How the Government Killed Affordable Housing
By John O. Norquist
Mayor of Milwaukee and a Democrat
Adapted from his book The Wealth of Cities: Revitalizing the Centers of American Life.
A big-city politician deplores government intrusion into housing and urges cooperation with private owners
By focusing on below-market public housing, the government has smothered market mechanisms that would attract private-sector investment.
Private landlords still provide most of the low-cost housing in the U.S., and much of what they supply is in pretty good shape.
Federal intervention in housing has been a disaster for cities and the people who live in them.
After a succession of fiascos associated with attempts to eradicate slums, build housing for the poor, and pursue other seemingly noble goals, it should be obvious that government
efforts often make urban conditions worse rather than better. Not every government effort is destined to fail. In Milwaukee, where I serve as mayor, we have achieved success with some
housing endeavors. But the efforts that have brought genuine benefits have usually been local initiated and have tried simply to help the private market work better, rather than
assuming that a bureaucracy can competently build or operate places that people call home.
The sorry consequences of federal involvement in housing can be seen in the decline of low-cost housing. Up to the 1950s, American cities offered people without much
money a variety of choices in shelter. Not all of the housing was pretty or spacious. But the options were numerous, and included walk-ups, apartments over stores, triplexes, duplexes,
single-family houses, apartments over garages, flats in back, boardinghouses, tenements, low-rent hotels, and row houses.
Many of the customers for these places were immigrants, most of whom eventually moved on to something much better. Though much of this housing fell short of
today’s standards, it allowed people to save their money while still being sheltered in an urban setting.
Efficient, low-income housing grew organically in cities. For instance, at the turn of the century it was common for people
to live above the shops on a commercial street. Tenants attracted to these apartments worked in the establishments below or on streets nearby. Sometimes the apartments above shops were
occupied by the shop owners themselves.
In Milwaukee, German and Polish immigrants with peasant backgrounds placed an extremely high value on home ownership. Their self-denial and inventiveness is
demonstrated by the Polish flat.
The Polish flat was a modest three- or four-room cottage built with the first money these immigrants saved. As the mortgage was paid off, the owner of the cottage
typically would raise it on posts four or five feet high in order to construct a semi-basement living space, with a separate entrance, below. Sometimes this space was occupied by newly
arrived, income-earning members of the owner’s family or extended family; sometimes it was let to boarders. As soon as additional income allowed, the timbers in the basement were
replaced with brick walls. Rooms were added to the upper floor. Sometimes cottages were lifted off their foundations and rolled through the neighborhood to be joined to the homes of their
kin. You could tell the Polish families that had made it in Milwaukee they no longer used the basement for income, and had converted their duplex to a single-family house.
In Milwaukee and other big cities, there were sometimes gaps in the urban housing market. The incredibly rapid urbanization
of the United States during the industrial revolution caused the gears of the housing market to grind painfully at times in an effort to keep up, particularly in the major destination of
immigrants, New York City.
In 1890, muckraking journalist Jacob Riis produced How the Other Half Lives, documenting the unhealthy living conditions in some of New York’s tenements.
Riis’s book focused public attention on real problems, resulting in valuable improvements in immunization programs and water, sewer, and sanitation services. But a detrimental
consequence of the book was the vilification of such urban housing forms as New York’s tenements and Boston’s triplexes.
Reformers spread the notion of a housing shortage, claiming that the market had failed. New York, Chicago, and other cities began to create public housing, at first
paying for it themselves. Cities built only what they could afford, and thus built to a human scale. In 1920 in Milwaukee, money was appropriated for cooperative home building, which
consisted of two- or three-story apartment buildings. These buildings had an institutional look, but unlike later federally funded housing many of these buildings are still in service and
attractive to tenants.
While cities tried to patch perceived housing gaps, state and federal bureaucrats and planners began to damn the urban
neighborhoods that were playing such a valuable role in assimilating immigrants and low-income citizens. Of the poor but marvelously functional and upwardly mobile Polish neighborhoods of
Milwaukee, one state health official said:
The 12th and 14th wards are more
than any others the regions of the modern cave dwellers....The basements are occupied from choice and long fixed habit, as well as, in some cases, to reduce the cost of living. In many
cases well-to-do owners of the property are found living in the basement when the first floor rooms are vacant. The only excuse for such living is ignorance.... In fact, the basement
has a musty, sour, human smell that they like.
Such prejudice fueled many state and federal improvement programs for cities. The exalted ideals of reformers crushed the humble dreams of the immigrants. Lot
coverage restrictions gradually eliminated new construction of the rear house and the Polish Flat, report researchers Judith Kenny and Thomas Hubka. As a consquence, home
ownership became more difficult.
In 1930, the Hoover administration developed a model zoning ordinance that emphasized separation of houses from commercial and industrial activity. This was a
response to some legitimate concerns raised by people living near noxious factories, stockyards, and rendering plants. But the result is the familiar pattern we see today in suburbs
offices in one parking pod, retail in another, light industrial in another, and housing on cul-de-sacs, isolated from everything. Neighborhoods have no corner stores or anything
else within walking distance, except identical housing. Nearly overnight, with the widespread adoption of these codes, the corner store with living space overhead ceased to be built in
the United States. Main Street, with its mixed uses and pedestrian orientation, became a historical rather than contemporary form.
Separated, single-use zoning hurts U.S. cities. If governments would get rid of some of their prohibitions on combining commercial and residential uses, developers
could build low-cost housing on top of venues like video stores, supermarkets, fast-food outlets, or drugstores. Developers will respond, as they have in Japan, Western Europe, and
Canada as well as a few U.S. cities like Charleston, South Carolina, and San Francisco.
In 1937, as part of the New Deal, Congress established the United States Housing
Authority to create more public housing. Most of it was two-story and three-story construction, widely scattered. Early public housing simply shadowed the natural housing market,
supplementing a market disrupted by depression and then war. By 1950 federal public housing intended to be a temporary program during a time of economic distress had
outlived its usefulness. The small federal bureaucracy could have been easily dismantled. Instead, aided by Congress, it looked for and found a new clientele.
Housing bureaucrats adopted the migration of poor African Americans to big cities as a cause. Before the gears of urban housing markets could click into place,
giving low-income blacks housing strategies like immigrants before them, the federal government jumped in with sterile high-rises, separated from the urban fabric by lawns and parking
This resulted in such infamous projects as Pruitt-Igoe in St. Louis, where 12,000 African Americans with incomes at or below poverty level were warehoused in a
high-rise apartment complex and expected to create a community. They didn’t. Pruitt-Igoe, Robert Taylor Homes in Chicago, and scores of similar projects were complete
From coast to coast, cities used federal urban-renewal grants and, later, Urban Development Action Grants to eliminate the
blight of low-cost hotels and apartments. Removing blight really meant putting people without means on the streets and onto government dependence. After World War II, journalist Pete
Hamill rented a one-room apartment in New York for $8 a month, which, even in today’s inflated dollars, would be a low outlay, about $100. That kind of opportunity was available
in U.S. cities before urban renewal removed it. By tearing down low-cost housing, the government forced private providers out of the low-end housing market, thus creating both a
permanent public-housing clientele and, eventually, homelessness.
After much of the low-cost housing had been destroyed, the federal government began a single-room occupancy program to increase the supply of one-person dwellings.
For nearly 200 years the market had produced low-cost housing in a variety of forms, shapes, and sizes. Now the only low-cost housing is produced by the government. And considering the
tax subsidies involved, it is not low-cost.
What’s wrong with federally funded public housing other than poor targeting, poor design, poor management, and
periodic scandal? Just one thing: It’s not needed. The United States does not have a housing shortage. Rather, it has a distorted housing market. The federal government, by
focusing on below-market public housing in city neighborhoods, has smothered market mechanisms that would attract private-sector investment. This has made it easy for lenders to
redline those neighborhoods. In his book HUD Scandals, Irving Welfeld points out how illogical it is to have the government build affordable housing:
If the poor cannot afford food, we earmark assistance and give them food stamps. We don’t create farms that grow only ’affordable food’ or build
’affordable food’ supermarkets where only the poor can shop.
The housing problems of cities have been aggravated by government agencies like the Federal Housing Authority (FHA), which has insured almost $200 billion in
mortgage loans for detached, single-family, new construction. The FHA diverted capital from the urban housing market by focusing almost exclusively on new single-family homes in the
And for most of its existence, the FHA has been unnecessary. Mortgage insurance has been widely available in the private market since the mid-1950s. Yet the private
companies providing it have to compete every day with the federal government.
The federal Department of Housing and Urban Development (HUD) is another problem agency. It has 11,000 full-time employees (that’s more than 100 federal
bureaucrats for every central city in the U.S.). It administers dozens of programs that add billions of dollars to the national debt each year. And most of these programs aim to solve
problems that have actually been created by government.
Congress hasn’t helped in any of this. Over the years it has directed housing programs to sprint one way, stop, turn
around, and sprint the other way. Until 1949 low- and middle-income workers were public housing’s clients. For the next 25 years policies wavered back and forth, but gradually
excluded all wage-earners except those with the lowest incomes. In the mid- 1970s Congress tried to turn the clock back to the good old days and appeal to a broader range of
incomes. Not surprisingly, it was too late to induce role-model families to live in what had become shabby, crime-ridden projects. In the 1980s the tide turned back to
providing services only for people with the very lowest incomes.
After high-rise projects failed miserably as family housing, local housing authorities began to convert them to elderly housing. In Milwaukee, these changes were
working well. In the 1970s, however, HUD told local housing authorities that the agency’s rules required that elderly people live with people with disabilities. Under HUD’s
rules, however, disabled included people with drug or alcohol addiction. Often these people had criminal records. Not only did they have to be housed in the same buildings with
elderly people; it required placing them on the same floors. A conspiracy theorist might think this was a calculated attempt to drive law-abiding citizens out of federally
subsidized housing in order to turn it into an extension of the crowded federal prison system.
As a state senator in 1987, I visited a high-rise housing unit on the west side of Milwaukee. The elderly residents cried as they pleaded with me to help get the
drug addicts and criminals off their floors. I told Milwaukee Congressman Gerald Kleczka I wanted the law changed. After continued pressure from Kleczka and from Wisconsin’s U.S.
Senators, and over the opposition of HUD bureaucrats and advocacy-group extremists, the rules were finally changed years later, during the Clinton administration.
Private landlords still provide most of the low-cost housing in the United States, and much of what they supply is in
pretty good shape. Some is not. That’s where building-code enforcement has traditionally stepped in. Court-enforced penalties may be the only way to deal with genuine slumlords.
But experience has taught our Milwaukee building inspectors that people who own and manage residential property may perform poorly simply because they don’t know better.
Milwaukee’s inspectors were using up valuable time chasing the same code violators who were renting to the same bad tenants over and over. Then deputy building
inspector Marty Collins had the idea for the Landlord Training Program, in which building inspectors teach landlords how legally to screen against bad tenants those with a
history of damaging property, engaging in criminal activity, or not paying the rent. The inspectors also teach that well-kept property attracts reliable tenants. The program provides
tips to landlords on how to comply more easily with code requirements. Equally important, the program gives building inspectors an opportunity to learn from landlords.
More than 30 percent of Milwaukee’s landlords have completed the program. Code violations among those who have received training are down substantially. Also,
landlords are helping the police reduce illegal drug use and related crime.
Milwaukee’s building inspectors, police, and neighborhood groups together devised the Drug Abatement Program which encourages landlords to evict suspected drug
sellers immediately, even if this means passing up the opportunity to stage a big drug raid. Why? Because people, especially children, who live near a suspected drug house need quick
relief from the threat to their lives and property. As soon as drug activity is suspected, the landlord is informed and asked to evict. Police monitor the suspects if they move to
another location in Milwaukee. Statistical review shows that drug sellers generally stop after being confronted; they know that the police and that cooperating landlords have them on
People already living in public housing should be allowed to stay as long as they follow the rules. But the federal
government should stop producing new public housing. Over time, the private market can produce low-cost housing much more efficiently. The presence of public housing, both through its
buildings and through rent subsidies, distorts the low-cost housing market by chasing away private investors and raising rents.
The federal government should also reduce its mortgage subsidies, whether they are made through the Federal National Mortgage Agency, the FHA, or the
mortgage-interest tax deduction. In 1994, income earners in the top 20 percent received $63 billion in housing subsidies; those in the bottom 20 percent received $18.7 billion. The
current mortgage interest deduction could be capped at the level of interest required to finance a half-million-dollar home. Over time, as housing prices increase, the deduction would
have a decreasing impact on housing decisions.
There are many bad policies that need to be discontinued and bad habits that must be broken. If we heed the lessons from this century’s experience with housing
problems and urban deterioration, we can make stronger, healthier cities which will work better for everyone, including people of modest means.
Reprinted with permission from The American Enterprise, a Washington-based magazine of politics, business, and