Region Forward Blog

Henry Cisneros on Housing's Key Role in America's Economic Recovery

Mar 27, 2013
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Last Thursday Henry Cisneros former HUD Secretary under President Clinton spoke at an event organized by the Washington Regional Association of Grantmakers as part of its Brightest Minds series.

Cisneros provided first-hand insights on the evolution of the American housing market and discussed how housing will play a critical role in whether the country’s economic recovery is sustainable for the long-term.

He began by emphasizing the importance that housing has on the country’s economy. When the industry is taken as a whole it accounts for as much as 20% of America’s GDP. When an industry of that size is hit as hard as it was in 2007-2008 it’s no wonder that the Great Recession was so deep and prolonged.

The housing industry appears headed both locally and nationally in the right direction. This is critical because as Cisneros noted over the past century all general economic recoveries have been preceded by a recovery in the housing market.

In addition to the sheer size of the housing industry’s share of the economy Cisneros discussed the importance of housing location and type for metropolitan areas and their residents. Where housing is located has a major impact on how places function. When affordable housing is built in the US it is often built far away from primary job centers. The knock-on effects of this are well-known to readers of this blog: productivity loss environmental degradation increased stress etc.

Cisneros noted that in many high-priced regions like metropolitan Washington or the Bay Area people often move far away from the center to find cheaper housing. What they often don’t realize is that the massive transportation costs associated with such a move can easily exceed any savings realized by reduced housing costs.

A Changing Economy in Metropolitan America

After sketching out the impact that housing has on the economy and on how places work Cisneros moved on to discuss changes underway in the country and how these changes will impact U.S. metropolitan areas and housing in particular.

He started with some history: in the early and middle parts of the 20th century manufacturing was the backbone of the American economy. As Cisneros noted even for cities that aren’t normally thought of as being manufacturing hubs – such as Houston and Los Angeles – manufacturing still accounted for at least 30% of their economic activity. For major hubs like Detroit it was even higher (50% or more).

With manufacturing comprising such a large share of urban economies it was inevitable that once manufacturing started to decline in America these places were the hardest hit. The root of the problem was not urbanization rather a massive economic shift away from a fundamental industry.

Flash forward to today and we see another major economic shift underway. This one however is very urban-friendly. Almost all of the industries growing or projected to grow in the future – higher education information technology green building new media hospitality and tourism etc. – are thriving in urban areas. It’s almost a complete reversal of the manufacturing decline. People are moving to urban areas in droves to participate in this new economy.

“The wind is behind the sails” of metropolitan area economies as Cisneros put it. He noted though that the process isn’t entirely self-sustaining. As bright as the urban future might appear it will require new infrastructure and new policy to support it. Housing and particularly affordable housing is one of the most critical needs.

Recommendations

Cisneros closed by offering several strategies leaders in government business and notably for the audience in the philanthropic community can employ to help make this economic shift more inclusive:

Rebalancing housing policy from an ownership-dominated system to one that more equitably addresses renters’ needs – a major and growing part of the housing market. Promoting home ownership is important but far too few resources are provided to renters currently and in an increasingly urban economy that imbalance isn’t sustainable.

Secure valuable land around transit for affordable housing and to prevent displacement. We all know that we need affordable housing and transit-oriented housing however the two are often hard to achieve at the same time. One strategy Cisneros recommended is for localities to ensure that any public housing development sold be required to include at least a certain percentage of affordable units in redevelopment.

Fix urban education systems: Struggling school systems are cities’ “achilles heel” Cisneros noted. No amount of urban renaissance will keep families in cities once they have kids if the schools are failing. Reducing income and racial segregation at schools and more close cooperation among housing and education policy are two ideas Cisneros put forth.

Invest in housing counseling: Studies show that people who go through housing counseling are much more likely to hold on to their homes than those who don’t. Area residents can contact the Capital Area Foreclosure Network to find a HUD approved housing counselor.

Promote senior housing: The country’s population over 65-years-old is going to double from 40 million to 80 million by 2040 (and the over 85 population will nearly triple). Most of these people will live in their own homes but their homes aren’t adapted to senior living. Small changes – such as lowering cabinets or replacing door knobs – can make it much easier for people to live in their current home longer.

Last but not least all of these strategies will need champions. Whether it’s promoting tax reform to benefit renters encouraging low-income housing tax credits fighting for better schools or permitting zoning changes to allow multi-generational housing none of these issues will happen without consistent support from issue advocates.

For more on the Cisneros speech visit WRAG’s The Daily WRAG.

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