Downs talks more about the public and the private

In his book Neighborhoods and Urban Development, Downs makes the case that a certain number of run-down neighborhoods are necessary in an urban area to house the poor. He presents a life cycle view of housing that says the wealthy buy new construction as it is the most expensive, the middle class settle into the midrange homes, and the poor find the least expensive housing in properties that are nearing the end of their useful lives.

Through the 60s, many slummy areas in the US were bulldozed. Minneapolis razed an area called the Gateway District in the name of urban renewal. By the 70s there were already regrets about this unscrupulous destruction of a city’s history. What Downs is saying is that these areas are necessary for affordable housing. Yet in his day, cities did not want to host such services and competed to let other municipalities bear the burden of this public service.

As a result, every municipality is engaged in a competitive struggle with other municipalities in its metropolitan area, each trying to get rid of its deteriorated housing and to avoid accepting any more. These struggles are hidden by the unwillingness of anyone to admit that a certain amount of deteriorated housing is necessary to house the area’s poorest households. Instead, all espouse the myth that deterioration could be completely eliminated if only everyone tried hard enough. That would in fact be true if nonpoor households were willing to pay the public subsidy costs of helping the poorest households occupy housing that met middle-income standards.

From an analysis standpoint, it is important to note that different levels of government act as a private parties even when engaged in public objectives. The citizens of a municipality share the resources of that city, but they are perfectly happy to push off other obligations, even incented to, on a neighboring city. In the same way, school districts compete for students from strong supportive families. There is a morphing within the levels of governance depending on whether the analysis is inward-looking (a public action) to outward-looking (a private action).

The change to note from when Downs wrote this book in the early 80s is that there is a different view of homes or buildings in poor condition. Probably due (at least in part) to his insights, policymakers realize a property in poor condition can be a source of affordable housing. There is even a name for them, NOAH, naturally occurring affordable housing.

Competition still exists between cities around affordable housing issues. But now it is in securing state levels funds from Minnesota Housing Finance Agency to make new mixed-use housing projects feasible. Due to the expense of new construction and the lower-income from below-market rents, a subsidy is needed at all levels to make these buildings work. At least the syncing of the public objective aligned, though not always I grant you. Instead of pushing low-income housing off on others, wealthy cities can find themselves competing to house the poor through a mixed-use project. Unfortunately, they tend to lose out on the support necessary to fulfill their obligation to the needy.