The Ones That Failed: Housing Policy Flops

August 9, 2011

Today’s post comes from guest blogger Katie Wells. Katie is a doctoral candidate in geography at Syracuse University and an adjunct instructor at George Washington University in D.C., where she lives and conducts research. Her dissertation examines histories of property development and poverty in this city.  Katie will be writing occasional pieces on the history of DC housing policies and organizing, to provide added historical context and another perspective to DC’s current housing struggles.

As I think about what’s happening now—and what could be happening in the coming year—around housing policies, it’s not hard to see the legacies of decades-old housing policies in the landscape. CNHED has written about a few of them here. Other folks have written about them here, here, here, and here. What’s sometimes not as easy to see is the effect of the housing policies that failed. Which policies didn’t make it—and why?

Here’s a quick look at two very different failed policies, which address opposite ends of the housing crisis and reflect distinct forms of political engagement: 1) a tax on speculation in the 1970s and 2) a right to shelter in the 1980s.

Failure 1: In 1978, City Council passed a temporary anti-speculation tax after debating various versions in legislative hearings. The Residential Real Property Transfer Excise Tax was written in response to concern about widespread flipping and speculation in the residential property market.

Speculation is, roughly, an investment in a property that carries very little risk but offers the possibility of large gains. It can drive up the cost of housing and property taxes to the point where the residents of the area can no longer afford to live there. Speculation can also be predatory. In D.C. in the 1970s speculators took advantage of the wave of first time black homeowners who didn’t have “the expertise to go through land records to find out what the slum speculator paid, and when.” The new homeowners often paid exorbitant rates for houses that just weeks earlier were listed at a fraction of the price. A Council study found the following: “Between October 1972 and September 1974…one out of every five sales of homes in the District involved two or more sales of the same property, 80% within 10 months of each other.”

Inspired by the politics of SNCC and the just-passed D.C. Human Rights Act, which protected against discrimination in housing, the law levied a steep tax (near 100%) on short-term buying and selling of residential properties without improvements. It also required an inventory of all transfers of residential property and the disclosure of the seller’s purchase price and costs to buyers of residential property. All three of these measures were the first of their kind in the country. (Caveat: Vermont at the time had a tax to stop speculation of rural land.)

The law expired in 1981 with the City Council’s blessing. By December 1979, the Washington Post had already deemed the law an utter failure. By that time, the law had only been implemented three times, thanks in large part to easy-to-find loopholes.

Some blamed the failure on the City Council and Mayor, specifically the way its progress on civil rights was not met with progressive stances on economic justice. Mayor Walter Washington once asked, “But what’s wrong with speculation?”

Others cited the influence of the real estate industry.  They first became politically organized through the debates on the tax and actively opposed it. In addition, there was the racial politics of speculation. With the new win of home rule, many black leaders thought it was finally their turn to turn a profit—and the development industry was the place to do it. Speculation sounded to many like a form of economic power that was owed to black city residents. As a result, one observer wrote that it was difficult for “activists to invoke the same degree of outrage at black profit seekers as they do when the perpetrators are white.”

Failure 2: Through an entirely different set of tactics in the early 1980s, the Community for Creative Non-Violence (CCNV) helped to enact a policy that affected not developers but homeless residents of the city. Unlike the speculation tax, this policy—a right to shelter for every resident on every night of the year—was implemented against the wishes of the City Council through a public initiative (Initiative 17) with seventy percent of voters’ approval. CCNV’s demonstrations, hunger strikes, and legal actions had won not just national attention but strong, local support in a city where homelessness was booming and the new homeless shelter system was overwhelmed with demand.

Like the speculation tax, this policy was the first of its kind in the nation. (That year, a D.C. court also made the city the first in the nation to allow homeless residents the right to vote.) And, like the speculation tax, the policy was short-lived. In 1990, after heated public debate, the Right to Overnight Shelter Act was repealed by City Council—and another popular referendum failed to overturn the repeal.

The repeal of this law and the failure of the second referendum can be attributed to a series of factors, perhaps most importantly corruption in city government that led to poor planning in the shelter system and widespread frustration with city-run homelessness services.

Some also cite “compassion fatigue” and disgust on the part of city residents with what they perceived to be a too-wide safety net inviting everyone on the east coast to come to town. One study contests such claims. It shows that voters who lived closer to shelters were likely in both the 1984 and 1990 referendums to support the right-to-shelter. Distance to a shelter often increased overall support for shelters rather than decrease it as NIMBYism might suggest, which makes the referendum’s failure appear as an anomaly.

Another story has circulated that the wording on the referendum in 1990 was misleading, sort of a Florida-chad issue. The result of the vote might not have reflected actual support for the law.

So, what? What are the legacies of these two failed policies on the housing landscape today?

On one hand, the effects of the speculation tax seem dismal in contrast to the right-to-shelter law. The right-to-shelter law provided the grounds for a number of legal actions and fines against the Mayor for inadequate shelter conditions and turned the city into a trailblazer for national homelessness policy. The speculation tax did no such thing. The speculation tax did not in the least bit stop the conversion of affordable housing stock into investment tools.

On the other hand, the legacy of the tactics involved in the passage of the speculation tax seems to be greater than that of the right-to-shelter law. In recent years, affordable housing policies, like inclusionary zoning and property tax assessment caps, have been established through legislative hearings and city council decisions—not popular initiatives.

The failures of these different policies raise key questions for people who care about DC’s policies for keeping housing available and affordable:

Would either of these policies fly today?

How can grassroots policies, like the right-to-shelter, be made to stand the test of time?

If, as reporters Tom Sherwood and Harry Jaffee told us almost two decades ago, “in Washington, the way to create a fortune is selling and buying property,” what kind of housing policies can succeed—or need to fail—to make this a city where there is housing for all?


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