Transcript Suburbs

Introduction
• Local governments exist at the
pleasure of the states
• Development of suburbs & cities not
‘accidental’ or ‘natural’
• What federal policies encouraged rise
of the suburbs?
• Why a history of poor being
concentrated in ‘central cities?’
Rise of The Suburbs: Federal &
Local Policies
• Post World War II Fed. Programs
– today, ‘metro’ area = lots of cities/suburbs
– most Americans now live in suburbs
– Homeownership largest source of wealth
• Counties’ and cities’ power over land use
– Zoning
– Demand for public services affects zoning
– Land use decisions generate revenue
Rise of The Suburbs: Federal &
Local Policies
LA County
Why so many
jurisdictions?
Why spread
over such large
area?
13m people
200 cities
Rise of The Suburbs: Federal &
Local Policies
What policies
encouraged these
development patterns?
Natural conditions
Market forces
Public policies
Rise of Modern Suburbs
• Consider when most metro areas were
booming
• Consider how wealth & opportunities from
boom times transfer across generations
Rise of Modern Suburbs
• Who got what, and why?
• How much did 20th century public policy
shape who has what now?
• How much did public policy shape what
regions look like today?
Federal Role in Rise of Suburbs
• 1) Homeownership increased with federal
assistance in the 1930s – 1950s
• Large Fed. role in Public and Private
Housing
– FHA lending criteria
• 1945 - 1960 2% of FHA loans to Blacks
– Realtor ‘code of ethics’ circa WWII
– Bank’s lending practices
– Racial deed covenants (unconst. 1948)
– Contemporary practices ??
Federal Role in Rise of Suburbs
• 1) Racist FHA, 1933 ‘detrimental effects’
•
•
•
•
•
•
•
•
•
•
1) English, Germans, Scotch, Irish, Scandinavian
2) Northern Italians
3) Bohemians / Czechs
4) Poles
5) Lithuanians
6) Greeks
7) Russian Jews of lower class
8) South Italians
9) Negros
10) Mexicans
Federal Role in Rise of Suburbs
• 1) FHA / VA loans
– disinvestment in central cities
– Federal rules give preference for single-family
detached homes
• rather than....
• “Safe” lending criteria biased against cities, and
people who remained in cities
2012
2010
2005
2000
1995
1990
1985
1980
1975
1970
1965
1960
1955
1950
% of Home loans FHA
45
40
35
30
25
20
15
10
5
0
Federal Role in Rise of Suburbs
• 2) Federal Highway Program
– 1956 “National Highway Defense Act”
• Federal subsidy for massive sprawl
• Cheap, distant land could be developed
• Nearly all $$ to Highways
– as opposed to ???
• disinvestment in central cities
Federal Role in Rise of Suburbs
• 3) Mortgage Interest Deduction
– Tax expenditure / “loophole”
– tool to direct spending to something
• credits for planting a crop (or not)
• credits for exploring for oil, R&D...
– How it works / what does it apply to:
• interest on home loans an ‘itemized’ deduction of
US taxes owed
• Lowers amount of income taxed
Federal Role in Rise of Suburbs
• 3) Mortgage Interest Deduction
• Example (fake):
– You earn $60,000 - 25% IRS tax bracket
– “standard” deduction = $6200
• you pay 25% tax on $53,800 if ‘standard’ ($13,400 fed taxes)
– If you itemize:
• deduct home loan interest, property tax, points
• bigger house = more debt = less tax paid!
• $10,000 in interest + $2,000 prop. tax = $48,000 taxable
income
– $12,000 in fed. taxes
– USA gives you $1400 p/ yr for buying a house
Federal Role in Rise of Suburbs
• 3) Mortgage Interest Deduction
• Tax expenditure = direct subsidy
– At the same income level, renters pay more in federal
taxes than homeowners
• using tax code to pay (wealthy) people to buy (really big)
homes
– ¾ of deductions go to HHs over $100K income; 1/3 to HHs over $200K
– Costs $70,000,000,000 per year
– about $1 trillion over next 14 years
Federal Role in Rise of Suburbs
Federal Role in Rise of Suburbs
Who gets rental
assistance:
Elderly
31%
Adults w/ children 33%
Disabled
23%
Federal Role in Rise of Suburbs
• 3) Mortgage Interest Deduction
• Are there other things we could spend $1 trillion
on?
• Other forms of housing?
– rental assistance
• What effects on demand for housing?
Federal Role in Rise of Suburbs
• 4) Federal ‘Open Housing’ Policies
– Fair access too late?
• 1962 JFK exec. order
• 1964 Civil Rights Acts
• 1968 Title XIII CRA (Fair Housing Bill)
– Not until 1970s that suburbs ‘open’ location
opportunity
• sort of, maybe....
• James v Valtierra
– USSC uphold CA referendum votes re: public housing
Race and the Rise of Suburbs, post
WWII
• Homeownership increased with federal
assistance post 1930s
• Rise in suburbs left old cities in decline
• Minorities & poor were left in older cities, older
suburbs
• 1955 - 40% of ALL housing starts were FHA / VA
– this is when contemporary suburbs were built
– Were these places ‘open’ too late?
– 2011: 27% of home loans (1st time buyers)
More recently
• Less affluent concentrated in
– (Older) suburbs, sections of older urban cities, rural
areas
• Many central cities making a comeback
– gentrification (Boston, SF, Seattle, NYC, DC, Chi.)
– less affluent renters forced out by market
• FHA / VA major lending source for minorities
– Part of Fed. stimulus plans; 40% of loans in 2010
– 27% of home loans in 2012 (1st time buyers)
Portland
Fragmentation
• New cities vs. traditional cities
• The Lakewood Plan
– Newer cities starting in the 1950s provided
fewer services
– Privatization and contracting for services
• Cities can be strategic
– for better or worse....
• specialized cities (Vernon, Industry...)
• Is this fair?
Fragmentation
• Recall the public choice model
– Cities as firms in competition
• For tax base
– Businesses
» That generate sales tax revenue
– Residents
» Who have limited service demands
• More places = more fierce competition
The Consequences of Metropolitan
Fragmentation
• Winners and losers
• Efficiency gains—providing services at a
lower per unit cost
• Inter-municipal inequality—differences in
social status and wealth
• Isolation of less affluent in major cities
• Some suburbs don’t get the good stuff
The Consequences of Metropolitan
Fragmentation
• Within a region:
– Person works in City A
• Generates tax revenue for City A
– City A zones out multi-family housing
• Impacts roads in City D, City E, County
– Person shops in City B
• Tax revenue, business go to City B
– Person lives in City C
• Sends kids to school, uses parks, roads, etc.
– City C has weak retail, commercial base
Regional/Metropolitan Government?
• Cities and counties may share some
local powers with regional governments
• Progressive reformers wanted
consolidation of local governments to
create more efficient economies of
scale
– rare
State and Regional Planning
Alternatives
• State growth management laws
– May define urban growth areas (UGAs)
• Limit development out of UGAs
– May require places have low income
housing
– Distribute infrastructure costs by impact
• Transportation impact fees, School impact fees,
park impact fees, fire impact fees, etc.
State and Regional Planning
Alternatives
• State growth laws
– Local impact fees
• What equity issues?
• Who should bear the costs of new development?
– existing residents / firms of where growth occurs?
– new residents / firms who locate in a place?
– what about neighboring places?
State and Regional Planning
Alternatives
• Regional revenue sharing
– “Winning” place doesn’t get all tax
revenue from new business
• Some % goes to pool shared across the region
• Lowers zero-sum, cut-throat competition
– Encourage attracting mix of businesses
and residences
Are we Better of Without Zoning?
• Pro: Market forces will lead to
competition and lower prices
• Market might not deal with true cost of
growth and development
• The Local Land Use Dilemma
– Consider what level of government
should regulate land use
Summary
• Federal and local policies have
shaped development of metro areas
• What equity issues?
• “Central” cities making a comeback
– gentrification
Summary: St. Louis Metro Area