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HOMES Manifesto

If you’re poor, but hardworking, moving to a place where hardwork is rewarded is an obvious way forward. However, if you can’t afford to live there until you’re richer, then you’re stuck.

In other words, social mobility depends on geographical mobility.

It’s an issue explored by Derek Thompson in a fascinating piece for the Atlantic:

“Living affordably and trying to climb higher than your parents did were once considered complementary ambitions. Today, young Americans increasingly have to choose one or the other—they can either settle in affordable but stagnant metros or live in economically vibrant cities whose housing prices eat much of their paychecks unless they hit it big.”

To make his point, Thompson looks at a list of American cities ranked according to an index of social mobility:

“…the top of the list was crowded with rich coastal metropolises, including San Francisco, San Jose, Los Angeles, San Diego, and New York City.”

He then compares this against a ranking of housing affordability:

“…the 10 least affordable cities in the country included, predictably and dispiritingly, San Francisco, San Jose, Los Angeles, San Diego, and New York City.”

The basic pattern is as follows:

“When a city grows rich, its wealth tends to outpace its housing supply, forcing prices higher and making vast swaths of the city unaffordable for middle-class families. And once the rich are ensconced, they typically resist the development of more housing, especially low-income housing, anywhere in their vicinity.”

However, there are some exceptions – and the most interesting of these is an American city that doesn’t get much attention over here (nor, one suspects, over there):

“The Minneapolis–St. Paul metro area is richer by median household income than… New York, or Chicago, or Los Angeles… Among residents under 35, the Twin Cities place in the top 10 for highest college-graduation rate, highest median earnings, and lowest poverty rate, according to the most recent census figures. And yet, according to the Center for Housing Policy, low-income families can rent a home and commute to work more affordably in Minneapolis–St. Paul than in all but one other major metro area… Perhaps most impressive, the Twin Cities have the highest employment rate for 18-to-34-year-olds in the country.”

How do they do it?

In terms of policy, two things in particular make Minneapolis special among American cities. The first is ‘fiscal equalisation’ – the sharing of local tax revenues across local authority boundaries. This helps a prevent a Detroit-style scenario in which the less-favoured parts of the metropolis slide into penurious decline. The second key element is that responsibility for building affordable housing is shared across all neighbourhoods – i.e. it isn’t concentrated in the poorest communities:

“The Twin Cities’ housing and tax-sharing policies have resulted in lots of good neighborhoods with good schools that are affordable for young graduates and remain nice to live in even as their paychecks rise. This, in turn, has nurtured a deep bench of 30- and 40-something managers, who support the growth of large companies, and whose taxes flow to poorer neighborhoods, where families have relatively good odds of moving into the middle class.”

The UK, of course, goes a lot further than the US in equalising tax revenues between different areas. However, we do so in a highly centralised way. The key point about the Minneapolis model is that the policy originates from, and is coordinated across, the metropolitan region. Governance takes place at the appropriate level, which is locally, but not so locally that there is no cooperation between organically-linked neighbourhoods.

We need to apply this model to our ‘city regions’, so that places like Greater Manchester and Tyneside can achieve their own combination of affordable housing and economic opportunity.

Crucially, the City Deals programme, which is the most advanced part of the Government’s localism agenda, enables and encourages just this sort of co-operative local leadership. Rebuilding the foundations for strategic governance at a city-wide level may prove to be the Coalition’s most enduring achievement.

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