Rethinking the Welfare State: The prospects for ... - e-Library

Rethinking the selfare state 68
adequate to meet the demand for new housing units. In fact, a major housing dynamic in
urban centres is “filtering (or ‘trickling’) down,” where middle-class dwellings, which
eventually deteriorate and become less valuable, eventually filter down to lower-income
groups:
The “trickle down” process is a well recognized concept in the housing
market. As a household builds and occupies a new house, existing housing
is vacated, making it available for occupancy by lower income
households, who in turn liberate their own accommodation as they move
up-market. Through this continuous chain of moves, more housing is
ultimately made available for the poor. 75
In centres where this dynamic is preponderant, subsidies for the construction of middleclass
housing may, it can be argued, have a more dramatic effect on low-income housing
availability than subsidies which directly target only the construction of low-income
housing units, particularly insofar as developers are likely to find the higher profitability
of middle-class housing units rnore attractive. Howenstine, however, cautions that this
“trickle down” process slowed considerably in the early 1990s. 76 Moreover, access to
middle-class housing, which increasingly takes the form of single-family homes as
opposed to rental units, also requires access to the mortgage market, which low-income
households (and particularly the poorest among them) may find difficult, if not
impossible. There are also geographical problems as far as access to the labour market is
concerned—the housing vacated by middle-class families may be in a suburb distant
from the areas where the adult members of most low-income households are employed.
In any event, studies such as those conducted by Malpezzi and Vandell cast doubt on
the effectiveness of such subsidies in increasing the housing stock. Except in markets
where it can be assured that (1) their effect on the number of households will be
negligible and (2) the degree of supply elasticity is quite low, supply-side subsidies are
unlikely to accomplish their stated objective. In nations such as Sweden, where income
polarization and birth rates are low, communities are relatively small, mobility is limited,
and housing patterns are stable, these conditions can be met, and may make supply-side
subsidies highly attractive. Elsewhere, however, the case is likely to be far more
equivocal.
Demand-side subsidies
The nation with the most widespread and recent experience with demand-side subsidies
for housing is the United States. Since the Reagan administration, there has been a steady
shift in the allocation of housing funding away from construction of affordable, locally
managed housing and towards vouchers, which are used to rent in the private sector. 77 By
1993, 1.3 million households were receiving vouchers, about the same number as were
then living in traditional public housing projects. 78 The Clinton administration continued
this trend of privatization, and from 1993 to 1998, a further 76,000 (or about 6 percent of
the total stock) units of Department of Housing and Urban Development (HUD) housing
were demolished. 79