Public Policy Comparative Public Policy Comparative StudyStudy

Dr. Minzi SuDr. Minzi Su June 27 – July 22, 2011

Week Three: US Housing PolicyJuly 13, Wednesday

July 14, Thursday

Agenda

0 Understanding Social Policy in General0 US Housing Policy0 Class Discussions0 Case Study -

Understanding Social Policy In General

0 Common policy problems0 Needs vs. costs0 The social policy arena

0 Major policy options0Choice 1 – Approaches to determining who qualifies for social

policy benefits0Choice 2 – Determining how redistributive each social policy

should be0Choice 3 – Determining how to provide economic assistance

0 Explaining policy dynamics0 Cultural explanations & Economic explanations0 Political explanations & Institutional explanations

Needs vs. costs0 Prior to the late 19th century, government social policies

were a patch-work of emergency initiatives and a few standing programs whose implementation was dominated by favoritism.

0 As increasing numbers of citizens gained the right to vote and to organize freely, many began to pressure the government to provide a social safety net in the economic sphere for people who suffered visible misfortunes and to try to alleviate poverty more generally.

0 As governments devoted more and more resources to these efforts, other citizens became concerned about the rising cost of social policy. In the late 20th and early 21st centuries, governments sought to fine-tune social policies in response to the increasing globalization of domestic economies.

The Social Policy Arena0 Four major groups of citizens – children, the elderly, the

infirm and the recently unemployed – have been at the center of social policies in industrialized countries for a century now. These groups include people who for one reason or another can make a claim hat they cannot support themselves at the moment. Because these are situations that most citizens can visualize facing, public pressure for government programs to deal with these situationally poor citizens has been considerable.

0 Over time, governments moved to respond to another challenge: alleviating poverty among the chronically poor, that is, people who are of working age but are having a hard time escaping poverty.

(Continued)0 Concern about the present and future costs of those

government initiatives – assistance programs in the social policy sphere comprise the largest component of government spending in the industrialized countries. These governments face a true political dilemma: should they decrease benefits to control costs, or should they protect those benefits by either cutting other programs or raising taxes?

0 This difficult decision is made more complicated by the impact of economic globalization. Domestic governments in high-benefit countries fear that this puts them in a lose-lose situation, often referred to as social dumping, in which workers with low skills will move to high-benefit countries to enjoy greater social policy benefits while employers will move abroad to avoid the higher tax burden associated with those programs.

Major Policy Options

0 Once the government decides to provide economic assistance directly to individuals, how might this goal be accomplished? Social policy design involves three basic choices: (1)How does one determine who qualifies for this assistance?

(2)how redistributive is the program?

(3) how will the assistance be provided?

Choice 1 – Approaches to Determining Who Qualifies For Social Policy Benefits

0 Two major models: the public assistance model and the social insurance model.

0 In the public assistance approach, sometimes called social assistance, eligibility for benefits is means-tested. Recipients must demonstrate economic need to qualify for benefits. Advocates of this approach argue that means-testing enables governments to target resources to the truly needy – thereby alleviating extreme poverty without spending government resources on self-supporting individuals. This logic has proven powerful in countries with an individualist heritage such as Australia and the U.S. – both countries’ social policies are predominantly means-tested.

Critics of Public Assistance Model

0 On the logistical side, critics note that truly needy often struggle to prove their eligibility while others cheat the system by using fraudulent documents to qualify for benefits they should not receive.

0 On the political side, critics assert that reliance on means-tested programs makes it difficult to build public support for social policy because few people want to envision themselves as poverty-stricken individuals. This attitude can stigmatize recipients of public assistance and can make such programs more vulnerable to political attacks.

0 Critics of public assistance favor a social insurance approach.

Social Insurance Model

0 In this model, all citizens in a given circumstance are eligible for assistance regardless of their degree of economic need. E.g. all families with minor-aged children might receive benefits, all senior citizens might receive pensions, or all unemployed persons might receive income supplements. Because of the absence of means-testing, the approach creates entitlements.

0 This approach helps to build support for social policy creates new problems not faced by public assistance programs. Because citizens are sold on these programs through the promise of future benefits, they do not want to see benefit levels cut.

Choice 2 – Determining How Redistributive Each Social Policy Should Be

0 That is, how much money should be taken from some taxpayers to pay for others’ benefits?

0 The public assistance approach is explicitly redistributive: everyone pays taxes to support the program, but many people may never meet the relevant poverty test to qualify for benefits. In contrast, the social insurance approach leaves open the possibility that all citizens may benefit. As a result, governments can choose to limit the redistributive element in social insurance programs.

0 This means that programs can be based on either the principle of individual equity or the principle of basic needs.

Choice 3 – Determining How to Provide Economic Assistance

0 That is, what policy instruments should be used? Often benefits are provided via government transfers to the individual. These transfers could be cash payments or they could involve in-kind benefits – e.g. food or government services.

0 Another instrument of social policy involves government subsidies for certain basic needs – e.g. government could spend money to make food, public transportation, or housing available at abnormally low prices.

0 A third option consists of the use of tax expenditure, which reduce citizens’ tax obligations when they spend their money for certain purposes. Lower sales taxes on food and income tax deductions for dependents and for owning a home are examples of the tax expenditure approach to social policy.

Explaining Policy Dynamics

0 What contextual factors influence policymakers as they try to meet the varied challenges of social policy?

0 Similar to research on health policy, most studies of social policy making have been notional case studies complemented by several comparative case studies. Cultural forces are particularly visible in this research, but economic, political, and institutional factors can also influence the path of social policy.

Cultural Explanations

0 Cultural traditions form one of the most widely discussed influences on social policy making.

0 The liberal tradition of individualism had deeper roots and more political impact in the Anglo-American countries than in other industrialized countries. The U.S. is often said to be the most individualistic of the Anglo-American countries in terms of its approach to social policy issues.

Economic Explanations

0 As industrialized countries become more affluent, it may be harder for most citizens to support reaching out to less fortunate citizens via social policies because they may feel that such policies are no longer necessary.

0 Short-term economic conditions also shape decision making, e.g. rising unemployment tends to put more demand on a variety of social policy services – unemployment insurance, poverty relief programs and the like.

0 The pressures of globalization have motivated a move away from universalist social insurance policies in search of an “affordable welfare state”.

Political Explanations0 Political parties are frequently cited as an influence on social

policy. Leftist political parties play an important role in stimulating the emergence and evolution of the welfare state in most industrialized countries, whereas rights parties worked to slow its development.

0 The few countries without powerful leftist – Canada, Switzerland, and the U.S. – manifested the slowest growth in government and in welfare spending.

0 Another political factor that influences social policy decision makers is the nature of interest group competition. The primary constituencies of social policy are among the least affluent and least organized portions of any country.

Institutional Explanations

0 Several cross-national studies of the evaluation of the welfare state not that federal states have tended to have lower levels of welfare spending than unitary states.

0 Federalism’s mix of responsibilities can provide more opportunities for opponents of welfare spending to intervene in the political process and slow the growth of the welfare state.

0 Another often-discussed institutional obstacle to sweeping policy change is the use of presidential executive-legislative relations.

U.S. Housing Policy

0 Background: policy process and history0 Contemporary dynamics 0 Roles can be played in creating affordable housing by

governments, the private sector and the nonprofit sector0 Critical thinking about housing policy reform

Background: Policy Process and Policy History

0 Early “ill housed” housing condition0 Major housing problems0 The problem of homelessness0 Preventing homelessness in America0 Affordable housing issues0 Housing policy initiatives

Early “Ill Housed” Housing Conditions

0 Beginning with the wave of Southern and Eastern European immigrants at the end of the 19th century, the housing conditions in low-income urban areas have ranged from below standard to grossly inferior.

0 The introduction of public sanitation in urban areas in the early 20th century improved some of the health hazards associated with slum dwellings, but conditions had improved so little by Franklin Roosevelt’s second inauguration in 1936. He argued hat a third of the nation was “ill housed.”

0 In 1945, 45% of all American households and up to 80% in some southern states – did not have indoor plumbing.

Major Housing Problems0 Although good housing in a good neighborhood is certainly

no guarantee against tragedy and misfortune, inadequate housing increases one’s vulnerability to a wide range of troubles.

0 Physically deficient housing is associated with many health hazards.

0 Unstable housing conditions that cause families to move frequently are stressful and often interfere with education and employment.

0 When low-income families face high rent burdens, they have little money left to meet other needs. Vulnerability to crime is strongly influenced by residential location too.

(Continued)0 People who live in distressed neighborhoods face a greater

risk of being robbed, assaulted – or worse – than inhabitants of more affluent areas do.

0 In its preamble to the 1949 Housing Act, Congress declared its goal of “a decent home in a suitable living environment for every American family.” After 60 years, the nation’s housing problem remains acute.

0 In 2005, 42 million households lived in physically deficient housing, spent 30% or more of their income on housing, or were homeless. Put differently, about 100 million Americans – almost 35% of the nation’s population and more than double the number lacking health insurance – confronted serious housing problems or had no housing at all. (US Census Bureau 2008)

The Problem of Homelessness0 Even in the face of 1990s economic prospect, homeless

statistics show the number of homeless has remained stubbornly high. Between 500,000 and 600,000 people are considered “homeless” at any given time – without a “permanent, safe, decent, affordable place to live” .

0 The most proximate cause of homelessness in America is poverty. Statistics show between 20 and 30% of homeless families surveyed in 1996 said they had gone without food for part of the previous month . The homeless also face persistent deprivation and constant threat of harm.

0 Homeless in American persists in part because many urban areas remain economically depressed, housing costs have risen rapidly in the past decade, and wages for lower skilled workers have remained stable.

(Continued)0 Although single men constitute about 60% of the homeless

population, families constitute about one third of all homeless and are the fastest-growing group of homeless.

0 The homeless elderly will also be an important group as America ages in the next decades.

0 Although about 70% of the homeless live in central cities, rural homelessness is a hidden problem. The rural homeless are more likely to be families that are homeless for shorter periods of time, often as a result of domestic violence.

0 One of the hardest groups to reach, however, is the one fourth of homeless who have been homeless for at least five years.

Preventing Homelessness in America0 Permanent housing provides a “base” for people to move out

of poverty. Many organizations that address the homeless population have shifted their focus from emergency shelter to prevention.

0 In part this shift is a result of the McKinney Homeless Assistance Act of 1987, the federal law that provides funding for homeless assistance programs. The law emphasizes “continuums of care” – regional systems that provide services and housing for an entire range of needs, from medical care to employment.

0 Provide rural homeless families with temporary shelter and rental assistance funds because rural homeless are often for only short periods of time; provide supportive housing for the mentally ill and for substance abusers.

Affordable Housing Issue0 There is no single definition of affordable housing. What is

considered “affordable” by a family earning $100,000 a year will likely be out of reach for another family that earns only $25,000 a year. Incomes and housing costs also vary by location. A typical home in one community might cost $300,00, while that same house would cost half as much in another part of the country.

0 Rules of thumb often are used to determine affordability. E.g. the federal government considers housing to be affordable if a family spends no more than 30% of its income on its housing costs, including utilities. Using this benchmark, a family earning $30,000 a year could afford to pay up to $9,000 a year (or $750 a month) on housing.

Still An Affordability Problem0 According to the latest data from Harvard’s Joint Center for

Housing Studies, between 2001 and 2007 the number of households paying more than half of their income for housing, considered a severe housing burden, increased by 30% to 17.9 million households.

0 While some assume that recent home price deflation means that Americans no longer have a housing affordability problem, the data does not support this assumption. In the unlikely event that home prices should continue to decline until 2015 and eventually reach 2000 levels, projections from the Joint Center indicate that there would still be 16.2 million households severely burdened by housing costs.

Housing Policy Initiatives

0 Housing is central to the economy of the United States, accounting for 1/5 of the gross domestic product (GDP). Housing construction generates employment and consumption of other goods. Housing generates property taxes for local governments, along with other revenues for building permits and other fees.

0 One of the most important policy initiatives is to ensure that all Americans have affordable housing and permanent shelter.

0 Others include ensuring nondiscrimination in housing and promoting balanced metropolitan growth.

Contemporary Dynamics

0 The first federal legislation related to housing in 1937 created public housing projects as a response to the housing crisis caused by the Great Depression. Public housing is an example of supply side housing policy, where government provides living units at affordable prices.

0 Housing vouchers are another federal strategy to stimulate housing demand in the private rental market. Vouchers encourage landlords to rent to economically marginalized persons by subsidizing the difference between their income and a maximum allowable rent.

(Continued)0 Other federal strategies include block grants to states to

encourage states and local governments to support low-income housing. The community Development Block Grant is the largest block grant program.

0 The low-income Housing Tax Credit program offers tax incentives to private enterprise to participate in developing low-income rental units.

0 The Fair Housing Act of 1968 made discrimination on the basis of ethnicity in the housing market illegal. The U.S. Department of Housing and Urban Development (HUD), founded in 1965, was designed to oversee public housing and other subsidy programs.

Discussion

0 Three ways to help people afford their homes0 Direct grants – subsidized housing.0 Guaranteed loans – make it easier for the poor to obtain

a mortgage0 Tax incentives – help the poor by giving significant tax

reductions to those who buy a home

Small group discussion: Which of the three approaches (there are others) do you think is best for poor people? Which is best for society as a whole?

(continued)0 The Federal Housing Administration (FHA) was established

under the Roosevelt administration in 1934 as a way of stimulating new housing construction and reducing unemployment in the construction industry.

0 Combined with the Veterans’ Administration program for home loans instituted after World War II (the GI Bill), the FHA encouraged widespread homeownership among White working-class persons in the United States in the 1950s and 1960s.

0 Largely as a result of these federal policies, urban neighborhoods received much less help from the FHA than suburban neighborhoods.

(continued)0 Until the late 1970s, the vast majority of homes purchased

with mortgages underwritten by FHA insurance were in suburban areas. Construction for single-family homes was favored over that for multiple-family dwellings or rehabilitation of existing housing stock, further disadvantaging lower-income urban residents who often could not afford to purchase single-family homes. In this way the federal government fostered segregation and inequality.

0 The FHA changed these practices in the 1980s and began underwriting mortgages in urban minority neighborhoods. These loans allow for lower down payments than conventional mortgages, but they also involve higher interest rates and higher fees.

(Continued)0 HUD also administers public housing, rental voucher

programs, housing and community development block grants, and housing programs serving the elderly, the homeless, and other special needs populations.

0 The Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, known as Freddie Mac, are two private institutions created and monitored by the federal government that provide a secondary market for home mortgages – “government-sponsored enterprises” - the fuse of the subprime mortgage market crisis – caused the greatest recession since the Great Depression in the U.S. history a couple of years ago.

Handouts – Summary of Federal Housing Policies Outline Provisions and

Impact on theProblem

Affordable Housing – What Can Federal Government Agencies Do?

0 The “government” role in housing refers to the variety of activities – taxation, zoning, subsidizing, regulating, lending and others – that take place at several levels of government – federal, state and local.

0 At the federal level, the government serves primarily as a funder, providing financial resources through federal tax policy such as the home mortgage interest deduction, direct subsidies such as assistance to low-income renters and indirect subsidies such as tax credits to builder of affordable homes. Through its other funding mainstays – the Community Development Block Grant Program (CDBG) and HOME – the federal government provides funds to states and localities as well as the flexibility to address their area housing needs.

(Continued)0 In early 2009, the federal government provided substantial

additional funding for affordable housing through the American Recovery and Reinvestment Act (ARRA) of 2009. ARRA provides support for affordable housing in several areas, including preservation of affordable housing units and rental assistance to low-income residents. In addition, ARRA expands funding for neighborhood stabilization and community development efforts that create and/or preserve affordable housing, and revitalize in neighborhoods hit hard by the foreclosure and economic crisis.

Affordable Housing – The Role State Governments Play

0 State governments help lower the cost of homeownership through mortgage revenue bond programs and also can allocate their portions of CDBG and HOME funding, along with state matching funds, to areas throughout the state.

0 Low Income Housing Tax Credits (LIHTCs), a major source of funding for new and rehabbed rental homes, also are allocated at the state level.

0 Some states promote housing and community development through state-run housing trust funds or other funding mechanisms.

(Continued)0 In addition, states are responsible for allocating a large

portion of Neighborhood Stabilization Program funds to their localities and guiding these localities in developing plans for using these funds to create and preserve affordable housing and stabilize communities wracked by foreclosures.

0 It’s important to recognize that the state role goes beyond providing funding. Among other key roles, states can provide incentives or requirements to encourage localities to adopt policies that will help expand the supply of affordable homes. States also can serve as conveners and educators, as well as facilitators, through strengthened enabling legislation.

Affordable Housing – What Local Governments Do?

0 Local governments are often where the rubber meets the road as far as housing is concerned. From implementing zoning regulations and processing requests for waivers to issuing building permits, and conducting housing code inspections, localities play a direct role in shaping the housing that gets built in their communities.

0 Some localities also donate public-owned land or property that has gone into tax foreclosure and contribute local funds to build or rehabilitate homes.

0 Many larger local governments are also responsible for creating and implementing plans to use funds provided through the Neighborhood Stabilization Program.

(Continued)0 These local governments allocate these funds to eligible

organizations that develop and/or preserve affordable housing.

0 Local governments may also administer foreclosure prevention programs that aid homeowners in danger of losing their homes.

0 It’s worth noting that not all government initiatives require spending money. By reducing barriers to development, expanding allowable densities, and creating incentives or requirements for the inclusion of affordable homes within new development, local governments can expand the supply of affordable homes with minimal public expense.

Affordable Housing – The Roles & Responsibility of the Private Sector

0 The private sector can participate in and underwrite media campaigns to raise awareness of the need for workforce housing.

0 As the drivers of jobs, tax, revenue and economic development, area employers and business associations hold considerable sway with city council members and legislators when it comes to reforming zoning regulations or other practices that limit the supply of affordable homes.

0 By advocating for more effective local housing policies and actively supporting efforts to expand the supply of housing, private employers can help both themselves and their communities.

(Continued)0 Private employers can advocate for state grants for

communities that meet their fair share of the need for affordable homes and tax credits for employers that help employees obtain housing.

0 They can participate directly in employer-assisted housing programs that help employees find affordable housing and, in turn, attract and retain a stable workforce.

0 It is also important to recognize the critical role that private-sector developers play in expanding the overall supply of housing.

0 Private financial institutions – namely lenders and services – are critical partners who can help to ensure long-term affordability for homeowners and can also help families stay in their homes.

Affordable Housing – What Can The Nonprofit Sector Do?

0 Nonprofit organizations have been the sponsors, developers and operators of housing – particularly for low- and moderate income people – for many years.

0 Some nonprofit community development groups focus on the overall improvement of targeted neighborhoods. Others have as their mission serving vulnerable populations such as the homeless or physically and mentally disabled. Still others are sophisticated housing developers who specialize in putting together multiple funding sources to expand the supply of affordable homes.

(Continued)0 Nonprofits also have the flexibility to participate in unique

partnerships. E.g. some nonprofits provide housing counseling to the employees of private sector firms that offer employer-assisted housing benefits to their workers.

0 Other nonprofits build close connections with residents of particular neighborhoods, gaining the trust of local residents that may be essential for the success of revitalization efforts.

0 Nonprofits also can work with state and local governments to pool financing for specific housing developments. Or, they can advocate for broader policy changes, such as zoning changes that create more affordable housing opportunities in the communities they serve.

Critical Thinking About Housing Policy Reform

0 The housing market federal housing problems are intimately connected to the larger market forces and have less to do with the needs of low-income and marginalized groups than with the resolution of economic downturns.

0 Profits made in housing construction, sales, and loans have been the driving force in the shifting housing policies and regulations sponsored by the federal government.

0 The historical ideologies that assume that everyone who works hard has equal opportunity to move up the economic ladder presume that securing housing is an automatic result of personal qualities of self-reliance, individualism, and hard work.

(Continued)

0 Unfortunately, separating the reality from these historically based assumptions has been particularly difficult in the creation of housing policy.

0 The reluctance to provide extensive housing support disproportionately affects members of oppressed ethnic groups, who also have to face discrimination in the housing market when they do attempt to access housing in the private market. As long as housing policy remains the handmaiden of the market economy, the real needs of disadvantaged Americans will be an afterthought.

Case Study

0 Case I – Baltimore, Maryland “Live Near Your Work”0 Case II – Immigrants Face Discrimination, Abusive

Fair Housing Policy in Nebraska

Q & A – the Final Team Project0 Format Requirements – APA Lite – available on the course

website – www.uspolicy.weebly.com , the page of “Links” – “Writing Format” 0 2.0 APA Title & Text Pages (p. 5 – 8)0 6.0 APA Citations & References (p. 16 – 20)0 All margins are 2.5 cm

0 Contents: (choosing either Model 1 or Model 2)0 Model 1 – Study Effects of a Policy (intended effects,

unintended effects, distinguish the effects between a short-term and a long-term)

0 Model – Study Implications of a Policy (changes in the distribution of material resources, and changes in distribution of services, rights, and statuses.)

0 Sino-US Comparison

Course EvaluationsThree Steps to fill out the Course Evaluation Survey

STEP 1: Go to the page of “links” of the course website: www.uspolicy.weebly.com , there is a link that will lead you to the Course Evaluation Survey on the Survey Monkey - http://www.surveymonkey.com/s/T8KQKJZ

STEP 2: Enter the password (zhuhai0809) to get into the survey page. There are 10 multiple questions for you to answer, and there is only one answer to each question that needs to be marked “√” (except Question 10 – an open-ended question to get your personal opinion).

STEP 3: Choose “Done” to submit your survey, then thanks for your cooperation.

Thank You!

Good Luck!