Blighted cities should give free housing to rich people?

One of the perks of being a software patent expert witness is that one gets to visit Wilmington, Delaware, where the Federal District Court hears disputes between corporate titans.  Walking and driving around the empty blighted downtown it occurred to me that it will likely be decades before most parts of the city could be revitalized as a place where people would voluntarily live. Without a sufficient core population of people with at least a middle class income there is no way for a supermarket to thrive. Without an array of businesses, there is no practical way for a middle class person to move into Wilmington and have the kind of city living experience that is available to a resident of Boston, San Francisco, New York, or Washington, D.C.

[Note that due to Delaware's niche in providing a safe legal home to America's corporations and banking services, plus presumably a reasonably efficient city government, Wilmington is not nearly as blighted as Detroit, for example. Middle class people commute into work here every day, but they also go home at night, resulting in a dead downtown.]

Our governments (federal, state, and local) spend a huge amount of money and energy helping poor people to stay poor in cities such as Wilmington. We provide free housing, free medical care, free food, etc. Our society also spend a lot of money to bring poor people to middle class areas, e.g., in Massachusetts where the state mandates a certain percentage of “affordable” housing in every town. and where children from poor areas rides buses, sometimes for two hours each day, to attend schools in richer areas.

But once a city falls below a certain level of prosperity it often seems to get stuck. Nearly all of the locals are now poor. There are few of the services available upon which middle class families would depend. The tax base shrivels to whatever percentage of federal Welfare transfers can be harvested by the local government, e.g., taking a percentage of Medicaid spending through a property tax on a doctor’s office.

For an attempted quick break-out, why not offer 10 years of free housing to the first 5000 families willing to move back into a blighted city? The conditions would be that the family must have at least 1.5X the median household income of the state and send their children to the same schools that are available to other city residents (i.e., public schools, charter schools, and private schools if a voucher program is in place). That critical mass of 5000 families would be sufficient to support the range of businesses necessary to attract the next 5000.

The success of cities such as San Francisco, Boston, Chicago, et al., proves that middle class Americans want to move back into the cities. The continued failure (in terms of desirability for middle class residence) of cities such as Detroit, Baltimore, Buffalo, Wilmington, et al., proves that middle class Americans don’t want to move in by themselves.

22 Comments

  1. sam

    February 3, 2014 @ 4:42 pm

    1

    Doesn’t it really boil down to schools? The middle class moved out because they could no longer make sure their kids avoided exposure to lower class kids. In a lot of cities rich enclaves remained because the rich can simply send their kids to expensive private schools.

    Any sustainable re-gentrification scheme has to find a way to allow for de facto income segregated schools. I doubt that’s feasible under current laws.

  2. philg

    February 3, 2014 @ 4:47 pm

    2

    Sam: Public schools received about twice as much funding as private schools (see http://www.mackinac.org/1118 for example). So in theory it should be possible for a public school to be better than a private school. And anyway the program doesn’t need to attract every family with 1.5X a state’s median household income, only 5000 such families. Surely there are some families that earn 1.5X the median income and want their kids to attend public schools (or whatever other schools are available in a city).

    [And separately, it might make sense for a politician trying to raise taxes to refer to a family at 1.5X the median income as "rich" but I don't think that is a fair characterization.]

  3. sam

    February 3, 2014 @ 4:56 pm

    3

    I don’t think it’s a matter of school funding or even necessarily of instruction quality. The physical school building upper middle class people will willingly send their kid to can’t have any significant number of tough poor kids in it. It has to be a segregated environment of middle class kids. That’s not politically viable at present.

  4. philg

    February 3, 2014 @ 5:00 pm

    4

    Sam: I would believe you if I didn’t look across the street at the public high school here in Cambridge. At $27,000+/year in per-student funding it is far more expensive than all but a handful of private schools worldwide (and in fact the true cost is higher because this $27k figure does not include the capital costs of the building and campus).

    The school contains “tough poor kids” (Cambridge offers free housing to families with children as long as the parents don’t work; they wouldn’t be considered “poor” if you counted the value of the housing ($25,000 to $60,000 per year) but by official standards they are poor) and also a fair number of children whose families have an income that exceeds the 1.5X median state income threshold that I posited.

    It is true that there are more upper middle class children in the suburban school systems, but there are plenty in Cambridge.

  5. Anonymous

    February 3, 2014 @ 6:34 pm

    5

    What about crime? Crime in Wilmington is much higher than in its suburbs. Do you think people are willing to trade personal safety for lower taxes?

    http://www.neighborhoodscout.com/de/wilmington/city-center/#crime

  6. Fazal Majid

    February 3, 2014 @ 7:54 pm

    6

    Presumably the middle class left Wilmington for reasons other than affordability. Making housing more affordable is not going to resolve those root causes, except perhaps in making private school affordable to those who no longer need to pay for housing, assuming public schools were the problem in the first place.

  7. John Klein

    February 4, 2014 @ 7:45 am

    7

    Philip: please take a look at http://midtowndetroitinc.org/newsroom/latest-news/midtowns-boom-shows-no-signs-slowing-down. The area around the university is actually booming. But my own observation is that people with kids don’t want to move in because of the schools.

  8. Mark

    February 4, 2014 @ 9:23 am

    8

    The problem we have (Virginia) isn’t the poor kids being schooled with rich kids or even the caliber of school, it’s the fact that our larger cities taxed the citizens right out of the city.
    With high real estate taxes, high utility costs and even higher personal property taxes, many folks left the city simply over the cost of living there. Couple those reasons with crime and heavy traffic and you see the exodus to the suburbs, in mass.
    And Phil, I can only imagine the squeal you’d get from liberal-types when you offered the above average middle-classer free housing for ten years.
    You have a great idea, but it would take an emotionless society for it to be accepted.

  9. Alex Masa

    February 4, 2014 @ 11:20 am

    9

    @philg “why not offer 10 years of free housing to the first 5000 families willing to move back into a blighted city”

    Because having the city, the state or the federal government “offer” things, including what you’re proposing, is an open invitation to abuse, corruption, bad management, cronyism and so on. May I also remind you that the public authorities don’t have their own money but only the money they confiscate – excuse me, I meant to say obtain through taxation – from the people they govern? I am completely against somebody “offering” my money to others.

  10. philg

    February 4, 2014 @ 1:08 pm

    10

    Folks: The arguments about crime, taxes, etc. all would make sense except that middle class people did move back into many cities that had terrible crime, high taxes, schools, etc. After they moved in the crime rate fell, the test performance of children in schools improved (unclear if the schools were actually doing a better job!), and the overall quality of life in the city improved enough to attract more middle and upper-middle class families. Again, the goal is not to attract every middle class family in America. It is to attract enough that the city can become self-sustaining going forward.

    Alex: I can see the argument that it doesn’t make sense for government to give out free housing. However, we already have that as an entrenched policy and in fact the government has been providing free housing to multiple generations of some families for many decades. I was simply pointing out that for an entity such as a city government that depends on collecting taxes it might make financial sense to give away 10 years of free housing to a critical mass of upper middle class families that can restart a city as a place where people who pay more taxes than they consume in services will wish to live.

  11. CHenry

    February 4, 2014 @ 10:35 pm

    11

    Instead of subsidizing the affluent to live in areas where there are few amenities to make life there attractive, the things that should be subsidized are the amenities themselves. One significant amenity is convenient, clean, fast, and safe transportation from neighborhoods to other areas where there are offices. Tram lines, subway/metro and surface rail that allows the practical choice of owning fewer cars per household. Reducing taxes on businesses that open in these areas that make living there more convenient: food markets, dry cleaners and shops that cater to residential owner’s needs. The “new urbanism” in the old city. If the cities are going to subsidize anything, it should be secure municipal garages for those looking to keep a vehicle off the street with discounts to those who purchase monthly mass transit passes. Encouraging mixed-use development and building safe municipal parks,go a lot farther toward generating attractive neighborhoods than giving away subsidized leases. If anything, there should be stricter limits on the numbers and density of properties eligible for Section 8 support in every neighborhood. High density of Section 8 residences invariably results in deteriorating neighborhood conditions and chases off potential residents who are earners that pay taxes.

  12. CHenry

    February 4, 2014 @ 10:56 pm

    12

    I suppose the larger question is why a housing subsidy should be sufficiently attractive to someone who already has the means to choose to live in a neighborhood that has better housing stock and amenities than do the poorer neighborhoods lacking both in amenities and good income-earning residents? If you have the money, choosing to live where houses are better, shopping, schools, roads, rail service, policing and municipal services are better seems so obvious as to be hardly worth asking.

  13. Bob

    February 5, 2014 @ 11:44 am

    13

    If we hold up cities such as NY and San Francisco as success stories in attracting people back to their core areas, it might also be instructive to note that none of them offered any free housing to middle income earners; quite the opposite; the rules for affordability were loosened except for those below poverty line.

    I’d guess that the problem in so many smaller cities is the lack of economic vibrancy, job offerings and cultural amenities, something that is not easy to fix. For every San Francisco there are the Stocktons and San Bernadinos, for every Chicago there is Detroit, St Louis, Gary, etc.

  14. Anonymous

    February 5, 2014 @ 9:53 pm

    14

    nbsp;Zillow.com shows that the cost of housing in Wilmington is low, very low. The same site also shows that, with one exception, the local schools are terrible. Educated middle class families are not going to be motivated by a small economic advantage (free housing in a cheap city) that requires them to sacrifice their kids education or their safety. I don’t know about other cities, but places like NYC always had some rich/educated people, good restaurants, a few good schools…etc. It was the expansion of that existing class of people that created the current situation, not the arrival of a few “pioneers” willing to endure crappy conditions in the hope of a better future.

  15. philg

    February 6, 2014 @ 4:20 pm

    15

    Anonymous: I’m not sure that 5000 families qualifies as “a few” pioneers in a town with a population of 71,000. There are plenty of jobs in Wilmington (Delaware’s unemployment rate is below the national average) and there is plenty of money, as evidenced by people paying $200,000 to $500,000 for newly built houses that are as much as a 30-minute drive away. Wilmington is certainly not as dangerous or crime-ridden as New York, Boston, and Washington, D.C. were in the 1970s.

  16. Anonymous

    February 6, 2014 @ 6:58 pm

    16

    Philg, if your proposal has merit, the rich people moving to Wilmington will be rewarded by a dramatic increase in the price of their housing after a few years (ask any New Yorker who bought a co-op twenty years ago). Getting free housing may deprive them of that benefit.

  17. philg

    February 6, 2014 @ 7:11 pm

    17

    Anonymous: My proposal doesn’t have anything to do with whether or not individuals can make money buying or selling real estate (though presumably existing property owners would benefit if their part of Wilmington were gentrified). The proposal is about building a base of upper-middle-income citizens from whom taxes can be collected by the city government and doing so with the counterintuitive method of offering free housing precisely to those who do not need free housing.

  18. Anonymous

    February 6, 2014 @ 10:15 pm

    18

    Philg: what I was trying to say is that if your proposal is a good one, those upper-middle income citizens would not need the incentive of free housing, they will do far better purchasing a home in Wilmington.

    Long term, this is my opinion, cities are going to be the place to live. Far more efficient and more interesting. I just don’t know if Wilmington will be among those cities. What cities need is good governance. NYC had that for the past twenty or so years, this is what made it so attractive.

  19. philg

    February 7, 2014 @ 12:57 am

    19

    I will note that the governor of Michigan has proposed something vaguely similar, i.e., bringing 50,000 skilled and/or degreed immigrants to Detroit. See http://www.nytimes.com/2014/01/24/us/immigrants-seen-as-way-to-refill-detroit-ranks.html (I assume that the immigrants would be effectively imprisoned as Detroit residents and taxpayers, facing deportation if they accepted a job offer in San Francisco, for example).

  20. CHenry

    February 7, 2014 @ 11:17 am

    20

    Immigrant gulag in Detroit.

  21. Jim Howard

    February 10, 2014 @ 3:11 pm

    21

    Austin’s downtown has really boomed in the last 20 years or so. A lot of people would like to live there if they could afford the high prices.

    Perhaps the existence of several excellent private schools and a public high school that was good enough for President Bush’s kids has something to do with it.

  22. Brian

    February 14, 2014 @ 10:56 am

    22

    The $1 homes are a similar scheme. Sell current property for $1 maybe throw in rehab incentives but you have to live on the site for so many years. Covington and Newport Kentucky did something like this back in the 90′s.

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