. 67). Apart from a few socialists, activism among the working class was quite low. The reason for the slight pressure of the working class can be found in the circumstance that American workers earned definitely more than European workers and were therefore able to afford private market housing. That also explains the fact that most of social housing, which was constructed before 1914, had been occupied by a wealthier stratum of the working class and lower middle class. These groups can be identified as “[…] the main beneficiaries of social housing [...]” (Harloe, 1995, p. 67), also beyond the pre-war period. Furthermore, cheap suburban land was available and transport systems developed rapidly in the United States (Harloe, 1995, pp. 59).

2.1.2 Interwar Period

The interwar period was even more characterized by an enormous dynamism of the North American economy. This increased the already mentioned fact that the working class became quite well-off. As a consequence, working class and lower middle class households demanded primarily housing on the private market (Harloe, 1995, p. 133). A huge housing boom occurred, as barley has observed before.

Although social housing remained marginal compared to the private rental housing, “[...] interest in social housing in the US did not disappear entirely in the 1920s.” (Stone, 2003, p. 6). As explained before the idea of cooperative residential neighborhoods existed in the United States already before World War I and even enforced in the interwar era. The highlight of this vision can be dated with the limited-dividend housing law (the so called “Mitchell-Lama”) which was passed by the State of New York in the late 1920s. This law made sure that, among other things, cooperative residential neighborhoods (the “coops”) for moderate-income and middle-income people got supported (Stone, 2003, p. 6).

Coops were mainly a reaction against eviction and slumlords (http://www.alexisrobie.com) and a visionary attempt to escape the squalor of mass-housing and to improve living conditions. Established by the Amalgamated Clothing Workers in 1928 the Workers Cooperative Colony in Bronx was one of the first coops in New York (Stone, 2003, p. 6). The community predominately consisted of immigrants who worked in the garment sector and followed a communist vision of cooperatively owned apartment complexes (http://artsake.massculturalcouncil.org). The physical condition of construction was inexpensive and pragmatic. Nevertheless the focus was on a family-friendly environment and community interaction. For these purposes high-rise buildings with large windows were arranged around a communal public space which was characterized by green spaces, paths, gardens and fountains (http://www.alexisrobie.com).

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Figure 2: Amalgamated Housing Cooperative in Bronx

(Source: http://www.alexisrobie.com)

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Figure 3: East River Housing Corporation in East Village, New York City

(Source: own picture)

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Figure 4: East River Cooperation in East Village, New York City

(Source: own picture)

It is important to emphasize that despite the vision of an affordable and community-based neighbourhood, cooperatives were mostly only affordable to the well-off working class. Although the coop-vision was very popular and successful in former times, most of the projects had to face severe challenges. “[...] [S]ubletting and turnover tended to undermine the socially oriented philosophical foundations [...]” (Stone, 2003, p. 6) and caused numerous forecloses of coops.

Besides the cooperative vision of the 1920s the following years, more precisely the 1930s, were deeply influenced by the Great Depression whose start is dated with “[...] the collapse of the New York Stock Market in autumn 1929 [...]” (Harloe, 1995, p. 150). In context with social housing policies this period showed the development of a permanent public housing program for the first time. Although the focus of the housing policy of the United States lied in these days on home ownership, one major exception got noticeable, namely public housing. This concept differed clearly in financing, development, ownership and occupancy from conventional housing concepts (Stone, 2003, p. 6).

When President Franklin D. Roosevelt was elected in 1933, “[t]he need for work, rather than the need for housing, was the dominant concern [...]” (Harloe, 1995, p. 200). Roosevelt argued that a continuing and new depression could only be prohibited by restructuring the economy. A major public works program, called ‘New Deal’, was established to create demand and provide work for boosting the economy of the United States in particular (Stone, 2003, p. 6). Roosevelt did not focus on the need for public housing in general, he rather argued that “[...] public housing construction could make a minor but useful contribution to unemployment relief [...]” (Harloe, 1995, p. 199). Anyhow, this program was supported by housing reformers who expected “[...] federal resources for the production of public housing for low-income families [...]” (Stone, 2003, p. 6). This expectation should be fulfilled already in the same year and modest public work funds had been defined to subsidize the construction of low-cost housing. Roosevelt’s legislation occurred mainly with regard to slum clearance (Stone, 2003, p. 6) and boosting the economy. The focus definitely did not lay on spatial planning and sustainable treatment of the environment (Fassmann, 2006, p. 4).

In 1934 the National Housing Act was adopted and the Federal Housing Administration (FHA) was established. This institution should be in charge of allocation of federal mortgage insurance (Von Hoffmann, 2008, p. 5). The implementation of FHA came along with efforts “[...] taken by the federal government to reform the banking and mortgage finance system” and to save the private housing market (Harloe, 1995, p. 191).

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Table 3: United States’ Housing Policy Timetable – Interwar Period

(Source: www.hud.gov. Own illustration)

According to John Mollenkopf, the first public housing developments were constructed by the government in 1936. The efforts in establishing a public housing program and the National Housing Act of 1934 built the basis for the United States Housing Act of 1937 which declared that local housing authorities “[...] would have complete responsibility for developing, owning and managing projects, with the federal government providing capital financing and regulatory oversight [...]” (Stone, 2003, pp. 6):

SEC. 2. DECLARATION OF POLICY AND PUBLIC HOUSING AGENCY ORGANIZATION.

(a) DECLARATION OF POLICY.—It is the policy of the United States—

(1) to promote the general welfare of the Nation by employing the funds and credit of the Nation, as provided in this Act—

(A) to assist States and political subdivisions of States to remedy the unsafe housing conditions and the acute shortage of decent and safe dwellings for low-income families;

(B) to assist States and political subdivisions of States to address the shortage of housing affordable to low-income families; and

(C) consistent with the objectives of this title, to vest in public housing agencies that perform well, the maximum amount of responsibility and flexibility in program administration, with appropriate accountability to public housing residents, localities, and the general public;

(2) that the Federal Government cannot through its direct action alone provide for the housing of every American citizen, or even a majority of its citizens, but it is the responsibility of the Government to promote and protect the independent and collective actions of private citizens to develop housing and strengthen their own neighborhoods;

(3) that the Federal Government should act where there is a serious need that private citizens or groups cannot or are not addressing responsibly; and

(4) that our Nation should promote the goal of providing decent and affordable housing for all citizens through the efforts and encouragement of Federal, State, and local governments, and by the independent and collective actions of private citizens, organizations, and the private sector.

(b) PUBLIC HOUSING AGENCY ORGANIZATION.—

(1) REQUIRED MEMBERSHIP.—Except as provided in paragraph (2), the membership of the board of directors or similar governing body of each public housing agency shall contain not less than 1 member—

(A) who is directly assisted by the public housing agency; and

(B) who may, if provided for in the public housing agency plan, be elected by the residents directly assisted by the public housing agency.

(2) EXCEPTION.—Paragraph (1) shall not apply to any public housing agency—

(A) that is located in a State that requires the members of the board of directors or similar governing body of a public housing agency to be salaried and to serve on a full-time basis; or

(B) with less than 300 public housing units, if—

(i) the agency has provided reasonable notice to the resident advisory board of the opportunity of not less than 1 resident described in paragraph (1) to serve on the board of directors or similar governing body of the public housing agency pursuant to such paragraph; and

(ii) within a reasonable time after receipt by the resident advisory board established by the agency pursuant to section 5A(e) of notice under clause (i), the public housing agency has not been notified of the intention of any resident to participate on the board of directors.

(3) NONDISCRIMINATION.—No person shall be prohibited from serving on the board of directors or similar governing body of a public housing agency because of the residence of that person in a public housing project or status as assisted under section 8.

(Source: United States Housing Act of 1937 as Amended by the Quality Housing and Work Responsibility Act of 1998 as of 3/2/1999).

The above citied United States Housing Act of 1937 makes clear that local housing authorities have to target the very poor, but in reality the local agencies have the control over “[…] where they would build and whom they would accept […]” (Stone, 2003, p. 7). It is possible to generalize that local housing authorities targeted initially on “[…] white families consisting of two parents and children [...]” (Stone, 2003, p. 7). Reality showed again that the least well-off households weren’t able to afford public housing. This circumstance finally led to a changed role of local authorities, where the “[…] standard of new local authority housing was reduced, partly in order to produce rents that could be afforded by poor families [...]” (Stone, 2003, p. 7).

To summarize, in the interwar period first efforts for a permanent public housing program in the United States can be found. With the passage of the National Housing Act of 1934 and the United States Housing Act of 1937 structure and professionalism were implemented. For the first time in the history of the housing policy of the United States “[s]ocial housing began to become routinized, bureaucratized and professionalized [...]” (Harloe, 1995, p. 141).

2.1.3 Post World War II

Although the United States did not suffer from bombing, they were also faced with housing shortages after World War II caused by the ravages of war. As already mentioned, the housing policies of the United States aimed primarily at private ownership. This didn’t change in the period after World War II. Suburban homeownership got extremely subsidized and under the keyword “[…] “homes for heroes” […] millions of modest single-family, owner-occupied houses sprawl[ed] across the countryside […]” (Stone, 2003, p. 7). An additional boost to the private housing industry contributed the ‘GI Bill of Rights’ which included loan guarantees for veterans to support buying their own home (Harloe, 1995, p. 269).

However, the federal public housing program, which came into effect with the United States Housing Act of 1937 was officially to be continued. Although the Housing Act of 1949 is called weak and a false dawn for public housing (Harloe, 1995, p. 272), it confirmed the efforts of a permanent public housing program. The adaption of the former Housing Acts introduced the so-called urban renewal program, which defined that no new public housing was allowed to be constructed, besides it would replace “slum” housing (Stone, 2003, p. 8.). It gets clear that the national policy of “urban renewal” meant enforcement and rehabilitation and was based on the idea of slum clearance (Von Hoffmann, 2008, p. 1 and 12). That is the reason why the Housing Act of 1949 became known as a program of “[…] removing socially and racially undesirable groups from downtown areas […]” (Harloe, 1995, p. 271).

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Table 4: Housing Policy Timetable of the United States – Post World War II

(Source: www.hud.gov. Own illustration)

With regard to the above-mentioned social and economic backgrounds, the renewal program of the 1950s is more understandable. As a part of slum clearance, inner-city public housing continued to expand in the 1960s and was characterized by “[…] large estates of monolithic blocks of flats, often of dubious quality design and construction [...]” (Stone, 2003, p. 8). The expansion of public housing carried with it so called ‘clearance projects’ which “[…] demolished large areas of America’s urban neighborhoods for new public housing […]” (Von Hoffmann, 2008, p. 1). A further negative connotation could be observed, namely the increase of low-income and non-white families in public housing which unfortunately led to a stigmatization and marginalization of subsidized housing (Stone, 203, p. 8).

The late 1950s and early 1960s were also influenced by a significant opening towards private sector involvement in context with development and ownership of housing for low-income households. In 1954, federal government and private parties already came together and entered into negotiations to provide housing for low-income households. These parties had to assure that they would provide housing with “[…] certain standards to households with particular characteristics for a specified number of years [...]” (Olsen, 2001, p. 5). The opening towards private sector involvement shows the different understanding of social housing under the democratic administration. Subsidized low-income housing looked more like an “[…] assistance to the private sector which was ideologically more acceptable [...]” (Ball and Harloe, 1988, p. 59).

The Housing Act of 1959 established the so-called Section 202 Program initially for senior citizens, then in 1964 also for non-elderly disabled people (Stone, 2003, p. 9). The main instrument of the Section 202 Program was the provision of long-term federal loans at below-market interest rates exclusively to non-profit institutions. As a result, an increase in numbers of specialized non-profit organization took place.

Over the years, the Section 202 Program became very successful in the United States and a best-practice example for privately-owned social housing. Furthermore, the United States’ housing policy opened up more and more toward for-profit subsidized housing and initiated lucrative opportunities also for profit-motivated developers (Stone, 2003, p. 9). This new direction of housing policies continued and made direct subsidies and attractive tax incentives to private developers one of the “[…] principal mechanism in the US for production of housing for low and moderate-income people […]” (Stone, 2003, p. 9). An average number of 200.000 social housing units per year were built from 1969 to 1983. Whereby, from 1970 to 1973 a peak of 300.000 social housing units per year was achieved in the United States. But the legal framework also included a so-called ‘expiring use restriction’ which contributed to the boost of subsidized housing construction. This restriction defines that developers are allowed to opt out and to convert subsidized housing into unsubsidized housing after 20 years (Stone, 2003, p. 10).

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