Everyone needs a house. Rich people poor people; all people are included. This is a problem, because housing costs a great deal of money. Poor people that can barely afford food and clothing also have a difficult time finding affordable housing. As a result, some live in unsafe and unsanitary conditions that are badly in need of repair. As we read in several Los Angeles Times articles, there are many people here in the Valley that live in places like these, and that live way below the poverty line.
Many of these unkempt dwellings reside in the inner city of large urban areas, such as Los Angeles, Philadelphia or Chicago. According to our textbook, Urban Economics, (page 338) Poverty rates in the central city are about two times higher then the poverty rates for suburban areas. In some metropolitan areas, the differences in poverty rates are even higher.
Poor people reside in the central city for two different reasons, according to discussions on various economic models from lecture. First, the farther away that you get from the central business district, the higher your transportation costs to get to your job (assuming that the job is located in the CBD). If you can not afford to commute to your work, you will be unable to keep your job, making you worse off economically. Therefore, you would chose to locate your residence close to your place of employment (closer to the CBD) in order to reduce your transportation costs. IF you live close enough to your place of employment, you may not need to use any form of transportation other then your feet, which doesnt cost you anything but your time.
The second reason has to do with where new houses are built. New homes are built on land that was previously undeveloped, usually located on the outer edge of the residential district, furthest away from the central business district. The wealthiest people move into these new homes, leaving the upper middle class to move into their old residences. This trickle down effect does hold true at the bottom end of the scale as well. The poor that are on the margin of being considered middle class will be able to afford to move into nicer houses. The poorest people are left to keep occupying the oldest homes, located in the inner city, thereby keeping the inner cities poor.
Now, it seems terrible to allow people to live in low quality homes, and some people feel that the way to get poor people into nicer homes is to require the building owners to upgrade their buildings. First, in order to revamp the building, the owner would have to charge the tenants a higher rent to pay for these changes. The poor are barely able to pay the rent at the current price, and most will be unable to afford a rent hike. Upgrading these buildings would place them in a different category (they would be fit for middle class tenants, rather then remaining housing for the poor), forcing the poor to look for other, rare housing that they can afford.
To help reduce the problem, the government has implemented programs to ensure everyone has access to adequate housing. One of the governments ventures includes employment and job training programs. Our text tells us on page 357 that, Employment programs operate on the demand side of the market, providing direct employment for the poor. Job training programs operate on the supply side of the market: they increase the labor skills of the poor, making them more attractive to private industry. By offering poor people these services, they are better able to obtain the funds needed to live in decent housing through employment.
The government has also introduced housing subsidies to the poor, to better equip them to pay rent for sanitary living space. Section 8 certificates are given to individuals who are considered to have very low income to help them pay for housing. The recipient of the certificate is required to contribute 30% of their income towards housing costs, while the government writes a check for the remainder. There are also housing certificates that work very similarly to the Section 8 certificates.
The effect that these vouchers have on the market is a negative one. By giving people free money for housing the government is pushing up the average market price of housing. These vouchers shift the demand curve for housing to the right. The supply of housing does not change therefore the new equilibrium is a higher price then without the vouchers.
Another option is public housing projects. This could be a decent idea, but the way that most projects are set up make them doomed from the start. Low-income people are put into these apartment-like complexes, concentrating a large amount of poorer people in a small place. These people do not own their units, and because of this, they treat them poorly. Without property rights for your residence, you are not likely to upkeep the structure, or its contents. It is for this reason that housing projects are in such poor condition. In addition, with the high concentration of poor people, there is also a great deal of crime within the projects.
Most taxpayers are in favor of public housing rather then housing vouchers. This is because of the resulting higher price of housing with the voucher program. The government should keep the idea of public housing, but they need to re-think the design of projects in order to make them more successful. If the government would include some type of ownership provisions for the tenants of the projects, there would be a great deal of positive change for the community. If you own your dwelling, you suddenly become more interested in the safety and upkeep of your community. As we discussed in class, this type of community leads to groups such as the Neighborhood Watch.