An Economist: Housing and Poverty Are Two Separate Issues

Shirley Svorny is professor of economics at Cal State Northridge

Due to our expanding economy and growing prosperity, median housing prices in the San Fernando Valley have risen more than 40% since their 1996 lows. Apartment vacancy rates have fallen from more than 10% in many areas in 1996 to closer to 3% today. At the same time, a number of articles in The Times have raised concerns about rising prices and overcrowding in our poorest neighborhoods.

Concerns about housing prices and availability in the Valley and overcrowding in its poorest neighborhoods confuse two separate issues. To fight poverty you need, among other things, a strong dose of opportunity. The housing market will take care of itself.

Prices are high and vacancy rates low because the Valley economy has been booming. Rising home prices and apartment rents serve an important role--they influence migration patterns, residential construction and occupancy rates. Higher prices slow the migration of individuals to our community. High prices also encourage some people to leave. Homeowners who no longer value the proximity to urban jobs will take advantage of the opportunity to cash in on the appreciation in the value of their homes. When they sell, space is made available for individuals who place a higher value on living in this area.


At the same time, rising home prices and apartment rents signal developers to pursue available means to build new homes and apartments. High prices encourage more efficient use of land; developers see profits in building up rather than out. Ultimately, changes in migration patterns and housing construction will moderate the price of housing in the Valley.

In the apartment market, higher rents lead to greater density. Higher rents encourage individuals to share units; the number of persons per household increases. Higher prices work to resolve the housing problem brought on by an economic boom by encouraging people to use space more efficiently.

Concern over families living densely in low-income communities is about poverty, not housing. In fact, attempts to limit density in poor neighborhoods would make residents worse off. The inflow of residents and increased density at a time of rising rental rates reflect increased local opportunities for work; displacing these individuals would move them farther from the jobs they seek to fill. The poorest families, faced with paying full rent, would have to move.

Over time, as residents find jobs, they leave crowded rental units for more attractive living conditions, perhaps farther out. But for many, these overcrowded units provide the first stop, a port of entry to our regional economy.

There is no simple solution to the problem of housing the poor. Public construction projects are costly, making them an expensive way for taxpayers to help the poor; it is far cheaper to buy existing homes than to have government agencies build them. To some extent, public construction is offset by reduced private-sector construction, limiting the increase in housing.

Large public housing projects have been magnets for crime and often fall into disrepair. To induce residents to maintain the facilities, some economists have suggested that ownership of existing public housing be transferred to residents.


Affordable housing and rent subsidy programs often shift valuable living space to people who might not, on their own, choose to live in the Valley, increasing demand at a time of scarce supply. For example, developers in Porter Ranch, negotiating with the city for the right to build new homes, were pressured into agreeing to reserve 400 residential units for 30 years as affordable housing for senior citizens. The problem with this set-aside is that, where land is valued for its proximity to jobs and other urban resources, it makes little sense to build subsidized housing for seniors. Faced with the true cost of living in the Valley, some seniors would choose to locate elsewhere; setting aside space for them makes a tight housing situation tighter.

Although some low-income families benefit from government subsidies to housing, it is not clear these are the families we really want to help. The families that need our help the most are the least skilled in negotiating the necessary channels, the least likely to get assistance. Wouldn’t public housing funds be better--or more fairly--spent on education in poor communities or to increase the earned income tax credit for the working poor?


The Valley’s economic recovery from the prolonged recession of the early- to mid-1990s has led to job creation and, as a result, increasingly expensive housing. High prices carry the signal that land is scarce and serve to manage the available stock of housing in the Valley. Public housing programs aimed at the poor cannot make scarce land less scarce. The best of times--offering opportunities for employment and advancement--necessarily increase the competition for resources in the San Fernando Valley.