CITIES AND HOUSING POLICIES

E151U: Housing and Urban Development

TheoryThe “City Limits” Explanation

Begins with a regional market of public goods (cities) similar to the market for private goods

Regional Market of Cities

Key Players in the Market

Residents choose to live in communities that maximize their preferences for local services (Tiebout, 1956)

Local decision makers: seek to retain/attract middle- and upper-income residents; consider the impacts of their taxing and spending decisions

and seek to offer the best cost to benefit ratio (tax to service);

compete with other cities by formulating policy to their city's economic advantage; and

avoid redistributive policy such as affordable housing and pursue developmental policy such as economic development (Peterson; 1981; Downs, 1994)

Theory predicts cities will spend more on economic development than affordable housing, and that

this propensity will increase as competition increases in the

region

Empirical Study“Test the theory”

$ for affordable housing

Competition

Empirical Study

Survey Data: gathered through a mail survey of city policymakers and staff

The cities were in all areas of the country

Census Data: collected U.S. Census data from 1990

Additional sources from publications

Dependent Variable

0

30

60

90

120

150

180

210

240

0 1-1.99 2-2.99 3-3.99 4-4.99 5-5.99 6-6.99 7-7.99 8-8.99

Local Housing Expenditures (logged)

Freq

uenc

y

Distribution: Non zero values logged (n=396)

Source: Basolo, Victoria. 1999. The Impacts of Inter-city Competition and Intergovernmental Factors on Local Affordable Housing Programs. Housing Policy Debate 10(3):659-688.

Study Variables Dependent

Local Housing Support

Dichotomous: 1= expended $

0= did not expend $

Continuous: $ expended, if any

Independent:

Inter-city competition # of cities in region (MSA)

Other independent variables: presence of planning, federal funding, growth rate, etc.

Study Findings Cities in regions with higher levels of inter-city

competition were less likely to spend any of their own source dollars on affordable housing compared to cities in areas with lower levels of competition

Cities with entitlement status for federal block grant programs and cities with higher growth rates were less likely to spend their own source dollars on housing programs

Cities spending higher levels of federal funding for housing, cities that had higher levels of non profit housing activity, cities with higher housing values, and larger cities were more likely to spend their own source dollars on affordable housing activities (Basolo, 1999)

Study Findings

The degree of inter-city competition appeared to have no effect on the level of own source expenditures on affordable housing in cities

As the homeownership rate increased in cities, own source expenditures on affordable housing decreased

Having an official housing plan, state-mandated housing set-asides, and population size were positively related to own source expenditures on affordable housing programs (Basolo 1999)

More Study Findings Cities in regions with higher levels ofinter-city

competition were more likely to spend own source dollars on economic development efforts;1

Cities with a formal economic development plan were more likely to spend own source dollars on economic development;

Cities with higher levels of support for economic development from elected officials were more likely to spend their own dollars on these efforts;

Cities in regions with higher levels of competition were more likely to spend more of their own dollars on economic development than affordable housing activities.2

________________________________

• Basolo, V. and C. Huang. 2001. Cities and Economic Development: Does the City Limits Story Still Apply? Economic Development Quarterly 15(4):327-339.

• Basolo, V. 2000. City Spending on Economic Development Versus Affordable Housing: Does Inter-City Competition or Local Politics Drive Decisions? Journal of Urban Affairs 22(3):317-332.

Is Affordable Homeownership a Special

Case?Our first goal is to increase citywide homeownership from the current average of 40% to 75%.  Why is this important?  Because homeownership creates pride and security and because homeownership builds our population base which in turns builds our tax base.

--Mayor R. Filippi (2003)

What did Mayors Think About Homeownership in Their

Cities?

6.5%10.1% 10.7%

8.3%

13.6%

20.5%

30.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Importance of increasing homeownership to their city’s fiscal

health

What Type of Policy isAffordable Homeownership?

 

Intercity Competition Support for Homeownership

Does this relationship hold? If yes, then…

Does inter-city competition result in lower support for homeownership? If yes, then this result suggests homeownership policy is redistributive.

Does inter-city competition result in higher support for homeownership? If yes, then this result suggests homeownership policy is developmental.

Results of Analysis

There is a positive relationship between inter-city competition and support for homeownership

Higher levels of regional competition are associated with cities that spent more on homeownership programs versus other types of housing programsAffordable homeownership is viewed as developmental policy, therefore, is more likely to be supported by local policymakers

In other words…….

What are the Implications of These

Findings?

About local policy?About devolution?

About the distribution of cities in a region?

Orange County, CA

Source: U.S. Census Bureau. N