Last year, as part of a $1.2 billion bond issue, Johnson persuaded the City Council to vote for $75 million for the construction of homes on more than 400 vacant lots, nearly all of them in depressed neighborhoods. It started slowly, with the purchase of 40 lots in a neighborhood on the West Side, then 54 more in three neighborhoods on the South Side. All the completed units will be reserved for families earning 140 percent of the area median income. All of them will be priced for sale at $300,000 or less.
Johnson estimates that the 400 vacant lots together are worth something like $25 million. Developers can buy any of them for $1 and get a subsidy of $150,000 for every unit they build. The mayor announced a couple months ago that the goal of the program was to cut red tape, better leverage city resources and attract more private investment. “We need to continue to leverage all of our tools,” Johnson insisted. By last month, five developers had been selected to build 99 homes.
If this doesn’t sound like a big deal to you, you’re right. It isn’t. It’s a drop in the bucket. The city is estimated to own 7,000 vacant or underdeveloped residential lots, most of them in communities with declining populations. Even the 400 lots Johnson is focused on represent a tiny percentage of what’s out there.
Besides, cities have been trying to entice developers with low-price property giveaways for decades now. Kurt Schmoke tried a $1 sale as mayor of Baltimore in the 1980s, and didn’t see much accomplished. No similar scheme has reported significant results.
So why is Brandon Johnson’s “Missing Middle Infill Housing” program worth taking a look at? Here’s why: It involves the local government more directly in the production of housing than just about any of the other efforts. It isn’t just handing money to developers and telling them to get to work. The city is, or at least is projected to be, an active partner. To be sure, developers will be heavily involved. But from everything Johnson has said, the city will be working with them more closely than has been the case in most other places.
This is the way social housing used to work in this country, with government a player rather than just a cash machine. It may be the way urban housing schemes need to operate in the future if they are going to accomplish anything. It doesn’t mean cities have to pay public employees to stack bricks. It just means they have to pay more attention.
IT MAY COME AS A SURPRISE, but this is something city governments did for much of the 20th century. The federal government did it as well. During World War I, the urban planning scholar Eran Ben-Joseph recalls, the federal government was actually the country’s foremost housing developer, creating more than 80 communities around the country with housing for nearly 100,000 people. It did that through a public enterprise called the U.S. Housing Corporation, which spent the equivalent of $2.3 billion in today’s dollars to design and plan its 80 projects. Private-sector workers pounded the nails, of course, but the Housing Corporation was into everything, not only supervising construction but renting or selling the completed units to tenants at modest prices.
The 1920s marked the end of the Housing Corporation's major building activities, but not the idea of publicly promoted housing, or social housing, as it was more commonly known. In the 1930s, most prominently in New York City, the local government worked with insurance companies and philanthropies to finance major housing projects whose construction was overseen by newly created public housing authorities. The most famous of these was Stuyvesant Town, launched under the auspices of Fiorello LaGuardia’s mayoral administration on a site just north of the tenement-dominated Lower East Side as social housing for World War II veterans.
Stuyvesant Town was nominally a project of the Metropolitan Life Insurance Co., but it was really a partnership. The crucial planning decisions were made by the city and its master planner, Robert Moses, and managed by the city’s Housing Authority. By 1950, Stuyvesant Town and an adjoining development had more than 30,000 residents. It was sold to private interests in 2006 and has undergone a series of financial ups and downs since then, but it is still going strong, with 25,000 residents.
Stuyvesant Town and a few other publicly planned developments around the country were, remarkably, modeled after social housing built in Austria in the 1920s, during the years of what critics of socialism liked to describe as “Red Vienna.” This massive enterprise, known as “Gemeindebauten,” was strictly a government enterprise, financed in large part by luxury taxes. What is startling about Gemeindebauten is not only its quality but its longevity. A century after its construction, roughly 60 percent of the city’s population lives in units either owned directly by the city or operated by nonprofits that receive municipal subsidies.
Tourists and urban planners still visit Vienna and marvel at its social housing system, but after the 1930s it essentially attracted no imitators in the United States. The federal Housing Act of 1949 offered a generous $1 billion in loans for urban renewal, but it was essentially an excuse to declare troubled neighborhoods slums and a bribe to private developers to clear the land and build what they wanted to build as replacements.
AND THAT IS ESSENTIALLY WHAT CITIES HAVE DONE over the last 70 years — they’ve taken themselves out of the business of promoting or even overseeing social housing and given developers carte blanche to do the construction. In some cases, Chicago perhaps foremost among them, public housing was built under the general umbrella of a housing authority, but as came to be known much later, the public entity ultimately became a sieve for sleazy deals with the private developers.
It would be foolish to absolve city governments of the evolution of their 1950s public housing projects into the decrepit high-rise warehouses for the poor that they eventually became. City officials initially believed that the high-rises were an improvement over the slum tenements in which most of the high-rise residents had been living. But there's little doubt that local governments failed to exercise adequate supervision of the projects as they began to deteriorate in the 1960s. City leaders promoted a new housing idea and then failed to keep track of what the management was doing.
The movement to turn social housing almost entirely over to private developers only gathered steam over the following decades. In 1974, Congress approved Section 8 rental subsidies to landlords willing to accept underclass tenants. Section 8 has been mostly a mess over the years, with the landlords reluctant, sometimes for racial reasons, to accept the impoverished applicants who need affordable housing the most.
THERE ISN’T SPACE ENOUGH to list all the housing subsidy programs that have been tried since then, but it’s fair to say that none of them have worked very well. Local governments have established set-asides asking developers to reserve a fixed percentage of units for affordable applicants, but they have generally allowed the developers to pay a fee in lieu of meeting the percentage, and this is what most of them have done. When stricter set-asides are imposed, frequently nothing gets built at all.
More recently, as most of us know, localities have been changing their zoning rules to permit six- or eight-unit apartment buildings in residential neighborhoods filled with single-family homes. This may be a way to impose diversity on homogeneous communities, but except in a very few places, it has not created much housing.
The plain fact is that subsidies to private developers, no matter how generous, have not done much to solve the affordable-housing problem. As the Center for American Progress concluded last year, “The private real estate market does not supply a sufficient number of housing units that are affordable, safe, healthy, and located close to economic opportunity.” Chicago’s “Missing Middle” will still be dependent to a large extent on private contractors. What matters is that the city keeps them on a relatively short leash, and does whatever it can, as it has promised, to keep the price of the new units under control.
So governments need to move more actively into the social housing business. This will never be a foolproof enterprise. Not long ago, it was reported that new housing sponsored by the District of Columbia's government, in a building with 52 units reserved for poor people, was costing local taxpayers $1.2 million a unit. There are no perfect solutions.
But the only practical way to generate significant amounts of affordable housing at this point is for local governments to manage it and regulate it. A long time ago, that was standard practice in urban America. Could it be standard practice again? In Chicago, Brandon Johnson seems to think so. We will see if his idea works.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
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