In Defense of Rent Control and Rent Caps (Part II of II)

 

Via Boston Globe

Yesterday, we posted the beginning of Duncan Kennedy’s testimony before the Massachusetts State Legislature’s Joint Committee on Housing. Below is the second half of the testimony.

Duncan Kennedy –

Claim 3: State provision of more section 8 certificates and subsidized affordable projects can resolve the housing crisis.

More section 8s and more rent-restricted affordable subsidized units could in theory have a major impact on the housing crisis. But there is no conceivable way that can happen in practice. Growing income inequality means upper income demand for housing grows much more quickly than lower income. Upper income buyers bid up prices in order to expand their share of the available stock. Exclusionary zoning closes both upper income and affordable units out of the suburbs (in spite of our ineffectual inclusionary regime). At the same time, it shifts upper income demand back toward the older inner ring city neighborhoods.

The crisis generates displacement and shelter impoverishment (skyrocketing rent/income ratios) through a downward squeeze. The rich expand their neighborhoods to adjacent less wealthy areas pushing residents into the next area down the chain. Or they jump into well located lower income inner city areas forcing residents to crowd into adjacent low rent areas. The crisis now affects the whole lower half of the income distribution.

To reverse the crisis, even just to stabilize the current disastrous situation, would require subsidies, section 8s and affordable construction, to the tune of hundreds of millions or even billions of tax-payer dollars directed at the middle and no longer just the lower end of the chain. Rent control, either caps or a full regulatory program, allows localities to defend themselves against these market forces. They can tailor their response to their local market conditions and in many situations turn them to their advantage. No new taxes required. The innovative legislation being considered in Massachusetts permits them to increase the supply of affordable housing targeted to their local conditions without calling for massive new subsidies from the state.

Claim 4: Income eligibility tests for rent controlled and capped units are a good idea.

Requiring proof of low income status for eligibility to have rent capped would be counterproductive because it would cause landlord discrimination against the very people the bills area trying to help. It is already documented that a large percentage of section 8 certificate holders, and disproportionally African Americans, experience discrimination from landlords who don’t want to rent to them at uncapped fair market value rents. In the midst of a crisis of escalating rents, a tenant who qualifies for the cap is obviously not as good a bet for the landlord as a tenant who does not.

In building-based rent control, an income eligibility requirement would mean more units available for income qualified applicants but it would also risk stigmatizing residents and whole buildings. The better response of H3924 is to authorize anti-displacement zoning so that localities can exclude upper income neighborhoods. The remaining reduction in units going to low income tenants serves the by the now universally recognized policy goal of mixing income groups rather than concentrating poverty.

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In Defense of Rent Control and Rent Caps (Part I of II)

Duncan Kennedy –

Via Boston Globe

The Massachusetts State Legislature’s Joint Committee on Housing is currently considering two bills that would revive rent control in the state. The first bill caps rent increases for not-owner-occupied residential housing at the CPI not to exceed 5%, with an income eligibility proviso. The second much more ambitious bill authorizes localities to choose among a menu of options to create their own version of full rent control. The options included fixing rents subject to increases for capital improvements, controlling condo conversion, good faith eviction requirement and zoning to deal with market variation within the locality.

On January 14, 2020, I offered testimony in support of the bills. Rent control has already been revived in Oregon, California and New York and in Massachusetts it is the focus of intense grass roots neighborhood activism particularly among the low income East Asian and Latina/o communities. At the hearing, they showed up in mass and testified in moving detail to the devastating effects of the crisis on individuals and neighborhoods.

What was absent, and the gap I tried with a fellow academic to fill, was a head-on attack on the industry arguments against the bills. Their arguments are of course rationalizations of their economic interest. But they make serious claims about consequences for the public interest and for supposed beneficiaries as well. Elected legislators, alas, are responsive both to the massive money spent lobbying against rent control and to some extent in good faith to the industry arguments. My goal, as laid out in the edited testimony we’re publishing today and tomorrow was to supplement not to displace the narration of blatant injustice and the invocation of a human right to decent housing with arguments in the policy language of the policy makers.

I wanted to post my testimony here because I think of it as law and political economy, in the particular tradition I work in, which might be called post-Marxist critical legal studies. It starts with groups led by elites, with strategies based on shared material and ideological, or “ideal” interests. They co-operate in social production and reproduction and compete over the distribution of stakes that are both material and “ideal.” Relations of domination and subordination are pervasive. The stakes of the game include the rules of the game, including prominently law. In this tradition the goal is not just to grasp the way law functions in struggles but also to push (humbly, uncertainly) on the side of emancipation or liberation or social justice.

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Exploitation Entrepreneurialism

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

Mehrsa Baradaran–

Keeanga-Yamahtta Taylor’s Race for Profit is an essential read not just for anyone interested in racism, housing segregation and post-Civil Rights era racial politics, but for anyone interested in understanding the American economy. It is impossible to understand contracts, property deeds, government guarantees, homeowner’s associations, or lending without knowing how each of these building blocks of the market can be used for race-based exploitation.   Taylor describes the relationship between exploitation and inclusion as real estate players shaping government policies “in ways beneficial to the industry and not the public.” Throughout the book, Taylor comes back to further refine her exploration of exploitation that differentiate and contrast her theory from other theorists who link exploitation to the higher prices, higher interest, or worse terms offered to Black homeowners.

As I highlight in my book, the definition of exploitation was pivotal in Alan Greenspan and President Nixon’s rejection of claims for reparations. Greenspan explained that because lending in segregated Black neighborhoods was “higher risk,” the lender had to charge more in interest and thus claims of exploitation were unjustified. Whether this was a cynical rhetorical move or not, this limited view of exploitation was adopted by Nixon and most administrations thereafter and was used to block remedial demands to rectify unequal housing. Taylor’s definition of exploitation is both more refined and more expansive. She finds exploitation in the government-guaranteed avoidance of risk in lending to and insuring low-income black buyers and exploitation in government programs that targeted Black homeowners with products that produced more debt rather than wealth.

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Addressing Race and Gender Inequities at the Root of Housing Injustice

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

Rasheedah Phillips–

As Keeanga-Yamahtta Taylor demonstrates in Race for Profit, housing exclusion, instability, and segregation are all racialized in nature, and sewn into the very fabric of American institutions, policies, and value systems. During the height of redlining in the mid-20th century, for example, a single black household in a middle-class area could make the whole neighborhood “risky” for mortgage loans in the eyes of the federal government. Black families – prohibited from buying homes in the suburbs in the 1940s, 50s, and into the 60s by the Federal Housing Administration – gained none of the equity appreciation that suburban whites gained over that crucial period.  Denied mortgages, Black people were often involuntarily driven into the rental housing market, where they faced ever more scarcity and less affordable rental housing.

Today, more than fifty years after the passage of the Fair Housing Act of 1968’s prohibition against housing discrimination, we find that exploitive real estate practices and the inequities that flow from them are not merely artifacts of history. Instead, these inequitable practices, particularly in the rental context, continue to show up in any number of permutations. They may appear as realtors showing Black renters fewer options (a 2013 study by the Urban Institute and HUD for example showed that Black renters saw about 11 percent fewer rental units than others). It may appear as “exclusionary zoning” practices that discourage density and multifamily buildings in wealthier, whiter areas. It may take the form of tenants with housing choice vouchers unable to rent in higher income neighborhoods, causing a concentration in so called “low opportunity” districts.

Through my work as a housing attorney, I’ve seen the continued impact of structural housing injustice on low-income tenants, particularly for Black women in Philadelphia, the site of much of Taylor’s powerful book. Although the focus in Race for Profit is on the role of systemic racism and predatory inclusion in the context of home ownership, the aftermath of those failures has led to exploitation in the rental context. Below, I focus on one issue – eviction records – and highlight some large-scale and individual approaches to ameliorating the problems Taylor encourages us to confront.

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Predatory Inclusion: A Long View of the Race for Profit

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

K-Sue Park–

The ascending slope of our current housing crisis is a good vantage point from which to think about Keeanga-Yamahtta Taylor’s new history of the federal response to an earlier point of crisis: she gives us reason to reconsider the role of the state in historic housing inequality, and new tools for demanding systemic change from the government going forward. At its core, Race for Profit is a rich and dense account of the government’s effort to finally include black people in its New Deal homeownership initiatives after decades of redlining erupted in riots over – among other grievances – housing starvation. In a literature that has focused principally on the history of racial segregation and formal exclusion through redlining, restrictive covenants, and racial zoning, Taylor instead highlights “predatory inclusion” as a principle mode of the American real estate market.

By focusing on this dynamic and the public-private partnerships that enabled it, her critique of the real estate system runs to its very foundations. As I elaborate below, this analysis resonates profoundly with other patterns of the real estate market’s development over a long historical arc—in particular, the government’s reliance on energies unleashed by incentives for private actors to accomplish public goals, its elevation of businessgrowth over social provision, and the way that real estate value continues to hinge on the race of the people present in a place, and to rise based on white presence and white desire.

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Symposium: Race for Profit: How Banks and the Real Estate Industry Undermined Black Homeownership

NB: This post is part of a series in our Race for Profit symposium. Read all posts here.

Keeanga-Yamahtta Taylor

In Houston’s upscale Galleria-Uptown neighborhood, the mall known simply as “TheGalleria” is, according to its website, “Texas’ largest and most luxurious shopping destination.” A local real estate website confirmed the value of the location, pointing out that housing values in the neighborhood sustained a “55 percent appreciation rate from 2005 to 2014.” The prize of rising property values was the promise to keep the neighborhood as white and middle class as possible.

In 2015, the Houston Housing Authority proposed building two hundred and thirty-three units of affordable housing in Galleria-Uptown, a neighborhood that is eighty-seven percent white. Swarming to the public meeting the way Texans flock to Friday night football, hundreds of mostly white residents packed public meetings to register, not just their disagreement, but their vehement opposition to building “affordable” housing units in their neighborhood. When a 281-unit apartment complex had been built two years earlier, there had been no outcry, but also no affordable units in that development.

White residents, two decades into the twenty-first century, have long perfected the art of talking about race by way of cues and codes to avoid talking specifically about Black or Latinx people. In this meeting organized to discuss the future of affordable housing in the Galleria district, residents complained about traffic, overcrowded schools, the construction costs of the project, and, of course, the potential effect on property values. But in a fit of frustration, one resident set aside time to write to the Department of Housing and Urban Development, and she wasted little time getting to the unvarnished point. Her opposition to the new, affordable development because it threatened to introduce “an unwelcome resident who, due to poverty and a lack of education, will bring the threat of crime, drugs, and prostitution to the neighborhood.” The woman writing the letter went on to extol her personal virtues as a hard worker, while disparaging those who she believed to were not, “I will fight very hard…before I give up that privilege and dignity to those who, either from lack of initiative or misfortune, don’t deserve to be [here].” These views may seem extreme in our era of coded and duplicitous double talk, but the sanctity of property value extracts a deeper truth that might otherwise remain hidden. Consider the comments of Galleria’s City Councilman, Greg Travis. His opposition to the affordable housing development that would bring Black residents to this white neighborhood was that, “People of different socioeconomic status sometimes have different values based on their socioeconomic status. Some people can afford things that other people cannot.”

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Racial Myths, Market Myths, and the Policy Roots of Predatory Lending in 1970s Chicago

Beryl Satter – 

9780674970953In The Color of Money and in the opening post of this Symposium, Mehrsa Baradaran challenges the notion that markets exist outside of political power. What she shows for credit policy, I have shown for housing policy, particularly in my book, Family Properties: How the Struggle over Race and Real Estate Transformed Chicago and Urban America.  Here I’d like to discuss a shocking example of governmental policies shaping “markets,” or, rather, supporting investors to extract wealth from segregated black communities: the Housing and Urban Development (HUD) Act of 1968.

In 1968, after rebellions following Martin Luther King, Jr.’s assassination finally focused Congressional attention, two laws were passed to address the problem of “the ghetto.”  First, the Fair Housing Act prohibited racial discrimination in the advertising, rental or sale of housing.  It included no significant enforcement mechanism.  Its solution to “ghetto” problems was to give those wealthy enough to move out the chance to do so.  “Fair housing does not promise to end the ghetto,” one senator admitted, but simply enables “those who have the resources to escape the… suffocating…inner cities of America.”

In contrast, the HUD Act attempted to address conditions within “suffocating… inner cities.” It created mortgage subsidy programs to help “lower income families in acquiring homeownership.”  It also reversed the workings of an earlier federal program that many felt had created ghettoes in the first place – the Federal Housing Administration (FHA)’s insured mortgage program.  Starting in the mid-1930s, FHA-insured mortgages had been denied to black or racially changing urban neighborhoods, thereby encouraging conventional lenders to similarly “redline,” or refuse to issue mortgages, in such areas.  In a major reversal, HUD specified that FHA-insured mortgage loans would be made in “older, declining urban areas.” Such areas need only be “reasonably viable” to qualify for FHA-insured loans.

The newly redirected FHA-insured mortgages were meant to spur the “resources…of private enterprise” to address the housing needs of “low income families.”  The HUD programs never acknowledged that racial segregation was unjust or even problematic.  Instead, they were built on the assumption that lending to blacks and Latinos was inherently risky. Those who needed protection were lenders, not borrowers.  HUD programs cosseted lenders active in what were euphemistically referred to as “certain neighborhoods”— that is, black, Latino, and racially changing ones — in ways so extreme that they damaged the very communities they were ostensibly created to help.

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The Racial Wealth Gap and the Question of Time Zero

Michelle Wilde Anderson

Each year teaching Property Law, I have taught many of the big cases and topics on race and property law, such as M’Intosh and Dred Scott; segregationist turbulence in rights of reasonable access; public accommodations law; racially restrictive covenants; the Fair Housing Act. I never quite had a cohesive idea about this—they each seemed formative.

Meanwhile, evolving case law and politics have made it clear that we still have a basic disagreement at the heart of American law and politics, and my students carry that question with them into class: On matters of race, did we reset the playing field of property to start a merit system where fair access to markets would govern? Did we create a new Time Zero—for instance, when LBJ signed the Fair Housing Act as a gesture of solace and appeasement seven days after Martin Luther King, Jr.’s assassination?

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Property Law as Poverty Law

Michelle Wilde Anderson –

I recently interviewed a man in a weakened rural town who makes sausages for a local meat packing business on the 3am shift. He told me about a homeless woman who had come to the meat shop one dark morning with blood-soaked hands. Delirious with cold and exhaustion, she had punched in the glass on an abandoned burrito shack to shelter from the cold rain overnight.

For her, housing and land still matter. The forces of weather and gravity mean that 100% of people need shelter, with a patch of dirt for it to stand on. More than ever, it seems that housing and land matter most for understanding poverty and rising inequality. An average of more than 550,000 people were homeless each night in 2017, and 6,300 people are evicted in the US every single day. I live in San Francisco, where just yesterday I passed by 40 or so tent shelters on sidewalks, plus two Lamborghinis worth at least $250,000. I’ll guess that those cars don’t spend their nights outside.

The 1L introductory Property Law course isn’t usually about how law helps protect money and drive poverty, but I think it could be. Teaching it as a class mostly centered on land helps it get there.

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