National Housing Policy Research Articles

The Financing of Residential Construction in Newfoundland

Elected governments in Canada have long stated that access to safe and decent housing is a basic right of Canadians. With the first housing legislation, the Dominion Housing Act of 1935, housing policy attempted to encourage the development of mortgage financing for residential construction. Successive versions of the National Housing Act (NHA) have given to government the powers to (a) initiate mortgage loans or (b) support the activities of other lenders approved under the terms of the Act. The main approved lenders are banks, life insurance companies and trust companies. The purpose of this note is to show that national housing policy has not been particularly effective in Newfoundland because of its reliance on these NHA-approved lenders. Financial instiutions do not operate effectively in Newfoundland in the area of house construction and thus the improvement in housing has had to be provided by other means. Over a third of new single-family dwellings (SFDs)in Canada are financed through channels not directly supported by national housing policy. For the years 1973-8, for instance, new SFDs financed outside government and approved sources range from 12.5 per cent of all SFDs in Nova Scotia to 63.8 per cent of all SFDs in Newfoundland.' Surprisingly, this aspect of SFD financing has not been studied by government or academic investigators, even though the number of dwellings financed by these 'other' sources exceeds the number financed by government sources in every province. In all provinces except Alberta, Manitoba, Ontario, and Nova Scotia, the number of SFDs financed by 'other' sources approximates or exceeds the number financed by the NHA and conventional mortgages of the approved lenders. In Atlantic Canada, SFD construction has a particularly strong influence on the provincial economies. For example, the 1973-1978 Canadian average of the value of new SFD construction as a percentage of Gross National Expenditure was 2.7 per cent, but in Newfoundland and Prince Edward Island, the proportion of Gross Provincial Expenditure attributable to new SFD construction financed by 'other' sources alone was 4.1 and 3.6 per cent respectively.2 Thus concern for the effectiveness of housing policy should be a very important

The Attraction of Home Ownership

George Sternlieb argues convincingly that rental housing is likely to remain in somewhat short supply in the immediate future with some loosening at a later date. All of this is premised on no significant change in current construction and market trends. On the other hand, a change in national housing policy and sharing equity advantages with tenants could produce significant increases in rental units.

The Equity of Alternative Policies for the Australian Homeowner*

The income‐tax treatment of homeowners and renters is an important instrument of national housing policy. Major changes in the treatment of homeowners occurred in 1975 and 1976; the second change focused especially on the problems of first‐buyers and was coincident with an expanded home‐savings grant scheme. As a further reform several writers have advocated the taxation of the rent imputed to homeowners.This paper develops a user cost of capital approach to estimate the distribution of housing costs along the income scale and between policy alternatives. The model indicates the vital importance of accounting for inflation whenever physical housing costs are inflating but mortgage costs are fixed in nominal terms. Although inflation is increasing housing costs at all income levels, high‐income homeowners appear to be suffering the greatest cost increases as the result of inflation. Furthermore, unless mortgages are indexed, the customary imputed‐rent formula is regressive.

Housing the poor: The task ahead in developing countries

The urbanization process in developing countries is proceeding at an unprecedented rate. Over the next 25 years, over 10 9 newcomers, about twice as many as during the past 25 years, will have to be absorbed by the towns and cities and be employed in non-farm occupations. Most of these newcomers will be poor and unskilled. The developing countries are not ready for this task ahead—in terms of attitudes, policies, institutions or resource mobilization. The objective of any responsible urban strategy must be to increase the capacity of towns to absorb and employ these poor newcomers, efficiently and productively. For many national and city authorities this formulation of objectives will involve a major attitudinal shift, away from architectural and city-oriented preoccupations toward a people-oriented set of concerns. A proper urban strategy would impact on all sectors: housing, land, transport, utilities, education, health and manufacturing, and on commerce in both the formal and informal sectors. This paper addresses housing which is one of the key sectors. The housing situation in rapidly urbanizing areas of the developing world is very poor and deteriorating. Typically 40% and in many cases 75%, of the population of fast growing cities is densely housed in squatter settlements without basic services. This proliferation of squatter settlements results from the failure of housing policy. The failure to generate sufficient financial resources to meet the infrastructure demands creates shortages which impact systematically on the poor. Unrealistically high standards in housing, zoning and public services means that the scarce resources produce fewer units at costs beyond the means of the mass of the people. Administrative and conventional barriers stand in the way of the poor gaining access to secure land tenure and credit which are essential to housing. The situation is enormously aggravated in some cases by governments which actually demolish the low standard illegal housing to which poor people in the circumstances must resort. The experience with public housing, typically rented to low-income families at highly subsidized rates, has been alarmingly bad in virtually every country. What are the key elements of a more promising approach? First, a fundamental element is the decision to try to absorb the newcomers rather than to throw barriers in the way of their integration. Second, national housing policy must be based upon what the national economy and the people can afford, otherwise, the policy cannot produce housing on a scale commensurate with demand and the poor will always be excluded. The approach that the World Bank has come to believe has the most promise of success could be described as “basic urbanization” and has two complementary thrust—the upgrading of existing slums instead of their demolition or “clearance”, and the development of new land at very basic, affordable, service levels which can be improved over time as family income increases. Both of these approaches depend upon provision of secure tenure or occupancy rights and relatively long-term credit. Public paticipation, self-help, community development and employment creation are also important features. These approaches have now been tested for large-scale replication in a number of very interesting projects, which are described briefly in the paper.

A National Policy and Budgetary Framework for Housing and Community Development*

Recent legislation has determined that federal budget allocations and tax expenditures for housing should be tied to specific housing goals or “missions.” The major issues of national housing policy can be organized within six problem areas—three relating to production and three to consumption. Current federal housing programs can be classified into four broad budget categories (involving mortgage credit and thrift institutions, housing assistance, community development, and tax expenditures) and a fifth off‐budget category of credit market activities. By examining a matrix that relates these five areas of federal involvement to the six broad problem areas, this article attempts to provide an analytical foundation for a national policy and budgetary framework for housing, housing finance, and community development.

The Changing Roles of Housing Production Subsidies and Consumer Housing Subsidies in European National Housing Policy

The Changing Roles of Housing Production Subsidies and Consumer Housing Subsidies in European National Housing Policy

Federal Housing Policies: Subsidized Production, Filtration and Objectives: Part I

ing produced in the first thirty-five years since federal legislation was enacted (1934). A host of questions about the costs and the effectiveness of this output in meeting the nation's housing goal-as set forth in the Housing Act of 1949 and re-affirmed in the Housing Act of 1968of a decent home and suitable living environment for every American family has gained momentum and the breadth and depth of these concerns create fundamental issues about' federal housing policies. Between April 1950 and April 1970, some 96 per cent of the nation's total housing production was built for ownership by the private sector. Substantial improvement in housing conditions was recorded during this period even though only a small proportion of total production was oriented toward housing-poor families. This fact raises basic concerns. How great was the progress recorded during the 1950-1970 period? To what was this progress attributable? To what extent did housing filtration successfully operate to improve the nation's housing status? The history of federal influence upon housing policy in the United States may be conceptually divided into three periods-1934 to 1961; 1961 to 1968; and 1968 to date. The initial period was characterized by the first groping efforts toward realization of a national housing policy of a decent home . . . for every American family. Except during the World War II period of controls, the tools essentially took the form of indirect intervention in the housing market -the creation of conditions that would

The Determination of National Housing Policies

the social marginal productivity is the highest.2 The estimation of social marginal productivity requires value judgments concerning various social objectives, and the use of shadow prices t The author acknowledges the financial assistance of the Institute for International Studies which made possible the basic research for this study, which was conducted in Santiago, Chile, in 1965. Typing and editorial assistance were provided by the Center for Real Estate and Urban Economics. Octavio Cabello at the Economic Commission for Latin America, Santiago, Chile, aided the author in manifold ways during his residence in Santiago in the Spring of 1965. Robert Dorfman, Visiting Research Professor at the University of California, Berkeley, offered a number of particularly incisive comments and suggestions on an earlier draft. Carlos Frankenhoff, Lowden Wingo, Albert H. Schaaf, Roland Artle, and others also reviewed early drafts of the manuscript. Richard Recht and Stanley Hamilton of the Center for Real Estate and Urban Economics assisted in reviewing the mathematical notation and suggesting changes in the final draft. Mr. Hamilton assisted the author in the revision of an earlier draft. A more detailed version of this article was published in Italian in the Rivista Internazionale, Milan, Italy, November 1967. * Professor of Finance and Chairman of the Center for

National Community and Housing Policy

This paper was prepared for presentation as an Elizabeth Wood Lecture at the School of Social Service Administration of the University of Chicago, March 9, 1965. The author is a member of the staff of the Office of Research, Plans, Programs, and Evaluation, Office of Economic Opportunity, Washington, D.C. The views expressed are his own.

Urban Renewal Realistically Reappraised

Recent-and often misguided-critical outpourings against urban renewal justify an effort to determine realistically the actual and potential contribution of government to the solution of urban problems. Broadly defined, urban renewal can encompass all public and private efforts to improve city form and life. Realism requires recognition at the outset that there are no panaceas for every problem a city may possess and that some solutions create or emphasize other problems. Equally, realism requires careful consideration of the genesis and purposes of government programs with limited objectives so that criticism of them relates to their efforts and not to the broader notion of urban renewal goals. One recent attempt at major analysis1 has gone astray partly because its author failed to see clearly the historical perspective and the limits of federal aid for slum clearance and redevelopment authorized by Congress under the Housing Act of I949 and its amendments.2 The author of The Federal Bulldozer views this urban redevelopment assistance as though it had been expected by the Congress to solve all national housing problems. He cites the 1949 Declaration of National Housing Policy, preface to a comprehensive housing act with six separate titles, as though that declaration pertained only to title I. He then proceeds to condemn urban renewal for not achieving the aims of titles II, III, IV, V, VI, and other national housing efforts. The Federal Bulldozer is based on the assumption that federal assistance for local slum clearance and redevelopment projects was meant to achieve the housing aims of such other programs as low-rent public housing and FHA mortgage insurance. By incorporating these and other myths in his analysis, he began with unrealistic expectations for urban renewal efforts undertaken with federal assistance.

The Debt-Expenditure Hypothesis and Residential Construction

This paper is devoted to an empirical examination of the debt-expenditure hypothesis as it applies to residential construction. To test this hypothesis residential construction and expenditures are analyzed to see whether they bear any consistent relation to either the flow of mortgage lending or changes in mortgage debt outstanding. The bulk of the paper is devoted to examining the regressions of a number of alternative construction-expenditure variables on associated debt variables; in these regressions residential construction or expenditure is the dependent variable while mortgage lending or debt is the independent variable. The debt-expenditure hypothesis asserts that categories of capital spending, particularly expenditures that are large relative to the income, saving, or net worth of the economic units involved, require corresponding increments of debt or tend in practice to be associated with such debt increases. This is sometimes rationalized on the grounds that the distribution of capital outlays by economic units does not match the distribution of saving so that the expenditures cannot be made without borrowing and the resulting increase in debt. In its simplest version, the hypothesis states that the expenditure-debt ratio is constant or, more generally, that expenditure is a linear function of debt. In discussions of national housing policy, especially particular housing bills, the debt-expenditure hypothesis is sometimes used to justify measures liberalizing mortgage lending terms or to adopt new Federal lending programs. Recently, the Senate Committee on Banking and Currency, in its report on S. 3418, urged adop-

Housing Data Obtained by Sampling Public Records

in a short period, that on the whole they have tended to be inflationary, and that they have not really aided house buyers.' Charges have been made that while the federal government has spent, insured, or guaranteed over $60 billion of purchases in the residential dwelling market, the commitment has not served its specified purpose under the National Housing Policy of improving the standard of housing while reducing its cost.2

The National Housing Manual. A Guide to National Housing Policy and Administration. ["Aldridge"] (Book Review)

The National Housing Manual. A Guide to National Housing Policy and Administration. ["Aldridge"] (Book Review)