Housing policy in need

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Washington is filled with the endless proclamationof good intentions. Yet, the social welfare system is in crisis. The line "I'm from the government and I'm here to help you" rings increasingly hollow. Such certainly is the case with the Department of Housing and Urban Development (HUD). In "America's Trillion-Dollar Housing Mistake: The Failure of American Housing Policy," Howard Husock has collected several essays which show that, unfortunately, HUD does more to subsidize business interests and left-wing activists than help Americans get into quality housing.

Federal policy is based on several myths. Explains Mr. Husock: "The core belief of housing advocates is that the private market cannot and will not provide adequate housing within the means of the poor." That's simply not true, he observes. The poor have found private housing throughout American history.

Obviously, conditions were often harsh, but then, that was the result of poverty, not market imperfections. Writes Mr. Husock: "Housing reformers invariably make matters worse by banning the conditions that shock them. Insisting unrealistically on standards beyond the financial means of the poor, they help create housing shortages, which then they seek to remedy through public subsidies."

For instance, HUD hands out cash and credit to: reduce interest rates for rental and cooperative housing for lower-income people; rehabilitate housing and condos; promote manufactured housing; subsidize homes in outlying areas (which must be farm buildings on "at least 2.5 acres adjacent to an all-weather road"); and encourage the purchase of homes in urban renewal areas.

At least some of the recipients of HUD's largesse sound worthy. But what to make of programs such as Mortgage Insurance -- Group Practice Facilities? It underwrites offices for health care professionals. Uncle Sam will even pay for doctors to move their X-ray machines.

Such programs demonstrate how Washington has become an endless soup line for the well-connected. But initiatives nominally directed toward the poor, such as public housing, often cause the greatest social damage."Most policy experts agree these days that big housing projects are noxious environments for their tenants," writes Mr. Husock. The harm radiates outward to surrounding neighborhoods, including those of lower- and middle-income people. Explains Mr. Husock, "crime and disorder" don't stay within the hideous high-rise projects, many of which have recently been dynamited in frustration, or the newer, more decentralized projects created in their wake.

HUD doesn't learn from its mistakes; it just comes up with new ways to spend money. For instance, vouchers were seen as a way to introduce market incentives, but in practice, the program has tended to concentrate benefits on those least able to maintain a household. The author writes: "Erroneous assumptions about housing affordability rest upon a failure to understand the importance of the means -- marriage and thrift, above all -- by which familiesimprovetheir prospects so they can move to a good home in a good neighborhood."

Uncle Sam also relies on regulations to advance his social ends. For example, the Community Reinvestment Act (CRA) is intended to bar mortgage discrimination.

In fact, studies demonstrate that apparent racial disparities in mortgage lending can be explained by differing credit histories. In a free market, businessmen pay an obvious price for discrimination and, therefore, are less inclined to practice it. While there is no evidence that the CRA has delivered credit to the creditworthy poor, complains Mr. Husock, it has become "a vast extortion scheme against the nation's banks," transferring roughly $9.5 billion to a national network of left-wing interest groups.

Mr. Husock's reform agenda mostly consists of getting government out of the housing business. Were it not for the artificial shortages created by regulators and activists, the private market would provide. So, he would sell off public housing, or at least set time limits for eligibility, as with public assistance.

He points to the non-profit group Habitat for Humanity as a model of what works. The organization requires beneficiaries to labor to construct homes for themselves and others, and it rigorously screens applicants. This "emphasis on values and character in selecting its families is in sharp contrast to what might be called the entitlement view of assistance," notes Mr. Husock, and is what makes Habitat a success.

The failure of federal housing programs offers further proof that good intentions are not enough. When it comes to housing, like most everything else, Washington should remember the Hippocratic oath: First do no harm.

Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Ronald Reagan.