Keep looking for root causes, even when it hurts
Reporter Natalie Moore of Chicago public radio station WBEZ reveals in a detailed report that differences in the racial composition of Chicago neighborhoods appears to account for a shocking degree of difference in the value of otherwise comparable homes in Chicagoland.
■ The WBEZ reporting builds on academic research on the disparity, but also identifies individual case studies illustrating gaps that just don't make sense: Appraisals that appear to miss the rightful objective value by tens of thousands of dollars, and a gap of hundreds of thousands of dollars between comparable homes found in communities with different racial demographics.
■ Policies that nudge Americans toward thinking of (and treating) their homes as a household's biggest financial asset have a whole lot of pernicious side effects. One of those is to disproportionately depress the wealth of some people based on the color of their skin. It's not right.
■ There are obviously multiple root causes of this problem -- racism clearly being one of them. But we also can't deal honestly with the problem without acknowledging that we've built and preserved a whole lot of public policies that enshrine homeownership as a financial investment and that protect entrenched interests.
■ We treat new housing starts as a key financial metric (in no small part because construction represents more than 4% of the economy). With lots of cheerleaders (and policies like mortgage-interest deductibility), it's no surprise that Americans build bigger homes than most of the rest of the world.
■ Those incentives, though, do some real practical harm to other interests. The mortgage-interest deduction favors families with high incomes and expensive homes. Treating homes as investments to be preserved rather than "machines for living in" (in the words of Le Corbusier) leads to NIMBYism and contributes to obstacles to the supply of middle-density housing (also known as the "missing middle" problem).
■ And there is the undeniable aspect that anyone who owns an asset benefits from the scarcity of that asset (merely as a function of supply and demand), so the roughly 65% of households have an inherent and perverse incentive to oppose the construction of new housing (even if that housing is smaller or cheaper than their own) -- which makes it difficult to forthrightly address homelessness with solutions like the construction of tiny homes.
■ Which loops us back to the problem of neighborhood disparities: Those who benefit from real-estate booms tend to be those who already have wealth. The rich simply do get richer. That widens the financial gap between the housing-wealthy and those who are not, and perversely sets those with meager household wealth and real-estate equity at even greater odds with what might otherwise be desirable policies for expanding housing overall, if those policies enlarge the supply of housing that would compete in the market with the housing other people already own -- and consider their biggest assets. (Households in the bottom half of the US income distribution have a median net housing equity of $89,000 -- versus $346,000 for the top 10%.)
■ Easy solutions are elusive, since these are complex problems with lots of contributing factors. But with median home prices breaking new records, there is no time like the present to examine the root causes of housing inequities and to consider what useful policies might contribute to disentangling the universal need to get people into housing from the good that comes from helping people to increase their household wealth.