The Effects of Market-Based Housing Reforms on Housing Affordability: New York 1990-2008

Since the 1980s, policies have increasingly encouraged housing provision by the private market. Programs to de-commodify housing such as rent regulations or social housing programs have gradually been terminated and replaced by policies to promote the delivery of housing through profit-making actors. Selling or demolishing social housing, liberalizing rents, or promoting homeownership have come to dominate the policy landscape, not just in Britain or the US, but also across many Western European countries. Programs such as the British Right-To-Buy, HOPE VI in the US, or the Dutch urban restructuring program are widely known, if only exemplary of this wider trend.

While political elites and free market advocates often claim market-based housing reforms to provide ‘general’ benefits and the basis for a ‘better functioning’ housing market, critical social science has pointed to the unequal effects that the promotion of private market housing can have. Relevant reforms might open up lucrative opportunities for capital accumulation in housing markets, but similarly undermine the ability of poor households to afford housing, particularly in attractive locations with high demand (Hodkinson, Watt & Mooney, 2013).

Systematic empirical evidence on the effects of market-based reforms on housing conditions has so far, however, remained surprisingly scarce. Gentrification research has given the first hints as to how the promotion of market principles heightens housing cost pressure on poor households and contributes to displacement from inner-city neighborhoods (Wyly et al., 2010). Our research takes this one step further by examining how market-based reforms have affected housing affordability on a city-wide scale and how this played out for different income groups.

New York City served as our research laboratory. We used the Housing and Vacancy Survey, a triennial public survey that covers housing and household characteristics. While the city’s housing market has historically been dominated by private market actors and a powerful real estate lobby, from the 1950s onwards, a number of redistributive programs have de-coupled housing, at least to a certain extent, from private market forces. New York developed a comparatively large and well-maintained public housing stock – by far the largest of all US cities –, relatively strict rent regulation in parts of the private rental market, as well as several subsidy programs to dampen rent levels in privately provided units. Certainly, these programs were far from able to “solve” the city’s long-standing housing crisis and New York has remained a city deeply divided by class, race and ethnicity, in which housing is particularly expensive and scarce. Still, relevant policies have been important in dampening housing costs of low-income New Yorkers and allowed (at least some of) them to afford housing in the city.

Since the early 1990s, however, a number of redistributive housing programs have been dismantled. While market-based reforms have not been a coherent strategy, and partly overlapped with new redistributive programs, overall, policies at federal, state, and city level have reflected greater market orientation. Programs for the subsidized production of units have been cut back, rent regulation has been liberalized and parts of the city-owned low-cost housing stock has been sold off (see our paper for a detailed discussion of relevant policy changes).

Our policy evaluation shows that already prior to the policy shift there was a lack of affordable housing in the city. The undersupply has, however, grown over the course of the reforms. In 2008, some 43% of all rental households in New York were confronted with an affordability problem, paying more than 30% of their income on rent; an increase by 2% since 1993. The share of households who pay more than 50% of their income on rent similarly increased, from 22.5% to 24.1% of all households. Even clearer is the analysis of affordability burdens by income groups: low-income groups, defined as the poorest 20% of all households, had the greatest affordability problems already in the past. For them, however, affordability has also deteriorated the most. Median rent-income ratios did not rise by more than 1.2 points for all income quintiles, except for the poorest 20%. For the latter, burdens increased as much as 9.4 points between 1993 and 2008. While poor households have thus been confronted with high housing costs for a longer term already, they have evidently felt the changing market structure and rising rents disproportionately (see Figure 1).

pic1

Figure 1: Rental housing affordability in New York, 1993-2008*
* Based on contract rent and total household income. See US Bureau of the Census (2008) for definitions. Source: US Bureau of the Census, Housing and Vacancy Survey, 1993, 2008. Authors’ own calculation.

The analysis of affordability among Black and Ethnic Minority Groups is further revealing. While Puerto Rican households have been able to improve their housing situation – largely due to the strong reliance on the existing public housing stock and comparatively favorable income developments – Black and Asian households have been disproportionately hit by rising rents. They are confronted with the highest increase in rent-income burdens among the groups considered, reflecting how class intersects with race as a discriminatory category in New York’s housing market.

Clearly, these results call into question the notion of generally beneficial consequences of market-based reforms in New York’s housing sector. Rather, they lend support to claims about unequal distributional consequences of promoting private market housing provision. Our analysis suggests that poor households have a much harder time finding an affordable place to stay in the city and are confronted with disproportionately greater difficulties to pay for housing than prior to market-based reforms.

These findings should be considered in light of current debates about mounting housing costs and affordability problems in urban centers, which have come to affect not only New York, but also other global cities such as London, Frankfurt, Amsterdam or Berlin. While there is growing attention on how these cities have become de facto unaffordable to people with limited financial resources, the political nature of the urban affordability crisis remains poorly understood and under-researched. Our findings suggest that more research should be directed to laying bare the distributional consequences of past and current housing policies and how they contribute to restructuring cities and urban space.

References:

Hodkinson S, Watt P and Mooney G (2013) Introduction: Neoliberal housing policy – Time for a critical re-appraisal, Critical Social Policy 33(1): 3-16.

Kadi, J and Ronald, R (2016) Undermining housing affordability for New York’s low-income households: The role of policy reform and rental sector restructuring. Critical Social Policy 36(2): 265,288.

Wyly, E, Newman K, Schafran A and Lee E (2010) ‘Displacing New York’, Environment and Planning A 42: 2602,2623.

 


This entry was posted in Environment, Inequality and Poverty, Welfare by Justin Kadi. Bookmark the permalink.
Justin Kadi

About Justin Kadi

Justin Kadi is a post-doctoral fellow at the Institute for European Urban Studies at Bauhaus-University Weimar. He holds an MSc in Urban Studies from the University of Amsterdam and New York University and a PhD in Urban Studies from the University of Amsterdam. His recent research focuses on housing policy and socio-spatial inequalities.

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