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Es difícil figurarse la manera en que la pérdida constante de población ha devastado a Detroit. Entre 1900 y 1950, cuando el crecimiento de la manufactura automotriz en los EE.UU. la convirtió en uno de los principales centros industriales y culturales del país, la población de Detroit saltó de 300.000 a 1,85 millones de habitantes. A partir de 1950, sin embargo, comenzó a disminuir. Y este descenso ha continuado hasta la actualidad, desplomándose a sólo 700.000 habitantes en 2010, una tasa de reducción casi tan rápida como lo había sido el aumento en la primera mitad del siglo XX.
A pesar del esfuerzo de Detroit durante varias décadas para mantenerse al ritmo de la pérdida de población eliminando el inventario de viviendas ruinosas, aproximadamente un cuarto de sus 380.000 parcelas se encuentra hoy abandonado y administrado por la ciudad u otros entes públicos. Hasta julio de 2014 se han demolido 114.000 propiedades, y 80.000 más se consideran arruinadas (Austen 2014). Si bien es cierto que el centro se está recuperando y los suburbios siguen mostrando vitalidad, un visitante desprevenido quedará anonadado por la “incomprensible desintegración del paisaje edificado” en amplias zonas de la ciudad (Austen 2014).
Este artículo, el primero de una serie de dos, considera las causas fiscales y repercusiones del superávit de viviendas y terrenos baldíos en Detroit, desde la extensión y ubicación de las casas y lotes abandonados en la ciudad hasta la espiral descendente de los precios de las viviendas, que ha provocado una sobrevaluación de las propiedades, mora en el pago del impuesto sobre la propiedad y ejecuciones tributarias; la adquisición pública de dichas propiedades; el patrón de valores del suelo a lo largo de la ciudad; y, finalmente, algunas maneras potenciales de reconciliar la cantidad de habitantes que quedan con la cantidad de propiedades vacantes y administradas públicamente. Estas medidas van desde revitalizar vecindarios densamente poblados a establecer un cinturón verde y adquirir parcelas vacantes para uso público, como parques, bosques, zonas de amortiguamiento industrial, lagunas de retención y otros espacios abiertos (Austen 2014).
Factores de la caída
Las causas de la decadencia de Detroit son múltiples y quizás demasiado conocidas. La infraestructura de transporte subsidiada por el gobierno federal, como por ejemplo el sistema de autovías interestatales, facilitó la rápida suburbanización, promovida además por códigos de desarrollo inmobiliario permisivos. La tensión racial, las fuerzas económicas globales y la corrupción desgastaron lo que quedaba de la ciudad propiamente dicha. En las primeras etapas del deterioro, los residentes de mayores ingresos, la mayoría de los cuales era de origen caucásico, se mudó a los suburbios en busca de una mejor calidad de vida, como se muestra en la tabla 1. Para 1990, la población afroamericana también había alcanzado su pico, y comenzó a disminuir en la primera década del siglo XXI. A comienzos de 1960, la manufactura de automóviles de Michigan inició su largo y vertiginoso declive, que afectó de forma desproporcionada a Detroit y Flint. La pérdida de puestos de empleo bien remunerados para la clase media dañó aún más la base demográfica y económica urbana, ya que dichas familias fueron a buscar oportunidades de empleo en otro lado. Las crecientes tasas de crimen y la erosión constante de los servicios públicos provocaron otra ola de deserciones.
La tabla 1 ilustra esta decadencia de las condiciones demográficas y económicas de la ciudad entre 1950 y 2010. Para el 2012, según fuentes gubernamentales, la mediana de ingresos de las unidades familiares era de solamente US$25.000, menos de la mitad de la mediana nacional de ingresos. Los índices de pobreza y desempleo eran 38 y 27,5 por ciento, respectivamente. La tasa de participación laboral era del 54 por ciento (comparado con el 63 por ciento en todo el país) y por cada 6,35 trabajadores empleados había una persona que recibía beneficios de discapacidad del Seguro Social (comparado con 1 de cada 12 en todo el país). Más del 34 por ciento de la población de la ciudad recibía cupones de alimentos, y el 81 por ciento de los niños de las Escuelas Públicas de Detroit eran elegibles para el Programa de Almuerzo Gratis o a Precio Reducido. Las fuentes de ingreso comenzaron a depender cada vez más de aportes externos, incluyendo los no residentes, como se explica en el recuadro 1. En 2013, cuando la ciudad finalmente sucumbió al peso de los problemas fiscales acumulados y se declaró en quiebra, sus deudas y obligaciones sin fondos ascendían a US$18.000 millones, o sea US$68.000 por unidad familiar, lo cual es aproximadamente 2,7 veces la mediana de ingresos de las unidades familiares (Turbeville 2013).
El fracaso del mercado de la vivienda
El descomunal excedente de oferta de viviendas que se acumuló a lo largo de las décadas como consecuencia de la demanda selectiva en Detroit corroyó el valor de la propiedad. La crisis inmobiliaria de 2007–2008 asestó el golpe final, lo que dio como resultado la desintegración casi completa del mercado de la vivienda de Detroit. En 2010, el precio promedio de una propiedad residencial, que en 2006 era US$57.000, se había desplomado a alrededor de US$7.000 (Hodge et al. 2014a). El excedente actual de suelo y vivienda de Detroit podría inhibir una recuperación de los precios inmobiliarios en los próximos años, incluso si la población se estabilizara.
Mora en el impuesto sobre la propiedad, abandono y adquisición pública de propiedades
Los funcionarios de la administración tributaria no han recalibrado el valor de tasación de las propiedades para que este refleje la caída del precios de las viviendas. Esto ha traído como consecuen-cia una sobrevaluación de hasta el 80 por ciento (Hodge et al. 2014a), contribuyendo a una falta de voluntad generalizada para pagar los impuestos, según Alm et al. (2014). Su investigación también muestra que hubo otros factores que agravaron, como las altas tasas tributarias estipuladas por ley, y la limitación de servicios como la seguridad pública.
En el medio de esta crisis inmobiliaria, la tasa de mora en el pago del impuesto sobre la propiedad llegó a un nivel alarmante del 50 por ciento (Alm et al. 2014). La figura 2 (pág. 15) muestra las tasas de mora por vecindario de la ciudad en 2010. La recaudación del impuesto sobre la propiedad depende de la capacidad de una jurisdicción para imponer sanciones por falta de pago, como señala Langsdorf (1973). Cuando los valores inmobiliarios colapsan, las autoridades tributarias no tienen un mecanismo de cumplimiento práctico; el ahorro de los propietarios por no pagar el impuesto sobre la propiedad es mayor que el valor de la casa que poseen y que perderían en caso de ejecución tributaria. Más aún, lo recaudado por la venta de propiedades ejecutadas de bajo valor es insuficiente para cubrir la deuda tributaria morosa y el costo para el gobierno de iniciar las actuaciones de ejecución tributaria.
La falta de pago generalizada del impuesto sobre la propiedad y el abandono subsiguiente de las viviendas ha traído como consecuencia la adquisición pública de miles de propiedades en todo Detroit. El quince por ciento de las parcelas de esta ciudad de 360 km2 está ahora vacante, y cerca del 25 por ciento de la superficie del suelo de Detroit no es actualmente tributable al ser propiedad o estar administrada por la ciudad o algún otro ente público (Sands y Skidmore 2014), como se ilustra en la figura 3.
La espiral descendente de ejecuciones tributarias
En la actualidad, la cantidad de propiedades que pasan a manos públicas por ejecuciones tributarias es mucho mayor que la cantidad de propiedades públicas adquiridas de vuelta por contribuyentes privados.
En Michigan, los impuestos sobre la propiedad morosos están sujetos a una tasa administrativa del 4 por ciento y un interés mensual del 1 por ciento sobre el monto adeudado, a una tasa de interés no compuesta y a partir del primer mes de falta de pago. Después de un año de mora, la ciudad transfiere la propiedad al gobierno del condado y el dueño es sujeto a un cargo de interés mensual adicional del 0,5 por ciento. Durante este período de dos años, los dueños pueden recuperar sus propiedades pagando todos los impuestos y cargos vencidos.
Si el impuesto sobre la propiedad queda sin pagar por más de dos años, el tesorero del condado de Wayne inicia las actuaciones de ejecución tributaria. Después de una audiencia para demostrar causa justificada en la corte de apelaciones, el tesorero del condado vende las parcelas ejecutadas en subasta pública. El monto inicial de la subasta es el del equivalente a los impuestos sobre la propiedad adeudados más intereses y penalizaciones, y lo recaudado se distribuye en forma proporcional entre las jurisdicciones tributarias. Si la propiedad no se vende en la primera subasta, el condado reduce el monto de subasta mínimo a US$500 y organiza una segunda subasta. Este procedimiento ha causado más evasión tributaria, ya que algunos propietarios prefieren ignorar sus facturas de impuestos a la espera de volver a comprar su parcela por US$500 en la segunda subasta.
Las propiedades que no se venden en ninguna de las subastas se pueden transferir a un organismo público (municipal o estatal) o a un banco de suelo estatal o local, o se puede retener para una subasta subsiguiente. Los registros del condado indican que el 80 por ciento de las parcelas vendidas a compradores privados en subasta en los últimos dos años están nuevamente en mora tributaria (MacDonald 2013). Dado que la tasa de mora tributaria es del 67 por ciento para propietarios que no residen en su vivienda (Alm et al. 2014), da la impresión de que una cantidad significativa de los compradores en subasta son propietarios absentistas que pretenden reducir sus gastos operativos y aumentar sus ingresos netos de alquiler dejando de pagar sus impuestos sobre la propiedad.
En las parcelas de bajo valor, los impuestos sobre la propiedad son, en la práctica, optativos. Para reducir la cartera de lotes con mora tributaria (MacDonald 2013), el condado no ejecuta la hipoteca de propietarios que deben menos de US$1.600 en impuestos y multas acumuladas, con lo cual estas deudas se convierten en optativas.
La recaudación prevista por la venta de parcelas de bajo valor es insuficiente para cubrir los gastos legales de una ejecución por falta de pago de impuestos y saldos tributarios impagados. El resultado final es una creciente tasa de mora e inventario de propiedades indeseadas que terminan en manos públicas, donde no generan ningún ingreso para la ciudad.
Y de aquí, ¿adónde vamos?
Se espera otra ola de ejecuciones tributarias a fines de 2014 y comienzos de 2015. ¿Qué se puede hacer para estabilizar la situación?
Cómo poner freno a la mora en el impuesto sobre la propiedad
Como se mencionó previamente, la mora se reducirá cuando los contribuyentes perciban que reciben un valor proporcional a su dinero. Así, si se mejoran los servicios prestados con la recaudación de impuestos como la seguridad pública, la evasión y el pago atrasado de impuestos se reducirá (Alm et al. 2014). Bajo el liderazgo del alcalde recientemente electo, Mike Duggan, el gobierno de la ciudad está adoptando medidas para mejorar el suministro de servicios públicos básicos y ordenar su panorama fiscal. Por ejemplo, en la actualidad sólo 35.000 de las 88.000 luces de la ciudad funcionan, así que Duggan piensa instalar cada mes 2.400 luces que alumbren (Austen 2014). También aumentó la cantidad de autobuses operativos de 143 a 190 y mejoró los servicios de remoción de nieve durante el pasado invierno, que fue particularmente riguroso.
Una reducción de las tasas de impuestos también reduciría modestamente la tasa de mora (Alm et al. 2014). Las tasas tributarias de Detroit, que son aproximadamente el doble del promedio de la región, son de 67 y 85 milésimas por dólar de valuación para propiedades que son un bien de familia y que no lo son, respectivamente. Este valor es el máximo admitido por el estado. Si bien es cierto que una reducción mejoraría la competitividad de la ciudad con relación a otras comunidades de la región, en la actualidad no se está considerando una reducción en la tasa del impuesto sobre la propiedad.
La alineación de la valuación con las condiciones del mercado actual también reduciría la mora. El Alcalde Duggan recientemente prometió reducir las valuaciones en un 5 al 20 por ciento en toda la ciudad, para reconciliarlas con las pautas estatales. No obstante, las reducciones prometidas por Duggan son sólo una pequeña fracción del recorte del 80 por ciento necesario para alinear las valuaciones con el valor del mercado, según Hodge et al. (2014a).
Retirar suelo del mercado
En la ausencia de una demanda sólida de suelo, la cual no parece probable en un futuro cercano, el excedente se tiene que retirar del mercado por un período de tiempo con objeto de que el valor inmobiliario mejore de manera general en toda la ciudad. Dado que los entes públicos poseen ahora tantas propiedades, son las autoridades gubernamentales las que tienen el poder para retirarlas del mercado de forma creíble. Sin este tipo de medidas políticas, la posibilidad de que estas parcelas se transfieran rápidamente al sector privado afectará la recuperación de los precios.
En la actualidad, hay muchos entes públicos que poseen suelos. Las autoridades de la ciudad de Detroit, el condado de Wayne y el gobierno estatal están colaborando para consolidar estas parcelas bajo un solo ente que pueda administrarlas de manera más efectiva. Detroit Future City (2010) detalla esta propiedad fragmentada de suelos públicos:
Los suelos públicos en Detroit están en manos de muchas agencias distintas de la ciudad, el condado y el estado, como también de muchas entidades autónomas o cuasi autónomas como las Escuelas Públicas de Detroit, la Comisión de Vivienda de Detroit y la Corporación de Crecimiento Económico de Detroit. Hay pocas ciudades que tengan un inventario de propiedades tan fragmentado de suelo público. No hay coherencia de políticas, procedimientos o misiones entre estos entes, y muchos de ellos están maniatados por requisitos legales burocráticos y procedimientos complejos. El Departamento de Planificación y Desarrollo controla la mayor cantidad de propiedades; sin embargo, su capacidad para darles un destino estratégico está restringida por obstáculos de procedimiento, como la necesidad de obtener aprobación del Concejo Municipal para cualquier transacción, no importa cuán pequeña o insignificante sea desde la perspectiva de la ciudad.
Aunque este proceso de consolidación es necesario, no es suficiente. Hacen falta recursos financieros para eliminar el deterioro urbano e implementar planes de uso del suelo. Los dirigentes municipales se centran principalmente en estrategias para devolver estas parcelas a manos privadas. Si pudieran estimular un mayor interés en las propiedades de Detroit, esta estrategia podría ser viable.
Hay, efectivamente, oportunidades emergentes para estimular la propiedad privada en el distrito comercial central (central business district, o CBD). Daniel Gilbert, fundador de Quicken Loans, ha mudado su sede al centro de Detroit y ha invertido US$1.300 millones en bienes inmuebles (Forbes 2014). Y la renovación del área del centro ha generado un aumento considerable de los precios de alquiler (Christie 2014).
Los valores del suelo en el CBD son muy altos, como se muestra en la figura 4 por las parcelas negras, que representan los valores del suelo más alto del mapa. Sin embargo, el gradiente de valores del suelo en Detroit es muy pronunciado. Si bien varias zonas dentro del anillo que rodea el CBD han retenido algo de valor, el precio del suelo cae rápidamente a medida que aumenta la distancia al CBD, aun cuando vuelven a subir al acercarse a de los límites de la ciudad, probablemente debido a las comodidades disponibles en los suburbios cercanos, como centros comerciales.
Dada la débil demanda fuera del CBD, podría ser más efectivo determinar qué propiedades públicas deberían volver a manos de contribuyentes privados, qué propiedades deberían retirarse del mercado durante una década o dos, con la opción de volver a introducirlas al mercado en caso de que las condiciones cambien, y qué propiedades deberían retirarse del mercado de manera permanente.
El plan de ordenamiento de 2012, delineado por Detroit Future City, propone la reasignación de suelo para parques, bosques, amortiguadores industriales, vías verdes, lagunas de retención, jardines comunitarios y hasta campamentos (Austen 2014). La implementación plena de esta propuesta ambiciosa requiere recursos financieros importantes. Pero consideremos la manera en que las autoridades estatales y federales intervinieron en el último episodio importante de ejecución tributaria masiva. Durante la Gran Depresión, muchos dueños de residencias familiares en suelos agrícolas marginales de Michigan, Minnesota y Wisconsin ya no pudieron pagar sus impuestos sobre la propiedad, lo que causó una ola masiva de mora tributaria, ejecuciones hipotecarias, abandonos y en última instancia confiscaciones. En esos estados, los gobiernos del condado frecuentemente pasaron a poseer miles de hectáreas, gran parte de las cuales fueron vendidas a los gobiernos estatales y federal. Los seis bosques nacionales de Minnesota, Wis-consin y Michigan, así como numerosos bosques estatales de la región, tuvieron su origen en el abandono masivo de suelo durante la Gran Depresión, cuando las autoridades estatales y federales fueron uniendo en mosaico un conjunto de suelos adyacentes adquiridos a los condados, ansiosos de vender las propiedades que habían decomisado por falta de pago.
En la actualidad, las autoridades del estado y el gobierno federal no se inclinan por un rescate financiero de Detroit. Pero la historia sugiere que los gobiernos federal y estatal podrían ayudar a Detroit a recuperar su viabilidad fiscal adquiriendo grupos de parcelas no deseadas, realizando pagos en lugar de impuestos (como es habitual para otros suelos públicos) y usando después el suelo para beneficio del público en general. Los usos potenciales se describen en el plan de ordenamiento mencionado anteriormente, y se exploran en el segundo artículo de esta serie. Una alianza del gobierno federal con el gobierno estatal y los gobiernos locales para hacerse cargo de estas propiedades podría ayudar a estabilizar el mercado del suelo y crear una fuente de ingresos para la ciudad y demás jurisdicciones fiscales pertinentes (incluyendo el gobierno estatal mismo, a través del impuesto de educación del estado). La recuperación del valor de la propiedad en combinación con la reinversión en el centro de la ciudad, el mantenimiento de los esfuerzos para mejorar el paquete de servicios brindados con la recaudación tributaria de Detroit y la eliminación del deterioro urbano, y una inversión a largo plazo en el capital humano y social de Detroit son elementos esenciales para una recuperación sostenible de la ciudad.
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Recuadro 1: Los no residentes como fuente de ingresos
Las fuentes de ingresos de Detroit dependen cada vez más de aportes externos, como por ejemplo de los no residentes, ya que su población y su base económica se han reducido. Este cambio se produjo en parte porque con el tiempo las legislaturas estatales de Michigan permitieron que la ciudad de Detroit usara estrategias de exportación de impuestos para afianzar su situación tributaria debilitada y lidiar con los cambios estructurales masivos de la economía regional. Aunque hubo períodos en que parecía que Detroit estaba por recuperarse, varias fuerzas impidieron la “velocidad de escape”.
Hoy en día, la ciudad de Detroit depende del impuesto sobre los ingresos, el impuesto sobre la propiedad, el impuesto sobre las apuestas en casinos, la coparticipación en los ingresos estatales, un impuesto de uso sobre las utilidades, subvenciones federales, y varios aranceles y licencias para financiar sus servicios públicos. De estos, el impuesto sobre las apuestas en casinos y el impuesto municipal sobre los ingresos se adoptaron para reforzar los debilitados ingresos provenientes de fuentes más tradicionales.
El impuesto sobre las apuestas en casinos, basado en las facturas de las ganancias de los apostadores, ha adquirido particular importancia para la ciudad de Detroit en la última década, como se muestra en la figura 2, que resume las tendencias de las fuentes principales de ingresos de la ciudad entre 1960 y 2012. La legislatura estatal autorizó la actividad de apuestas en casinos y el impuesto sobre las apuestas en Detroit en 1996 para ayudar a superar sus problemas fiscales. La construcción del casino se completó en 2001. Los US$180 millones en ingresos anuales adicionales ayudaron a reducir la presión financiera mientras otras fuentes, como el impuesto sobre los ingresos y la coparticipación de ingresos estatales, se iban reduciendo. Hasta el 85 por ciento de los apostadores de los tres casinos principales de Detroit no son residentes, según informes recientes y entrevistas con expertos de las apuestas (Miklojcik 2014).
Desde 1963, el impuesto municipal sobre los ingresos ha representado la fuente de ingresos más importante y, durante varios años, la de mayor crecimiento. En el momento de su adopción, la mayor parte del impuesto sobre los ingresos era abonada por los residentes de la ciudad. Sin embargo, a medida que la población se ha ido reduciendo, el impuesto sobre los ingresos de los no residentes que trabajan en la ciudad ha cobrado una participación cada vez mayor en la base gravable tributaria, compuesta de sueldos y salarios ganados por empleo dentro de la ciudad. La tasa tributaria es del 2,4 por ciento para los residentes de la ciudad, y del 1,2 por ciento para los no residentes. Aunque las corporaciones y sociedades también pagan un impuesto sobre los ingresos, es una porción muy pequeña de los ingresos totales recaudados. Según Scorsone y Skidmore (2014), aproximadamente la mitad de la recaudación del impuesto municipal sobre los ingresos en Detroit está pagada por no residentes.
La coparticipación de los ingresos estatales sigue desempeñando un papel clave en las finanzas de Detroit, a pesar de que la pérdida de población también ha reducido esta fuente de ingresos. En Michigan, el gobierno estatal recauda un impuesto estatal sobre las ventas y después comparte una porción de lo recaudado con los gobiernos municipales. Los ingresos del impuesto sobre las ventas se asignan a los gobiernos locales de acuerdo a disposiciones constitucionales y legislación estatal. La porción constitucional de la coparticipación de los ingresos depende del porcentaje de la población total del estado de cada jurisdicción. Dada la disminución del número de residentes en Detroit, esta porción de la coparticipación estatal ha venido disminuyendo a lo largo de varias décadas. La ciudad experimentó un crecimiento significativo de los fondos de coparticipación de ingresos en las décadas de 1970 y 1980 debido a aumentos en la coparticipación de los ingresos estipulados por las leyes estatales, que se distribuyen de acuerdo a fórmulas que los legisladores han ido ajustando en décadas recientes. Pero los nuevos cambios en las leyes estatales, en combinación con el estancamiento del impuesto sobre las ventas, ha provocado una reducción del crecimiento y en última instancia una caída en los ingresos de coparticipación de todas las ciudades del estado en la década de 1990. Durante la década de 2000, Michigan experimentó una recesión y esta caída continuó en la mayoría de las jurisdicciones locales, incluyendo Detroit.
Algunos han señalado que las reducciones en la coparticipación de ingresos fue una de las causas principales de los problemas financieros de la ciudad de Detroit y uno de los catalizadores fundamentales de su quiebra. No obstante, estas reducciones afectaron a todas las ciudades que recibieron fondos de coparticipación en Michigan. Si bien la reducción de los ingresos de coparticipación probablemente aceleró la declaración de quiebra de Detroit, no fue la causa principal. Más aún, es importante recalcar que la coparticipación de ingresos estatales de Detroit representa una transferencia neta positiva de fondos del resto del estado a la ciudad. Según el censo económico de 2007, las ventas al por menor en la Ciudad de Detroit fueron de US$3.200 millones, o sea alrededor del 2,9 por ciento de los ingresos totales del estado de Michigan, de US$109.000 millones. En 2012, los ingresos totales por coparticipación en todas las municipalidades de Michigan fueron aproximadamente US$1.000 millones, y la parte que le tocó a Detroit fue de US$172 millones, es decir el 17,2 por ciento. Dado que Detroit representa sólo el 3 por ciento de las ventas minoristas totales de Michigan, se puede concluir que la mayor parte de los ingresos de coparticipación estatal que ingresaron en Detroit se originó en transacciones producidas fuera de la ciudad.
En 2014, la ciudad de Detroit contaba con aproximadamente US$1.000 millones en su Fondo General, un monto considerablemente menor que en 2002, cuando los ingresos llegaron a un pico de US$1.400 millones. Esta caída de ingresos del 30 por ciento a lo largo del tiempo, sin un recorte proporcional en los gastos, condujo a la crisis fiscal de Detroit y su declaración de quiebra en 2013. Para el año 2012, Detroit había tomado en préstamo más de US$1.000 millones para tratar de evitar la mora y una crisis de liquidez (Departamento del Tesoro de Michigan, 2013).
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Sobre el autor
Mark Skidmore es profesor de Economía en la Universidad Estatal de Michigan, donde ocupa la Cátedra Morris en Finanzas y Política Gubernamental Estatal y Local, con nombramientos conjuntos del Departamento de Economía Agrícola, de Alimentos y Recursos y del Departamento de Economía.
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National Public Radio. 2014. “Chinese Investors Aren’t Snatching up Detroit Property Yet.” www.npr.org/2014/03/04/285711091/chinese-investors-arent-snatching-up-detroit-property-yet
Sands, G. y M. Skidmore. 2014. “Making Ends Meet: Options for Property Tax Reform in Detroit.” Journal of Urban Affairs 36(4) Octubre.
Scorsone, E. y M. Skidmore. 2014. “Blamed for Incompetence and Lack of Foresight and Left to Die.” Response to William Tabb’s “If Detroit Is Dead Some Things Need to Be Said at the Funeral.” Por publicarse en Journal of Urban Affairs.
Turbeville, W. 2013. “The Detroit Bankruptcy.” Demos, 20 de noviembre. www.demos.org/publication/detroit-bankruptcy
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Housing costs are spiraling upward in many areas throughout the United States, cutting down on the ability of Americans to save and leading to the gentrification of formerly affordable neighborhoods. However, as with many public policy challenges, it is not always immediately apparent where problems are the most acute. This became clear to Helen Campbell, an analyst in Los Angeles’s Housing + Community Investment Department, late on a Friday afternoon in July. An information request from the mayor’s office led her to discover that a large part of the San Fernando Valley in L.A. was home to the nation’s highest rental cost burden, which the U.S. Department of Housing and Urban Development (HUD) defines as a situation where families are paying more than 30 percent of their income on renting a home.
Los Angeles officials knew they had areas where home owners and renters were struggling to pay for housing, says Campbell, but they had no idea how severe the situation was or even where it was most pronounced. The mayor’s office needed authoritative data on this troubling trend for a lobbying effort to preserve the HOME Investment Partnerships Program (HOME), the largest federal block grant program for affordable housing. Currently, in Washington, DC, lawmakers are considering a Senate bill that would eviscerate the program.
If Campbell had used conventional geographic information software (GIS), it would have taken her an inordinate amount of time to analyze the city’s housing cost burden. But she was able to access the necessary information quickly by typing several simple queries into PolicyMap—a unique web-based software program that is changing the way that planning data is gathered and displayed. “If we didn’t have PolicyMap, we simply would have said no to the request,” Campbell says, “It would have taken too many hours to do the work.”
When Campbell ran her PolicyMap search, she discovered that the 29th Congressional District, part of which is situated within the city of Los Angeles, was, out of all of the 435 congressional districts in the country, number one in terms of rental cost burden and number three in terms of home owner cost burden. Those rankings for the 29th Congressional District, which includes a large part of the San Fernando Valley, translate into 62.9 percent of renters and slightly more than 50 percent of home owners there suffering from a housing cost burden. “We thought that South L.A. or Northeast L.A. would have higher rent burdens, but you have Valley as being the higher rent burden,” Campbell says.
Public Data for All
Since its launch in 2007, PolicyMap has grown into the largest geographic database on the web, and become the go-to public information resource for financial institutions, universities, nonprofits, and close to 2,500 government agencies. The online tool currently has more than 37,000 indicators, on categories ranging from crime to grocery store access, making the world of public data significantly easier to parse. Last year, the site had 434,000 unique visitors. Most of the data housed on PolicyMap is free, but proprietary data is available from various providers through paid subscriptions. Overall, PolicyMap’s easy-to-use mapping tools have helped democratize data analysis by making the process relatively affordable for nonprofits and local governments, which usually don’t have the resources to hire teams of GIS specialists. The site can help anyone in the public policy world avoid getting stuck on the wrong side of the widening digital divide.
One of the website’s most notable attributes is its capacity to simultaneously display various types of indicators, such as Superfund Sites, neighborhood income levels, or developments built with low-income housing tax credits. That capacity can facilitate contemporary planning initiatives, like the Obama administration’s Promise Zone or Choice Neighborhood programs, which require interagency collaboration and emphasize coordination of various types of investments in underserved areas.
PolicyMap also allows users to chart the effectiveness of particular programs over a period of time, helping them reap rewards or cut their losses down the road. Although government money is primarily doled out through formulas, there has been a marked increase in competitive grant programs that require progress reports and data that details evidence of needs. When it comes to competitive grants, according to Lincoln Institute President and CEO George W. McCarthy, “cities that have better data, and put together more polished proposals, are obviously going to have an advantage over those that don’t.”
The Starting Point
PolicyMap is the brainchild of The Reinvestment Fund (TRF), a Philadelphia-based Community Development Financial Institution (CDFI), which has $839 million in capital under management, and which invests in low-wealth people and neighborhoods. The organization finances a wide array of community building blocks, such as affordable housing developments, daycare centers, and grocery stores. PolicyMap was born out of TRF’s need to track how these community programs were working on the ground.
In the early 2000s, TRF began exploring ways to map and understand the impact of its own investments. “We were looking at where we were making investments over time,” says PolicyMap President Maggie McCullough, who was then a researcher with TRF’s Policy Department. “We also wanted to know what kind of impact we were making—how we had changed the markets in which we were working.”
In 2005, the state of Pennsylvania hired TRF to collect and map a vast amount of data on housing prices, foreclosures, and incomes. The project’s goal was to enable officials to think more strategically about how state money was being spent on housing throughout the state. But even with a contract worth almost $200,000, there were limitations to what TRF could do. The data and maps were trapped in a fixed format on a disk. “After we handed the disk over,” McCullough says, “I remember thinking that it was going to be like a paper report that sat on a shelf and was never going to get updated.”
That epiphany inspired McCullough and others at TRF to brainstorm on how to build a dynamic web-based mapping platform—one that would allow datasets to be refreshed and enable users to upload their own databases. In developing PolicyMap, McCullough was able to draw on her background as one of the pioneers in designing web portals for public information. In the 1990s, she was part of the team that built the U.S. Department of Housing and Urban Development’s (HUD) initial web presence. “My experience [at] HUD made me realize that if people [other than] researchers needed or wanted to understand data, we had to make it easier to understand,” says McCullough. “We had to give data indicators common names and simple descriptions, just like we had to give HUD programs common names.”
McCullough wanted PolicyMap to serve the entire country, unlike other data initiatives that focused on local geographies. Upon PolicyMap’s launch in 2007, “there really wasn’t any online GIS,” McCullough explains. “You could get driving directions and find a local restaurant with Google Maps, but a lot of that GIS software was locked on desktops. We wanted to create something that the public could access simply, over the web.”
The first dataset that TRF loaded onto PolicyMap in 2007 was comprised of reports from the Home Mortgage Disclosure Act (HMDA), the government’s most important data source for spotting predatory and discriminatory lending. At the time, the housing bubble was bursting, and officials from government and law enforcement were scrambling to get a grip on the burgeoning crisis; the HMDA data was one of the first places where they would look for information. But HMDA data wasn’t arranged in GIS user-friendly format, making certain types of searches extremely difficult. For example, if a researcher with a background in GIS wanted to zero in on a section of Detroit where she suspected there might have been a flood of high-cost loans, there was no online tool available to extract the HMDA data for that particular area.
PolicyMap’s initial success making data publicly available helped attract prominent paying customers—including the Federal Reserve Board in Washington, DC, which was in charge of collecting the HMDA data at the time. In addition to loading all of the HMDA data for mapping purposes and making it available to the general public, McCullough’s team custom-built a reporting tool within PolicyMap for the Fed that enabled its staffers to pull out HMDA data for any locale they wanted to study. Says McCullough, “We had made it easier for [The Fed] to access its own data.”
Leveling the Playing Field
Big lenders and real estate investors typically have in their toolkits subscriptions that can cost in the six figures for access to services that provide proprietary information such as property evaluation reports and in-depth market research. But many community-based organizations and local governments can’t afford to buy such licensed data. And even if they could afford expensive subscriptions, many community organizations and local governments lack the staffers or GIS capabilities to use it on interactive maps.
Take NeighborWorks, a national network of 240 community-based organizations that doesn’t have a GIS specialist on staff. Harry Segal, a performance and planning specialist at NeighborWorks America, says that PolicyMap has changed the equation for his network by giving them access to data and mapping tools that they couldn’t otherwise afford. “Any developer, public or private, trying to move into a new neighborhood has to court the powers that be and demonstrate an understanding of local market conditions,” Segal says. “It’s much more difficult for nonprofit organizations to compile this sort of data.” Without PolicyMap, he says, “the juice almost isn’t worth the squeeze.”
NeighborWorks’ PolicyMap subscription, which costs $5,000 per year, provides access to this kind of proprietary data and allows the organization’s members to query different sections of a map for information on a variety of indicators such as the average income of residents within a certain neighborhood and the level of high-cost mortgages that have been made there. This ability to look at different geographic scales empowers local community groups that are trying to access funding or call attention to predatory lending in their neighborhoods. “We have a couple of organizations in upstate New York. If you are looking at statistics on that region, they are going to be heavily skewed by New York City,” Segal says. “But with PolicyMap, we can pull up data by census tract or block group.”
Some city agencies also lack the capability to design or maintain the types of databases that they can now get through a PolicyMap subscription. “I am the only person here who has GIS capabilities,” says Sara Eaves, a planning and policy analyst for the San Antonio Housing Authority. She adds that PolicyMap allows many people in her office to perform tasks that would otherwise require specialized training. Through their PolicyMap subscription, the San Antonio Housing Authority also makes data publicly available about schools, residential vacancy rates, neighborhood income levels, and other information that a city resident might want to consider when deciding where to buy a house or rent an apartment. “We could maintain similar databases in-house, but we don’t have the resources. PolicyMap has allowed us to put interactive maps on our website, which is making the information available not just internally, but to the general public as well.”
Streamlining the Process for Cities and Community Groups
Many policy analysts use both full-blown GIS software, such as Esri, and the simplified GIS tools available on PolicyMap. Campbell from the Los Angeles Department of Housing + Community Development says that Esri offers the ability to do forecasts and run certain types of complex analyses that are not possible with PolicyMap. But she notes that PolicyMap saves her time and makes it easier to explain her research to laypeople. “I like PolicyMap because it is just based on facts and it is irrefutable,” she says, whereas Esri contains predictions about the future. “Sometimes, when you hand someone a community analysis report with Esri data, it may be too much information for them to digest. There will be 2005, 2010, and 2015 information. But for the 2020 information, there is a formula for how they created that forecast, which we may not need, and which may be wrong.”
PolicyMap is also flexible enough to respond to users’ changing needs. As data requirements have become larger and more complex, long-time PolicyMap customers have requested new tools to help improve efficiency. For instance, Melissa Long, the deputy director of Philadelphia’s Office of Housing and Community Development, had been using PolicyMap to display aggregated and cleaned-up census data. But several years ago, she realized that her agency needed more comprehensive analytic tools in order to apply for the increasing number of grants that are being awarded on a competitive basis.
“We needed a lot of neighborhood demographic information, and we needed to know what types of city programs were being deployed,” Long says, noting that having city data available on PolicyMap has improved the coordination among different city agencies and better positioned the city to apply for competitive grants.
Long says the tools that PolicyMap has developed for Philadelphia will enable the city to monitor its progress while implementing a Choice Neighborhoods Implementation Grant, which supports locally driven strategies to address struggling neighborhoods with distressed public or HUD-assisted housing. “The grant covers a five-year period. If we look and see that our neighborhood stabilization proposal is not working,” she says, “then we can make midterm grant corrections.”
Being able to map different types of data simultaneously also lets researchers chart the co-benefits from a particular investment. For example, two different programs in Philadelphia involve cleaning up and greening vacant lots. PolicyMap lets users see the lots rehabilitated by both programs simultaneously, and study whether they have improved the quality of life in surrounding neighborhoods. Philadelphia’s contract with PolicyMap has made it possible to overlay data from multiple studies—such as one from University of Pennsylvania’s Wharton School that showed how real estate values rose 17 percent on average around the cleaned-up lots, and another that showed how gun crime dropped significantly in the areas around them. A third co-benefit is the several hundred summer jobs that are tied to keeping the rehabilitated lots in good shape. “You cannot just look at housing alone,” Long says. One has to consider “all the other things going on in a neighborhood.”
One of PolicyMap’s most popular analytic tools is the Market Value Analysis (MVA), which TRF developed for Philadelphia and has replicated in about 18 other cities. MVAs evaluate the strength of different areas of a city by looking at color-coded sections of a map that denote assigned values, which range from “Distressed” to “Regional Choice,” which is the highest rating. The rankings are established using a technique called Cluster Analysis, which evaluates census blocks based on groups of indicators, such as home sale activity, vacancy rates, and foreclosures. When you click on any section of the map, a table pops up to reveal the data that was used to determine the ranking for that specific area. The Regional Choice Neighborhoods, McCullough says, are generally defined by strong sales values, low vacancy rates, and a mixture of home owners and renters.
Those MVAs provide government agencies and nonprofits the information they need to address an area’s specific problems, says the Lincoln Institute’s McCarthy. “You want to get the best bang for your buck from public money,” he says. “In the really terrible neighborhoods, that might mean investing in large-scale demolition to accelerate the reuse of properties. In a transitional neighborhood, you might want to acquire abandoned homes and fix them up.”
The Road Ahead
The PolicyMap team often releases new indices and new tools right on the heels of court decisions and agency rulings This past July, for instance, McCullough and her team released the Racially and Ethnically Concentrated Areas of Poverty (RCAP/ECAP) index, which is used to identify U.S. Census tracts that have both a high proportion of nonwhite individuals and people living below the poverty line. McCullough says that her team anticipated the Supreme Court’s ruling in June on “disparate impacts” in housing practices and, several months earlier, had started developing the index to help individuals and organizations understand the issues related to the court’s decision. “The timing was great,” she says. “When [the Supreme Court decision] happened, we were ready to go.”
PolicyMap is still missing major data sets that McCullough would like to upload, to help researchers get a better picture on critical issues facing the country. For example, McCullough says that she has long wanted to incorporate national foreclosure data as part of PolicyMap’s efforts to track factors influencing home sale prices, but it’s difficult to find comprehensive and authoritative foreclosure data sets. Plus, it’s still prohibitively expensive to purchase licenses for the foreclosure data from private vendors. PolicyMap clients have also expressed interest in accessing credit scores—some of the most difficult data to obtain. “We couldn’t even get permission from the credit-score agencies to license the data,” McCullough says. “And if we were going to get it from them, it would be aggregated at a high geography, [like] at a statewide level.”
Meanwhile, PolicyMap will get one of its biggest-ever data resources this coming October, with the first segment of a project tentatively titled “State of the Nation’s Land,” subsidized by the Lincoln Institute. “State of the Nation’s Land” will include a collection of 18 huge databases from 150 different government agencies, covering criteria such as heavily polluted sites, public investments in land, flood zones, and zoning information.
The Lincoln Institute project is intended to help government agencies do their jobs better and provide average citizens with tools they can use to hold their elected officials more accountable. It should also shed more light on some our country’s most vexing problems, like the persistence of poverty in certain areas or reverse redlining, when minority consumers are targeted for loans on unfavorable terms. Ultimately, however—as with the discovery that the San Fernando Valley is in fact the most unaffordable place to live in the country relative to local residents’ income—we cannot even anticipate some of the most interesting facts and trends that will be unearthed in the future, as more researchers get savvy about navigating PolicyMap.
“Every time I get into PolicyMap, I start looking at new things,” says McCarthy. “There is a whole process of discovery that I go through, and it’s very illuminating.”
Alex Ulam is a journalist who focuses on architecture, landscape architecture, urban planning issues, and housing.
Una versión más actualizada de este artículo está disponible como parte del capítulo 5 del libro Perspectivas urbanas: Temas críticos en políticas de suelo de América Latina.
Pocos países de América Latina (o del resto del mundo) se han atrevido a poner en práctica reformas tan radicales de la política de tierras urbanas como lo ha hecho Chile en los últimos 20 años. En 1979 el gobierno comenzó a aplicar las políticas de desregulación mediante la publicación de un documento donde se establecía que la escasez de la tierra era un producto artificial de la excesiva regulación, que había llevado a la virtual eliminación de los límites de crecimiento urbano.
Desde entonces ha habido cambios numerosos en la morfología y estructura interna de las ciudades chilenas, pero la evaluación de dichos cambios varía según la posición ideológica de quien evalúa. Si bien las políticas urbanas explícitas de orientación social han propiciado un mejoramiento significativo en lo que se refiere al acceso a la vivienda para la población de bajos recursos, algunas personas sostienen que la segregación espacial derivada de tales políticas ha perjudicado a la sociedad al indirectamente disminuir la calidad de vida, impedir el acceso al trabajo y agravar la alienación social.
Incluso antes del período del gobierno militar de 1973 a 1990, Chile estaba reconocido por su sistema político unitario y centralista, caracterizado por una fuerte presencia del Estado en la economía y la política. Esta sociedad con cultura relativamente homogénea se diferencia de otros países latinoamericanos por su fuerte tradición legalista. De la misma manera, las ciudades chilenas exhiben marcados contrastes cuando se las compara con sus homólogas latinoamericanas. Prácticamente no hay mercados de tierra informales; la tenencia de la tierra ha sido casi completamente regularizada mediante programas públicos radicales; y la mayoría de los pobres urbanos viven en áreas urbanizadas cuyas calles principales están pavimentadas. La violencia urbana, a pesar de su tendencia creciente, es aún mínima si se la compara con el resto del continente.
Políticas y problemas de la liberalización
Entre los aspectos más innovadores de la política urbana chilena figuran los siguientes:
Si bien, algunos de los logros de estas políticas de liberalización se han reconocido ampliamente como positivos -particularmente en lo que se refiere a la regularización legal y física o urbanística y la cantidad de vivienda social proporcionada- muchos chilenos creen que las políticas de los últimos 20 años han sido una fuente de nuevos problemas, entre ellos:
No está claro si estos cambios urbanos pueden atribuirse directamente a la eficacia de las políticas urbanas de mercado, o a la positiva evolución de la economía chilena en general. El crecimiento sostenido del producto interno bruto (GDP), con un promedio del 7 % anual desde 1985, se interrumpió sólo recientemente debido a los efectos de la crisis asiática.
Expansión del debate
A pesar de que la liberalización de los mercados de suelo urbano en Chile constituye una experiencia interesante e innovadora desde un punto de vista internacional, el debate público interno ha sido limitado. No obstante, los logros y problemas de la liberalización han llegado a tal punto de importancia que últimamente han estimulado un nivel generalizado de preocupación y una variedad de planteamientos al respecto. Más aún, el gobierno está proponiendo una serie de modificaciones de la actual “Ley General de Urbanismo y Construcciones”, que traerían consigo un número de cambios significativos, entre ellos:
Con el fin de facilitar una discusión concentrada en los temas anteriores, Carlos Montes, Presidente de la Cámara de Diputados de Chile, invitó al Instituto Lincoln a participar en un seminario coordinado con el Instituto de Estudios Urbanos de la Pontificia Universidad Católica de Chile. El seminario, llamado “A 20 años de la liberalización de los mercados de suelo urbano en Chile: Impactos en la política de vivienda social, el crecimiento urbano y los precios del suelo”, tuvo lugar en octubre de 1999 en la ciudad de Santiago. Allí se reunieron miembros del Congreso chileno y de la comunidad comercial (promotores, líderes financieros, etc.), oficiales de organismos públicos (ministerios, municipalidades, etc.), académicos y representantes de organizaciones no gubernamentales para participar en un animado debate. En la discusión se notó una marcada polarización ideológica entre las metodologías “liberal” y “progresiva” utilizadas para entender y resolver los asuntos de la liberalización, es decir, “más mercado” frente a “más Estado”.
Desde el punto de vista liberal4, estos problemas emergen y persisten debido a que los mercados de tierra no han sido nunca suficientemente liberalizados. De hecho, algunos liberales insisten en que la intervención pública no desapareció nunca, y creen que la regulación más bien aumentó después de que Chile retornara a la democracia en 1990. Por ejemplo, los liberales citan varios medios, a menudo indirectos, que utiliza el Estado para restringir el libre crecimiento de las ciudades, tales como cuando se intenta ampliar áreas designadas con protección ambiental y cerradas a usos urbanos, o se impone un criterio oficial y casi homogéneo de densificación para todo espacio urbano. También aseveran que los ciudadanos deberían tener la libertad de elegir diferentes estilos de vida, y que las autoridades deberían limitarse a informar a los ciudadanos sobre el costo privado y social de sus opciones, con el entendimiento implícito de que tales costos están reflejados en los precios del mercado cuando hay un funcionamiento eficaz de los mercados de suelo urbano, es decir, cuando están completamente liberalizados.
La principal explicación ofrecida por los liberales sobre los problemas de equidad y eficiencia que enfrenta el desarrollo urbano chileno actual son los avances insuficientes en la aplicación de criterios para “internalizar las externalidades”, particularmente externalidades negativas, por aquellos que son responsables por ellas. Tal como lo han clamado apasionadamente algunos de los representantes de este grupo, se debería permitir a los agentes privados actuar con libertad, siempre que éstos estén dispuestos a hacerse cargo de los costos sociales involucrados.
Por otra parte, los progresistas creen que la liberalización se ha excedido en su abordaje de mercado y ha dejado muchos problemas sin resolver, tales como el aumento en los precios del suelo; los problemas en la calidad y durabilidad de la vivienda; las condiciones de servicio de la tierra; los problemas sociales asociados con la pobreza urbana; y los problemas de eficiencia y equidad derivados de los patrones de crecimiento de las ciudades, p. ej., la disparidad entre áreas dotadas de servicios públicos y las localidades seleccionadas para proyectos privados de desarrollo.
Estas críticas reconocen la naturaleza imperfecta de los mercados urbanos y la necesidad de tener mayores niveles de control e intervención. Entre las formas de intervención recomendadas por muchos progresistas se encuentran los instrumentos de captura de plusvalía, los cuales raramente han sido empleados o incluso contemplados en programas de financiamiento para la provisión pública de nueva infraestructura y nuevos servicios urbanos. La creación de tales mecanismos apoyaría la idea de internalizar las externalidades, un punto de relativo consenso entre progresistas y liberales. La diferencia principal es que los liberales restringirían la captura de plusvalía a la recuperación pública de costos específicos, mientras que los progresistas considerarían el derecho a capturar la plusvalía entera que resulte de cualquier acción pública, bien sea como resultado de inversión como de regulación.
En términos más generales, los progresistas claman que no todo puede medirse estrictamente en términos monetarios. Hay valores y objetivos urbanos relacionados con la política pública que no pueden conseguirse a través del mercado, ni siquiera por ley, tal como el sentido de comunidad. Aunque mayormente se le desatiende en las nuevas opciones habitacionales facilitadas por promotores privados a familias de bajos recursos, tales como el sistema de vouchers, la solidaridad comunitaria es un asunto de enorme importancia para contrarrestar los problemas sociales que la segregación espacial tiende a exacerbar. La protección ambiental es otro ejemplo de un objetivo de política urbana para el cual las “etiquetas de precios” son de dudosa eficacia.
Con respecto al crecimiento libre de las ciudades y la idea de respetar las opciones para sus ciudadanos, los progresistas apuntan los fuertes costos ambientales y sociales que normalmente acompañan el crecimiento descontrolado. También hacen notar el hecho de que el único grupo que realmente puede elegir su estilo de vida a través del mercado es la minoría pudiente. Si bien conceden que hay beneficios en la concentración, los progresistas también expresan sus inquietudes sobre el exceso de densificación. Algunos chilenos han expresado interés en una autoridad metropolitana que maneje los asuntos regionales, y también en el uso de inversión en infraestructura pública como forma de orientar el crecimiento.
Las respuestas adecuadas a estos asuntos y perspectivas implican algo que va más allá de soluciones técnicas o fiscales, tales como el punto al cual los promotores realmente pagan por el costo total de los cambios que imponen en la sociedad (para no hablar del problema de evaluar los costos con precisión) o la sustentación del sistema de vouchers bajo demanda, que constituye la base de la política habitacional de Chile. Las soluciones también involucran inquietudes de mayor amplitud y con más contenido valórico, tales como los costos ambientales del crecimiento descontrolado y la importancia de mantener las identidades e iniciativas comunitarias locales. La discusión continúa en el Congreso y en otros entornos, pero es de esperar que pase un tiempo antes de que los bandos opuestos lleguen al consenso.
Martim O. Smolka es Senior Fellow y Director del Programa para América Latina del Instituto Lincoln. Francisco Sabatini es profesor asistente de la Pontificia Universidad Católica de Chile. Otros contribuyentes a este artículo fueron Laura Mullahy, asistente de investigación, y Armando Carbonell, Senior Fellow, ambos del Instituto Lincoln.
Notas: En contraste con el resto del continente, las drogas no eran un problema mayor en Chile hasta hace poco tiempo.
2 El área metropolitana de Santiago se compone de 35 jurisdicciones administrativo-políticas independientes llamadas comunas.
3 Véase Gareth A. Jones, “Comparative Policy Perspectives on Urban Land Market Reform”, Land Lines, noviembre de 1998.
4 El uso del término “liberal” en este contexto corresponde a su connotación en Chile, la cual se refiere a la fuerte influencia del principio económico del libre mercado, tal como la aboga la teoría desarrollada por la Escuela de Chicago.
Fuentes: Francisco Sabatini y colaboradores, “Segregación social en Santiago, Chile: Conceptos, métodos y efectos urbanos” (monografía, 1999); y Secretaría Ejecutiva de la Comisión de Planificación de Inversiones en Infraestructura de Transporte (SECTRA), “Encuesta de recorridos de origen y destino en Santiago”(1991).
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Over the last 50 years cities have been the scene of major transformations that have allowed them to evolve from being centers primarily for economic activities to a combination of more specialized productive, commercial and service functions. The results are mixed, but in those cities considered most successful, beauty and humanism have managed to coexist with economic efficiency and effectiveness, significantly increasing the creation of wealth and the well-being of the community at large. In this context, developments known as “large urban projects” seek to rescue dilapidated areas such as historic centers, former industrial and military zones, vacant railroads and airports, and decaying housing settlements and transform them into vibrant residential areas able to generate tax revenues, employment, and public and social benefits to enhance quality of life.
The redevelopment of waterfronts creates tremendous opportunities to reintegrate historic city centers with their adjacent waterways and to facilitate growth that would otherwise move to the outskirts of the city. Many concerns have to be addressed, however. What type and scale of development are desirable and possible? How can meaningful relationships be established between the old and the new? What are the impacts on the environment and the existing infrastructure? What public policies and investments are needed? What are the roles of the public and private sectors? How do we organize the planning process, including building political and community support?
Amsterdam and Havana are cases where waterfronts provide challenges and opportunities to address this complex balancing act. Both are UNESCO World Heritage Cities dealing with the pressures of profit-driven real estate development and the desire to protect both their historic centers and the interests of their contemporary populations.
In December 2003 the Lincoln Institute, with Havana’s Group for the Development of the Capital (GDIC), the Office of the Historian and the Port Authority of the Ministry of Transportation, cosponsored a seminar in Havana at which waterfront experts from Amsterdam, Rotterdam, New York and Panama shared their experiences with Cuban planners and public officials. This article elaborates on the Amsterdam presentation, in particular how management, experiments, planning and land policies enabled an impressive transformation of that city’s former industrial waterfronts, and offers lessons that may be applicable for Havana.
Planning and Development Policies in the Netherlands
The Netherlands has a well-known tradition of strong national planning and development, precipitated by the housing shortage since World War II. The notion of limited space drives the country’s development policies and its commitment to preserving green and agricultural areas between cities. Housing, infrastructure, retail and office development, environmental protection, agriculture, water management and open space are major concerns at both the national and local levels. With two-thirds of their country below sea level, the Dutch have always pursued new ways of relating to water. National planning policies thus concentrate on facilitating growth in designated areas, controlling urban sprawl and reorganizing inner cities without neglecting major infrastructure and the management and control of green spaces and water bodies.
The Dutch rediscovered the importance of their cities in the 1980s after the rapid growth of suburbs and new towns caused increasing congestion and a lack of livable spaces. The idea of a “compact city” was adopted in the nation’s Fourth Memorandum of Urban Planning (1988), advocating concentration on the urban nexus in order to “redevelop currently abandoned areas.” Typical sites include Rotterdam’s Kop van Zuid and Amsterdam’s Eastern Docklands. The compact city concept was broadened in the 1990s with the notion of the “complete city,” marrying concepts of multiple and intensive land use with the concentration of functions and activities in a melting pot of lifestyles.
The reorganization of transit areas and transport routes is another planning priority that aims to combine different transport functions and discourage the use of cars. Examples include the Airport City plan for the Amsterdam Schiphol Airport and the area around the future high-speed train station Zuidas-WTC. The Zuidas master plan creates enough space over the railway and highway for the construction of 7 million square feet of offices, 1,500 dwellings, retail space, hotels, museums and a new park.
Despite the national government’s plans and ambitions, financial resources determine its role in development projects. The significant decrease in national housing and development subsidies since 1990 has highlighted the strategic importance of the local government in the (re)development process. However, the Amsterdam case also shows that management capacity, reliable development partners and creative financial and development tools are instrumental for redevelopment.
Amsterdam’s Land and Housing Policies
Amsterdam is the cultural and financial capital of the Netherlands and the largest city in the Randstad-Holland or Deltametropolis region of 6 million people. The city has close to 750,000 inhabitants, 375,000 housing units and 417,000 jobs, and has one of the world’s largest conserved historic city centers.
Amsterdam’s land policies are strategic tools in the city’s redevelopment strategies. In 1896 the city democratically decided on a land-lease system to acquire land and lease it to future users. Important arguments for leasing were that increases in land value should benefit the entire community and the city should determine the use of scarce land to prevent speculation and undesirable development.
The land-lease system works as follows. The city’s land corporation acquires land and leases it to private developers for periods of 49 or 99 years. Leaseholders pay an annually adjusted amount for use of the land, determined by location, square feet of development, type of use (office, retail, affordable or market rate housing, open space, etc.), new or existing buildings, and parking (on the street or inside). The city determines the price of land through a residual land value method that links the market value of the property, the land and the construction costs. The value of land equals the sales value of the property minus the construction costs determined by the location (costs are considerably higher in the historic neighborhoods). In 2002 leases totaled 59 million euros.
Acquisition of privately owned land—as in the Eastern Docklands area—is financed through loans to the city’s land corporation, whose interest payments account for 80 percent of its expenses. Excess revenues are used to support the city’s development and rehabilitation efforts, particularly for commercially unprofitable projects such as parks and open space. This system also serves political objectives such as the provision and geographic distribution of affordable housing. In a high-density city like Amsterdam, land is scarce and its use is subject to much real estate pressure. As the landowner the city maintains a strategic role in determining the use, quality and amount of land available for development.
Amsterdam relies on its relationships with the city’s civic and nonprofit development groups for support and implementation of its plans, and the role of housing associations is critical. These associations were created as a result of the housing law of 1901, which allowed for union-related associations and religious organizations to establish nonprofit housing associations. With national subsidies and strong support from local governments, they have built thousands of units, especially in the neighborhoods damaged during the war. In some of these areas over 75 percent of the units is owned by housing associations.
The deregulation of the Dutch housing market in the early 1990s strongly affected the housing associations’ position as both owners and developers. They lost most of the national housing subsidies, but in exchange the government granted them more financial and institutional freedom to manage their assets. As a result, the nonprofit sector had to become more professionalized, and many of the housing associations merged to create economies of scale. Today, Amsterdam counts 13 housing associations that manage over 200,000 units, ranging from 1,400 to 37,500 units each. Many associations successfully positioned themselves as trustworthy and financially stable developers. Moreover, they became strategic partners for commercial developers looking for experts on affordable housing and partners for creating goodwill for their projects with the city and community groups. More and more, they develop mixed-income projects in collaboration with private developers using creative financial packages. In 2000, for example, half of the units built by housing associations were market rate. The resulting profits financed the other half as affordable and moderate-income units.
In an unexpected side effect of the housing reform, these associations have become leaders in setting high standards for urban design and planning. With their commitment to the city and to community development they have been willing to take risks with low-cost but provocative designs, and many of their projects have become international examples for innovative affordable housing concepts.
Waterfront Redevelopment in Amsterdam
Amsterdam is a city founded on water and around a dam that separated the Amstel River from the IJ River. In the seventeenth century, Amsterdam was the world’s most prominent commercial and maritime center. The canals and waterways built in that era still marvel the millions of tourists who visit the city every year. The relationship between the city and its waterfront has not always been organic; mistakes have been made, such as the 1898 decision to build Amsterdam’s central railway station in the middle of the port area. The station effectively ruined the visual relationship and physical connections between the IJ, the port and the dam, destroying the ancient heart of the capital.
In the past 40 years, most port functions have moved closer to the sea to handle container ships, while the large financial institutions moved to the south axis of the city due to a lack of space and poor accessibility. The inner city of Amsterdam, which is adjacent to the old port areas, remains the region’s largest center for retail, culture and entertainment and is well suited for pedestrians, bicyclists and public transportation. Although the port continues to play an important economic role for Amsterdam, the city essentially turned its back to the harbor for many years.
Major areas of Amsterdam are now being converted and rehabilitated, while entirely new areas are being built on artificial islands. The city’s southern and northern waterfront system of old piers and wet docks is becoming an attractive residential and mixed-use district with retail and cultural centers, new transit, parks and waterfront promenades, most of which mix contemporary design with the historic maritime character. The construction of IJburg, an overspill area in the IJsselmeer Lake, is designed to accommodate 45,000 new inhabitants.
Discussion about the redevelopment of the Eastern Docklands and the rest of the southern IJ waterfront began in the early 1980s. Following years of negotiations between the municipality, developers and well-organized community groups, the plan, currently in the final phases of construction, proposed a series of high-density, moderate-rise communities on the water, thus remaking a historic and cultural bond with the water. Housing is the major component of all development on the IJ bank, and 40 percent of it is affordable. In many cases the city’s professional nonprofit housing associations have led the development and encouraged private investment.
The formal planning process for the IJ-waterfront started with a design competition in 1984. Initially the city government endorsed the IJ Boulevard master plan by Rem Koolhaas for the entire 10 km southern waterfront. The redevelopment program incorporated a range of uses, but focused on office development and supporting amenities to stop the exodus of corporations and to finance the proposed infrastructure program. The plan was to be implemented by the Amsterdam Waterfront Finance Company (AWF), a public-private partnership of the city and one master developer/investor with unprecedented authority. Subsequent controversy over the size and cost of the plan, the collapse of the office market in the late 1980s, and growing discontent with the plan among the city’s prominent civic and community groups led to the dismantling of the partnership in 1994.
The city then changed its approach and passed a strategic memorandum titled “Anchors of the IJ” in 1995. This plan proposed to build on the existing island structure with a phased development starting at the outer edges and working toward the Central Station area. This pragmatic and organic approach concentrated the city’s efforts and resources on master plans for smaller and more manageable areas. The development program shifted toward housing with public buildings and squares (the anchors) at strategic locations within a framework of larger infrastructure investments. The national government committed to building a new tunnel in the early phases of the planning process and a light-rail system at a later phase. Urban design and development programs were determined by site potential and strong community input and were modified over time based on experience, new ideas and changing market conditions. Since the city owns the land and thus controls how much land is available for development, it encouraged private developers to team up with nonprofit housing groups to bid for portions of the waterfront. The Amsterdam case underscores the fact that strategy, planning tools, leadership and partners are interdependent and instrumental for redevelopment that benefits the community at large.
Implications for Havana
The uniqueness of Havana’s waterfront makes it a formidable site for innovative and comprehensive redevelopment and for avoiding the mistakes that have spoiled the charm of many other cities around the world. Havana is Cuba’s capital city, home to more than 2 million of the country’s 11 million citizens. Prior to the 1959 revolution Cuba was the leading business and tourist destination in the Caribbean, but its subsequent political isolation and lack of economic development have resulted in a mostly unspoiled historic city now in desperate need of repair. Since the collapse of the former Soviet Union and the subsequent loss of a market for 65 percent of Cuban exports, Havana has focused on attracting investment through real estate ventures. Most joint ventures (350 were active in 2001, worth $2.6 billion) are with Canadian and European companies in the booming hospitality industry. Tourism and related activities again generate much-needed foreign currency, especially in Havana where historic downtown hotels have been upgraded and new office buildings are being built in nearby elegant neighborhoods to the west.
The government recognizes the historic and economic value of Old Havana’s architectural heritage and strongly supports renovation and rehabilitation of its historic buildings and squares. The progress and benefits are impressive, considering the limited public resources and the state of the city’s infrastructure and buildings. The Office of the Historian, the development authority for Old Havana, has stimulated revenues that generated $50 million for social and historic preservation programs in 1999 alone (Nunez, Brown and Smolka 2000).
Havana’s waterfront is considered a key asset for future growth and therefore a key area of concern. The waterfront includes the famous Malecon Boulevard as well as the lesser-known inner-harbor districts on the east side of Old Havana. Along the shores of this bay, historic warehouses and small communities are mixed with decaying infrastructure, port facilities, heavy industry and shipyards. Many different city and state agencies are involved in planning for this vast area, yet no clear development directive has been defined and most players lack the authority to take that role. In response, some agencies have developed plans for individual properties, but implementation is unlikely because there is no funding in place and the oil refineries across the bay produce heavy fumes, which discourage some tourist-oriented activities.
Since land in Havana is publicly owned, capturing the increase of land values could create a strategic and sustainable source for financing much-needed public investments in affordable housing, public space and infrastructure. The local government can lead the redevelopment process; however, support and collaboration with regional and national public partners will be important for larger investments. Flexibility in program and a focus on process instead of blueprint planning is essential to accommodate changing market conditions and emerging opportunities. The latter is especially evident as development depends significantly on private investments.
With its historic beauty, proximity to the United States and lack of development for more than 40 years, Havana draws the attention of developers from throughout the world. It has the potential to become a model livable city that has preserved most of its heritage and is not spoiled by the automobile. It is in the interest of all of us, but especially the Cuban people, to ensure that attention to both high-quality redevelopment and the public interest determines the transformation of Havana’s waterfront.
Frank Uffen is managing director of New Amsterdam Development Consultants in New York. Other Dutch participants in the seminar who contributed to this article are Riek Bakker (partner, BVR Consultancy for Urban Development, Landscape and Infrastructure, Rotterdam), Ad Hereijgers (partner, DE LIJN Office for Urban Development, Amsterdam), Willem van Leuven (project manager, Amsterdam Project Management Bureau) and Rutger Sypkens (project developer, Ballast Nedam Construction, Amsterdam).
Reference
Nunez, Ricardo, H. James Brown, and Martim Smolka. 2000. Using land value to promote development in Cuba. Land Lines 12(2):1–4.
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Faculty profile of John Emmeus Davis.
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Until recently, a foreclosure on an owner-occupied home in the United States was a relatively rare event. According to data from the Mortgage Bankers Association (MBA), foreclosure proceedings were initiated on approximately 0.3 percent of all owner-occupied housing units with a mortgage in each quarter from 1979:Q1 through 2006:Q2 (figure 1). Since mid-year 2006, foreclosure proceedings have more than tripled and now occur at the rate of at least 1 percent per quarter.
To place these percentages in context, in the 27 ⅟2 year period between 1979 and mid-2006, a cumulative total of 7.5 million foreclosure proceedings had been initiated at a rate of 275,000 per year. In the 3 ⅟2 year period between mid-2006 and year-end 2009, 6 million foreclosure proceedings had been initiated, at a rate of 1.7 million per year, a more than six-fold increase. The conditions for high foreclosure rates are in place for at least the next two years, suggesting that another 4 to 5 million owner-occupied homes will enter into foreclosure in 2010 and 2011.
What is a Foreclosure?
A house is seized by a mortgage lender in a foreclosure proceeding after three steps have occurred. First, the homeowner fails to make contractually obligated mortgage payments, a condition commonly known as default. If homeowners fail to make one or two monthly payments, they are known as 30- and 60-days delinquent, respectively. In many of these cases, the homeowner “self-cures” by making the missed payment(s) in full and paying an additional (contractually pre-specified) penalty. A homeowner who misses three consecutive monthly payments is known as 90-days delinquent, and the probability increases that the house will end up in foreclosure (Tanta 2007).
In the second step, the lender initiates foreclosure proceedings. This process varies by state and can take between 6 and 18 months to complete. In the third and final step, the court system assigns the ownership of the house back to the mortgage lender. In some states, after a foreclosure occurs lenders may try to obtain a “deficiency judgment,” which implies that the foreclosed homeowner must compensate the lender in an amount equal to the difference between the value of the house after the foreclosure and the outstanding loan balance of the mortgage (Ghent and Kudlyak 2009).
What Factors Lead to Foreclosure?
We learn about the root causes of foreclosure by first exploring how foreclosure rates vary across places and over time. Figure 2 shows a graph of 90-day delinquency rates by state in the second quarter of 2009, when the 90-day delinquent rate ranged from 1 percent to 6.5 percent. Two variables explain almost three-quarters of the cross-sectional variation in delinquency rates across states: (1) the statewide unemployment rate in August 2009; and (2) the percentage change in house prices over the three-year period from 2006:Q2 to 2009:Q2.
Table 1 shows the highest and lowest five states in terms of foreclosure rates in 2009:Q2. The states with the steepest declines in house prices and highest unemployment rates have the highest percentage of seriously delinquent borrowers. The two states with the most disparate outcomes are Nevada and North Dakota. In Nevada, house prices fell almost 50 percent; the unemployment rate was 13.2 percent in August 2009; and the 90-day delinquency rate on mortgages was 6.5 percent. In North Dakota, homes appreciated by almost 11 percent; the unemployment rate was a low 4.3 percent; and the 90-day delinquency rate on mortgages was only 1.0 percent.
Figure 3 shows the time-series patterns of the nationwide 90-day delinquency rate, the national unemployment rate less 4 percent, and an index of commonly tracked house prices known as the Case-Shiller-Weiss (CSW) index. The vertical line on the graph at 2006:Q2 marks the height of the housing boom. Over the 2006:Q2–2007:Q4 period, nationwide 90-day delinquency rates started rising after house prices started to decline, despite relatively stable unemployment rates. During the recession, unemployment increased, house prices continued to fall, and the 90-day delinquency rate rose dramatically.
Both figures 2 and 3 suggest that foreclosures are associated with two “triggers”—falling house prices and rising unemployment rates. The double-trigger theory of foreclosures posits that the potential for a foreclosure is highest when (1) a homeowner is “under water,” meaning the house is worth less than the outstanding loan balance of the mortgage (plus any applicable fees); and (2) the homeowner experiences a significant disruption to income, such as unemployment, divorce, or a health event. In addition to the aggregated state-level and nationwide data shown here, the double-trigger theory of foreclosures has been shown to fit foreclosure patterns in loan-level data sets as well (Foote, Gerardi, and Willen 2010).
The double-trigger theory suggests that being under water is a necessary condition for a foreclosure, because it means the homeowner cannot sell the house unless he or she is willing to write the mortgage holder a check at closing to make up the difference of the value of the house and the outstanding loan balance of the mortgage. Recent estimates by the First American Core Logic company suggest that more than 10.5 million properties—20 percent of all residential properties with mortgages—are currently under water; many of them were purchased between 2005 and 2007.
Figure 4 shows that house prices have declined by 40 percent in nominal terms (50 percent after accounting for overall consumer price inflation) from the peak of the housing market in 2006:Q2 through the end of 2009. Standard underwriting calls for a homeowner to make a 20 percent down payment on a house. Given the decline in house prices, homeowners who bought at the peak of the market using a standard down payment are still approximately 33 percent under water. For example, if a homeowner buys a house for $100,000 with an $80,000 mortgage at origination and it then loses 40 percent of value, it is worth only $60,000. The house is now 33 percent under water ($80,000 – $60,000) / $60,000.
Most economists believe that being under water is not a sufficient condition to lead to a foreclosure, although there is some debate on this issue (Goodman et al. 2009; Foote et al. 2010). As long as the house value is not too far below the outstanding loan balance of the mortgage, there is a nontrivial probability that the house will appreciate such that its price will be greater than the mortgage in a reasonable amount of time, and this probability has value called “option value.” Given this value, and given that foreclosure is costly for homeowners, economic theory suggests that many homeowners who are under water should not “optimally” default on their mortgage. In many cases, the available data support this prediction.
Once a homeowner is under water, however, the data suggest that an additional shock to a homeowner’s income strongly increases the odds of foreclosure. Consider the experience of a homeowner who is under water and suddenly loses his or her main source of income due to unemployment or illness. In this case, the house is worth less than the mortgage, so the owner cannot sell or pull equity from the house. Furthermore, the homeowner has reduced income, so after depleting savings cannot make the mortgage payment in full.
To illustrate the quantitative relevance of this point, table 2 shows state-level maximum unemployment benefits (UI) and average mortgage payments for the set of ten states shown in table 1. In many states, UI benefits are not large enough for a one-income family to make a full mortgage payment. In all states, the average mortgage payment consumes a sizeable percentage of monthly UI benefits, leaving little income for food, transportation, clothing, health care, and other essentials.
Should Foreclosures Be Prevented?
A foreclosure seems like a simple transfer of an asset (the house) from the current equity holder (the borrower) to the current debt holder (the mortgage holder), which occurs whenever the borrower defaults on a mortgage obligation. If a foreclosure is just a simple transfer of assets across agents in the economy, then a case can be made that society should not care about foreclosures, the same way that normal people typically do not care how many electric guitars trade hands on eBay in any given month.
However, a case can be made that foreclosures are an undesirable outcome for society in some cases. Many economists think that foreclosures have externalities, meaning people not directly involved in the foreclosure process bear costs every time a house enters foreclosure. For example, foreclosures are estimated to reduce the resale value of nearby homes (Lin, Rosenblatt, and Yao 2007). In addition, foreclosures are associated with other costs that may be socially undesirable, such as the well-being of children (Kingsley, Smith, and Price 2009).
Has the Government Prevented Foreclosures?
Since 2007, the federal government has established initiatives and put into place a set of policies to try to reduce foreclosures. One of the first major initiatives, called Hope for Homeowners, was established in the spring of 2008. This program tried to address the first trigger directly to reduce the number of homeowners who were under water by encouraging institutions and investors holding mortgages to “write down” principal on those mortgages until homeowners were no longer under water. Participation in the program by mortgage holders was voluntary, and the program was structured in such a way that few mortgage holders participated (Cordell et al. 2009). For example, only one person received assistance in the first six months of the program’s launch (Arnold 2009).
In February 2009, the Obama administration announced another major initiative to reduce foreclosures, the Home Affordable Modification Program (HAMP) program, funded with $73 billion of TARP money. Implicit in the HAMP program is the notion that delinquencies and foreclosures have occurred because mortgages underwritten during the housing boom were often exotic, expensive, and ultimately unaffordable.
Until recently, HAMP’s solution to reduce foreclosures was to modify the terms of these mortgages (by reducing the interest rate, extending the amortization period, and offering some forbearance) for the purposes of making the mortgage “affordable,” meaning the mortgage payment would not exceed 31 percent of the borrower’s income after the mortgage was modified. As originally written, the HAMP program did not require the mortgage lender to reduce any of the borrower’s mortgage balance, and many unemployed did not qualify to receive a mortgage modification.
Figure 5 shows data from the Mortgage Bankers Association on 90-day delinquency rates for subprime adjustable-rate mortgages and prime fixed-rate mortgages over the 1998–2009 period. It is clear that subprime adjustable-rate mortgages are much more likely to be seriously delinquent than prime fixed-rate mortgages. These data might help explain why policy makers crafting the HAMP program have, until recently, focused on refinancing people out of exotic or expensive mortgages and into more conventional or less expensive mortgages as a method of reducing aggregate foreclosure rates.
These policy makers might have presumed that refinancing people from mortgages associated with high default rates to mortgages associated with low default rates would, by construction, reduce the overall default rate on all mortgages. There are two problems with this logic. First, people most likely to default are least likely to get a prime mortgage. This implies the mortgage choice at origination may be indicative of the underlying default risk of the borrower. In other words, defaults of subprime mortgages are high because, in some cases, subprime mortgage borrowers had high default risk and could only get a subprime mortgage.
Second, and more important, the recent data suggest that the majority of mortgages currently in default are not subprime mortgages (table 3). Given the current situation, it seems that a program designed to reduce foreclosures in the aggregate should focus on the inherent reasons that households with good mortgages or good credit are defaulting: the double-trigger theory.
Will We Have More Foreclosures?
Both foreclosure triggers are still in place. Unemployment rates are high, and the Congressional Budget Office (2010) is forecasting the national unemployment rate will remain above 9.0 percent in both 2010 and 2011. And, many homeowners are still under water. Assuming that house prices and housing rents will increase at the same rate over the next few years—not an unreasonable assumption given the behavior of historical rent and price data prior to 1996 (Davis, Lehnert, and Martin 2008)—then house prices should be expected to rise in nominal terms by somewhere between 1 and 2.5 percent per year for the next two years. Given the slow expected pace of house-price growth, many homes now under water will continue to be under water in two years.
Against this gloomy backdrop, Congress and the Obama administration have taken steps recently to prevent more foreclosures. First, on March 26, the administration revised the HAMP program so that the recently unemployed will be offered between three and six months of payment reductions (forbearance). This adjustment to HAMP is in line with the recommendations of a well-known plan to reduce foreclosures, written by economists at the Federal Reserve Board and the Federal Reserve Bank of Boston, commonly called the Boston Fed plan (Foote et al. 2009). It is also similar to an existing plan in the State of Pennsylvania that makes loans to unemployed homeowners to enable them to pay their mortgage, called HEMAP. In addition, mortgage investors will be subsidized by the HAMP program for writing down principal when borrowers are under water.
Second, the Obama administration has set up a “Hardest-Hit” fund distributing $2.1 billion to state housing finance agencies in ten states with severe house price decline and high unemployment rates. The state agencies are free to design programs to reduce foreclosures, subject to some guidelines (Housing Finance Agency 2010).
My colleagues and I have worked on foreclosure relief policy and are hopeful these new initiatives—the modification to HAMP and the Hardest-Hit fund—might significantly reduce foreclosure activity over the next few years.
About the Author
Morris A. Davis is an associate professor in the department of real estate and urban land economics at the University of Wisconsin School of Business, and a fellow at the Lincoln Institute of Land Policy. He was one of the authors of the Wisconsin Unemployment and Foreclosure Relief Plan, which was designed to reduce foreclosure activity of the unemployed. He also maintains and updates the Lincoln Institute Web site database on Land and Property Values in the U.S. (http://www.lincolninst.edu/subcenters/land-values).
Acknowledgments
I have benefited greatly from conversations, help, and advice from Chris Foote, Jeff Fuhrer, Kris Gerardi, Eileen Mauskopf, François Ortalo-Magné, Erwan Quintin, Steve Malpezzi, and Paul Willen. All mistakes and errors are my own.
References
Arnold, Chris. 2009. Investors support overhauling homeowner program. NPR broadcast, April 16. www.npr.org/templates/story/story.php?storyId=103148855
Congressional Budget Office. 2010. Current Budget Projections: Selected Tables from CBO’s Budget and Economic Outlook, Table E-1 (January). www.cbo.gov/ftpdocs/108xx/doc10871/economicprojections.pdf
Cordell, Larry, Karen Dynan, Andreas Lehnert, Eileen Mauskopf, and Nellie Liang. 2009. The incentives of mortgage servicers: Myths and realities. Uniform Commerical Code Law Journal 41: 347–374.
Davis, Morris A., Andreas Lehnert, and Robert F. Martin. 2008. The rent-price ratio for the aggregate stock of owner-occupied housing. Review of Income and Wealth 54(2): 279–284.
Foote, Christopher, Jeff Fuhrer, Eileen Mauskopf, and Paul Willen. 2009. A proposal to help distressed homeowners: A government payment-sharing plan. Public Policy Brief No. 09-1. Boston: Federal Reserve Bank of Boston. www.bos.frb.org/economic/ppb/2009/ppb091.htm.
Foote, Christopher, Kristopher Gerardi, Lorenz Goette, and Paul Willen. 2010. Reducing foreclosures: No easy answers. NBER Macroeconomics Annual 24(1): 89–138.
Foote, Christopher, Kristopher Gerardi, and Paul Willen. 2010. Should modifications ‘re-equify’ borrowers? A look at the data. Real Estate Research Blog, March 2. http://realestateresearch.frbatlanta.org/rer/2010/03/should-modifications-reequify-borrowers-a-look-at-the-data.html#more
Ghent, Andra C., and Marianna Kudlyak. 2009. Recourse and residential mortgage default: Theory and evidence from U.S. states. Working Paper No. 09-10. Richmond, VA: Federal Reserve Bank of Richmond.
Goodman, Laurie, Roger Ashworth, Brian Landy, and Ke Yin. 2009. Negative equity trumps unemployment in predicting defaults. Amherst Mortgage Insight, November 23: 1–8.
Housing Finance Agency. 2010. Innovation Fund for the Hardest-Hit Housing Markets (HFA Hardest-Hit Fund): Frequently asked questions, March 5. http://makinghomeaffordable.gov/docs/HFA%20FAQ%20–%20030510%20FINAL%20%28Clean%29.pdf
Kingsley, G. Thomas, Robin E. Smith, and David Price. 2009. The impacts of foreclosures on families and communities. Washington, DC: The Urban Institute.
Lin, Zhenguo, Eric Rosenblatt, and Vincent W. Yao. 2007. Spillover effects of foreclosures on neighborhood property values. The Journal of Real Estate Finance and Economics 38(4): 387–407.
Tanta. 2007. Delinquencies and defaults for ubernerds. Calculated Risk Blog, July 6. www.calculatedriskblog.com/2007/07/delinquencies-and-defaults-for.html
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Karl E. Case is professor of economics emeritus at Wellesley College, where he held the Katherine Coman and A. Barton Hepburn Chair in Economics and taught for 34 years. He is currently a senior fellow at the Joint Center for Housing Studies at Harvard University.
Professor Case is also a founding partner in the real estate research firm, Fiserv Case Shiller Weiss, Inc., and serves as a member of the Board of Directors of the Depositors Insurance Fund of Massachusetts. He is a member of the Standard and Poors Index Advisory Committee, the Academic Advisory Board of the Federal Reserve Bank of Boston, and the Board of Advisors of the Rappaport Institute for Greater Boston at Harvard University. He has served as a member of the boards of directors of the Mortgage Guaranty Insurance Corporation (MGIC), Century Bank, Lincoln Institute of Land Policy, and the American Real Estate and Urban Economics Association. He was also an associate editor of the Journal of Economic Perspectives and the Journal of Economics Education.
After receiving his B.A. from Miami University in Ohio in 1968, he spent three years on active duty in the Army and received his Ph.D. in economics from Harvard University in 1976. His research has been in the areas of real estate, housing, and public finance. He is author or coauthor of five books including Principles of Economics, Economics and Tax Policy, and Property Taxation: The Need for Reform, and he has published numerous articles in professional journals. Principles of Economics, a basic text coauthored with Ray C. Fair and Sharon Oster, is in its tenth edition.
Land Lines: How did you become involved with the Lincoln Institute of Land Policy?
Chip Case: I learned about the Lincoln Institute in the 1970s, when it was sponsoring conferences for the Taxation Resources and Economic Development (TRED) Committee. I had written my dissertation on property taxes and had been invited to attend one of those conferences. In the fall of 1980, I began my first sabbatical year from Wellesley College and needed a way to fund my research. I arranged a meeting with Arlo Woolery, who was executive director of the Institute at the time, and he agreed to support my work.
My relationship with the Lincoln Institute has continued over the four decades since then. I was on the Board of Directors in the mid-1990s and on the executive search committees for H. James Brown, the former president of the Lincoln Institute, and Gregory K. Ingram, the current president and CEO. I taught at many Institute-sponsored programs with the Land Reform Training Institute (now the International Center for Land Policy Studies and Training) in Taiwan for 15 years, and have participated in programs in Cuba and China multiple times as well.
Much of my research is in the spirit of what the Institute is about, and I continue to make regular presentations at various conferences and seminars. I was especially pleased to be involved with a conference on “Housing and the Built Environment: Access, Finance, Policy,” held in Cambridge in December 2007. The Institute later published the papers and commentaries as “Essays in honor of Karl E. Case” in a volume titled Housing Markets and the Economy: Risk, Regulation, and Policy, edited by Edward L. Glaeser and John M. Quigley.
Land Lines: What sort of work have you done for the Lincoln Institute recently?
Chip Case: Earlier this year I served as a discussant for the “Urban Economics and Public Finance Conference,” which was organized by Lincoln Institute visiting fellow Daniel McMillen with the Department of Valuation and Taxation. This annual program brings together leading scholars in the fields of urban economics and public finance to present and discuss their research. It’s a great forum and a good opportunity to showcase new empirical work.
I also recently returned from a Lincoln Institute program in Beijing, where I gave a series of lectures to planners and economists at the Peking University–Lincoln Institute Center for Urban Development and Land Policy. My role was to help decipher what has been happening in the U.S. housing market and to provide insight into the relationship between the housing market crash and the current financial crisis.
Chinese officials are very interested in learning from the market experience of the United States. To say that the housing market in China is in a boom period would be an understatement. In most cities, the market is straining under the limited amount of available land and insufficient infrastructure. The government has recognized that the rapid growth poses a challenge to its market authority and at the same time realizes that the growth can be harnessed as a source of potential revenue for the country’s cities.
Land Lines: What did you learn about the problem of local government finance in China?
Chip Case: Local governments in China own all the land inside their jurisdictions, and they have traditionally raised money by signing long-term leases on that land with joint ventures and other business interests that then use the land for development. The revenue from these leases has enabled local jurisdictions to provide the necessary public goods and infrastructure without ever collecting a tax.
Lately some jurisdictions are running out of new, undeveloped land to lease and thus are losing the source of revenues they need to support local schools, infrastructure, and health services. China has never had a property tax, but a property tax system has been recommended as a solution to falling local revenue. Convincing the local officials to implement a property tax, however, has proven to be a political challenge for many reasons.
Land Lines: How does your research relate to the work of the Lincoln Institute?
Chip Case: I have studied land and property tax issues for a long time. I published my doctoral dissertation under the title Property Taxation: The Need for Reform. My early interest in the property tax led me to think about the housing market, its inefficiencies and failures. I have written about the efficiency of the property tax and about the distributional effects of land prices and increases.
A significant component of my research deals with measuring land value and assessing how land value affects the location of labor markets and the allocation of resources and public goods. When someone buys a house, that person is buying access to a package of rights that is tied to the piece of land under the house. The value of the package of rights is capitalized into the cost of the house and is taxed as a component of the property’s assessed value. The package of rights–what is included and how it varies by location–is a hot issue right now, in no small part because of the current state of the housing market and its resulting impact on the financial stability of the country’s economy.
Land Lines: Tell us more about your interest in the property tax.
Chip Case: I’m an unabashed fan of the property tax. It has the potential to operate as a clear, transparent means of raising revenue. The fair market value of property is not a bad index of the ability to pay. Compare this to the federal income tax, which has become so complex as to be a bizarre means of allocating the cost of government, with very little intuitive connection to taxpaying ability.
Taxes should be neutral, and ideally not affect economic behavior. When taxpayers change their actions to avoid tax, they are worse off and the government has lost revenue at the same time. The hidden costs of these changes include higher prices and lower wages. The land portion of the property tax is one of the few taxes that does not distort economic activity, and that’s an extremely valuable tool for public finance.
The property tax offers support for local jurisdictions, self-government, and direct democracy. Local governments have a hard time imposing independent sales or income taxes if people can find a lower rate in the next city or town. Real estate is immovable property, and that’s a good base for a local tax.
The property tax is always under attack because it is highly visible. Almost no one knows how much sales tax they pay in a year, and for many people income taxes are withheld from their wages. But writing a large check for the property tax focuses taxpayer attention. That means controversy, but it also means accountability, and it allows local voters to decide whether their taxes are in line with the public services they receive. That’s almost impossible to judge at the state or federal level.
The property tax can always be improved, and that’s part of the important mission of the Lincoln Institute. But it needs supporters who can point to its strengths, and I’m always happy to take on that role.
Land Lines: What is the subject of your current research?
Chip Case: I am working on a paper with Robert Shiller about the effect of people’s expectations on the housing market in 1988 and during the period from 2003 to 2012. Shiller and I collected questionnaires from people who had purchased or sold a house at some point during those calendar years. We used more than 5,000 questionnaires to create a dataset that allows us to better understand the nature of the recent housing bubble and to pinpoint the beginning of shifts in expectations. It gives us a way to quantify and analyze various expectations about the housing market and to determine how those expectations play a role in decision making.
We can see, for example, that in 2005 the goal of owning a house began to fade from the American dream. This type of shift is culturally and economically significant. When it occurs in conjunction with the inertia of people’s expectations, we begin to see volatility in the housing market. And if the swing is strong enough, we also see that volatility may affect the national economy.
Since the price of a house includes all rights and resources tied to that piece of land, expectations about the market and access to future rights and resources play a role in determining the market value of the house. The market value in turn affects the amount of tax levied on the property. The relationship between market expectations and the property tax is complex; the research that Shiller and I are doing will provide some insight.
Land Lines: What do you anticipate will happen in the U.S. housing market going forward?
Chip Case: I am cautiously optimistic about the future of the housing market. The numbers seem to indicate that the housing sector is stabilizing and showing signs of slow but positive growth. The housing sector composes only about 6 percent of the country’s GDP, but it has been enormously important in the past. Its recovery would certainly help the economy come back from the devastating effects of the recession.
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It is difficult to overstate how ongoing population loss has devastated Detroit. Between 1900 and 1950, when the rise of U.S. automobile manufacturing made the city one of America’s premier industrial and cultural centers, the population spiked from 300,000 to 1.85 million. Beginning in 1950, however, it began to fall. And its decline has been continuous to the present day, plummeting to just 700,000 in 2010, at a rate of descent nearly as swift as the rate of ascent in the first half of the 20th century.
Despite Detroit’s decades-long effort to keep pace with population loss by removing dilapidated housing stock, roughly a quarter of its 380,000 parcels are now abandoned, managed by the city or other public entities. As of July 2014, 114,000 properties have been razed, and 80,000 more are considered blighted (Austen 2014).
While the downtown is recovering and the suburbs remain vital, the “unfathomable dissolution of [the] built landscape” in vast areas of the city may shock the unsuspecting visitor (Austen 2014).
The first installment in a two-part series, this article considers the fiscal causes and repercussions of Detroit’s surplus of housing and vacant property: from the extent and location of abandoned homes and lots throughout Detroit to the downward spiral of house price declines leading to overassessment, property tax delinquency, and foreclosures; the public acquisition of that property; the pattern of land values across the city; and, finally, some potential ways to reconcile the remaining number of people with the amount of vacant and publicly held property. These measures range from targeting densely populated neighborhoods for redevelopment to establishing a greenbelt and reclaiming vacant parcels for public use as parks, forests, industrial buffers, retention ponds, and other open space (Austen 2014).
Factors Behind the Fall
The reasons for Detroit’s demise are numerous and perhaps too familiar. Federally subsidized transportation infrastructure, such as the Interstate highway system, facilitated rapid suburbanization, which was further enabled by permissive development codes. Racial tension, global economic forces, and corruption corroded what remained of the city proper. In the early stages of the malaise, higher-income residents, most of them Caucasian, left for the suburbs in search of a better quality of life, as shown in table1. By 1990, the African-American population had peaked as well and began to drop in the first decade of the 21st century. Beginning in the 1960s, Michigan auto manufacturing began its long, precipitous decline, disproportionately impacting Detroit and Flint. The loss of well-paying middle-class jobs further harmed the urban demographic and economic base, as households sought new employment opportunities elsewhere. Rising crime rates and continued erosion of public services induced another wave of exits.
Table 1 illustrates this downturn in the city’s demographic and economic conditions from 1950 through 2010. By 2012, according to government sources, median household income was just $25,000, less than half of the national median income. Poverty and unemployment rates were 38 and 27.5 percent, respectively. The labor force participation rate was 54 percent (compared to 63 percent nationwide), and for every 6.35 employed workers, there was one person receiving Social Security Disability benefits (compared to 1 of 12 nationwide). More than 34 percent of the city’s population received food stamps, and 81 percent of children in the Detroit Public Schools qualified for the Free and Reduced Lunch Program. Revenue streams became increasingly dependent on external sources, including nonresidents, as discussed in box 1. In 2013, when the city finally succumbed to the weight of accumulating fiscal challenges and declared bankruptcy, its debt and unfunded liabilities amounted to $18 billion—or $68,000 per household, which is about 2.7 times the median household income (Turbeville 2013).
The Failed Housing Market
The enormous excess supply of housing that accumulated over decades as a result of winnowing demand in Detroit corroded the value of that property. The real estate crisis of 2007–2008 dealt the final blow, resulting in the near-complete breakdown of Detroit’s housing market. By 2010, the average price of a residential property had plummeted to about $7,000 from $57,000 in 2006 (Hodge et al. 2014a). Detroit’s current excess of land and housing would likely suppress real estate price recovery in the coming years even if the population were to stabilize.
Property Tax Delinquency, Abandonment, and Public Acquisition of Property
Tax officials have not recalibrated assessment values to reflect house price declines. The resulting overassessment is as high as 80 percent (Hodge et al. 2014a), contributing to a general unwillingness to pay taxes, according to Alm et al. (2014). Their research also shows that additional factors such as high statutory tax rates and limited services such as public safety worsen this delinquency as well.
In the midst of the real estate crisis, property tax delinquency reached an alarming 50 percent (Alm et al. 2014). Figure 2 (p. 13) shows delinquency rates by neighborhood across the city in 2010. Property tax collection depends on a jurisdiction’s ability to impose sanctions for nonpayment of taxes, as noted by Langsdorf (1973). When real estate values collapse, taxing authorities have no workable enforcement mechanism; homeowners’ savings from nonpayment of property tax are greater than the value of the house they own and would lose in the instance of foreclosure. Further, proceeds from the sale of low-valued tax-foreclosed property are insufficient to cover back taxes owed and the government costs of initiating foreclosure proceedings.
Widespread failure to pay property taxes and the subsequent abandonment of homes has resulted in the public acquisition of thousands of properties throughout Detroit. Fifteen percent of the parcels within the 139-square-mile city are now empty, and nearly 25 percent of Detroit’s land area is now nontaxable, owned and managed by the city or some other public entity (Sands and Skidmore 2014), as illustrated in figure 3.
The Downward Spiral of Foreclosures
Currently, the number of properties flowing into public hands via tax foreclosure far outpaces the number of publicly held properties being purchased back by private taxpaying owners.
In Michigan, delinquent property taxes are subject to a 4 percent administration fee and 1 percent monthly interest on the delinquent amount computed at a non-compounded rate, beginning in the first month of nonpayment. After one year of delinquency, the city forfeits the property to county government, and the owner becomes subject to an additional 0.5 percent monthly interest charge. During this two-year period, owners may redeem their properties by paying all outstanding taxes and fees.
If property taxes go unpaid for more than two years, the Wayne County Treasurer initiates foreclosure proceedings. After a show cause hearing in the Circuit Court, the County Treasurer publicly auctions the foreclosed parcels. The starting bid equals the unpaid property taxes plus interest and penalties, and the proceeds are distributed proportionately to the taxing jurisdictions. If the property doesn’t sell at the first auction, the county lowers the minimum bid to $500 and holds a second auction. This procedure has led to further tax evasion, as some homeowners elect to ignore their tax bills with the expectation that they will be able to repurchase the parcel for $500 at the second auction.
Property that doesn’t sell at either auction may be transferred to a public body (city or state) or to a state or local land bank, or it may be held for a subsequent auction. County records indicate that 80 percent of the parcels sold to private buyers at auction over the past two years are once again delinquent on taxes (MacDonald 2013). Given that the tax delinquency rate is 67 percent for non-homestead property owners (Alm et al. 2014), it seems likely that a significant proportion of buyers at auction are absentee landlords who intend to reduce their operating expenses and increase their net rental income by never paying property taxes.
Property taxes are effectively optional on low-valued parcels as well. To minimize the backlog of tax-delinquent lots (MacDonald 2013), the county does not foreclose on homeowners who owe less than $1,600 in taxes and penalties in aggregate, effectively rendering these debts optional.
Expected revenue from the sale of low-valued parcels is insufficient to cover legal expenses associated with tax foreclosure and unpaid property tax balances. The end result is an increasing rate of delinquency and a growing inventory of unwanted property that ends up in the public sector, where it generates no revenue for the city.
Where to Go from Here?
Another wave of property tax-related foreclosures is expected in late 2014 and early 2015. What can be done to stabilize the situation?
Curbing Property Tax Delinquency
As mentioned, delinquency will abate when tax payers perceive that they receive commensurate returns for their money. Thus, improving the tax-service package by upgrading core services such as public safety will reduce evasion and lateness (Alm et al. 2014). Under the leadership of recently elected Mayor Mike Duggan, city government is taking steps to improve basic public service provision and put its fiscal house in order. For example, just 35,000 of 88,000 streetlights currently work, so Duggan plans to install 2,400 functioning streetlights per month (Austen 2014). He also increased the number of operating buses from 143 to 190, and improved snow plowing during the particularly harsh winter.
Lowering tax rates would modestly reduce delinquency as well (Alm et al. 2014). Roughly double the regional average, Detroit tax rates are at the state’s maximum of 67 mills and 85 mills per assessed value for homestead and non-homestead properties, respectively. While a reduction would improve the competitive position of the city relative to other communities in the region, currently there is no discussion of reducing property tax rates.
Aligning assessed values more closely with actual market conditions will also reduce delinquency. Mayor Duggan recently promised to lower assessments by 5 to 20 percent across the city to reconcile them with state guidelines. However, Duggan’s promised reductions are just a small fraction of the 80 percent cut needed to bring assesment to market levels, according to Hodge et al. (2014a).
Removing Land from the Market
In the absence of robust demand for land, which seems unlikely in the near future, the excess must be removed from the market for a period of time in order for real estate value to improve broadly across the city. Given that public entities now hold so much property, it is within the power of government authorities to credibly remove it from the market. Without this type of policy action, the possibility that these parcels could be quickly transferred to the private sector serves to hamper price recovery.
Currently, public lands are held by many public entities. Authorities from the City of Detroit, Wayne County, and state government are working to consolidate these parcels under a single entity that can manage them more effectively. Detroit Future City (2010) details the extent of the fragmented ownership of public lands:
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Public land in Detroit is held by many separate agencies, including city, county, and state agencies, as well as autonomous or quasi-governmental entities such as the Detroit Public Schools, the Detroit Housing Commission, and the Detroit Economic Growth Corporation. Few other cities have such fragmented holding of their public land inventory. There is no consistency of policy, procedure, or mission among these agencies, while many are hamstrung by burdensome legal requirements and complex procedures. The Department of Planning and Development controls the largest number of properties, yet its ability to do strategic disposition is constrained by procedural obstacles, including the need to obtain City Council approval for all transactions, however small and insignificant from a citywide perspective.
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While this consolidation process is necessary, it is not sufficient. Financial resources are required to remove blight and implement land use plans. City leaders are focused mainly on strategies to return these parcels to private ownership. If they can stimulate greater interest in Detroit property, this approach might be viable.
Indeed, opportunities for private ownership are emerging in the central business district (CBD). Daniel Gilbert, founder of Quicken Loans, has moved his headquarters to downtown Detroit and invested $1.3 billion in city real estate (Forbes 2014). And downtown renewal has led to substantial rental price increases (Christie 2014).
Land values are very high in the CBD, as depicted in figure 4 (p. 16) by the black parcels, which represent the very highest land values on the map. Detroit’s land value gradient is very steep, however. While several areas within the donut around the CBD have retained some worth, land values plunge rapidly as distance from the CBD increases, though they rise again near the city’s border, probably because amenities such as shopping are available in the nearby suburbs.
Given the weak demand outside the CBD, it may be more effective to determine which publicly held properties should return to private taxpaying parties, which properties should be taken off the market for a decade or two, with the option of returning land to the market should conditions change, and which should be permanently removed from the market.
The 2012 master plan, as outlined by Detroit Future City, calls for the reclamation of land for parks, forests, industrial buffers, greenways, retention ponds, community gardens, and even campgrounds (Austen 2014). Full implementation of this ambitious proposal requires significant financial resources. But consider how state and federal authorities intervened in the last major episode of mass tax foreclosure. During the Great Depression, many homesteaders on marginal agricultural lands in Michigan, Minnesota, and Wisconsin were unable to pay their property taxes, and this default resulted in a mass wave of tax delinquency, foreclosure, abandonment, and eventual forfeiture. In these states, county governments frequently became the owners of thousands of acres, much of which was eventually sold to the state and federal governments. The six national forests in Minnesota, Wisconsin, and Michigan, as well as the region’s numerous state forests, all have origins in this mass land abandonment of the Depression Era, as state and federal authorities pieced together a patchwork of adjacent lands purchased from counties eager to sell off their tax-forfeited property.
Today, state and federal authorities have no taste for a Detroit “bailout.” But history suggests that state and federal governments could help Detroit regain fiscal viability by purchasing patchworks of unwanted parcels, making payments in lieu of taxes, as is typical for other publicly owned lands, and then using the land for the benefit of the general public. Potential uses are mapped out in the aforementioned city master plan which the second installment of this series will explore. A federal, state, and local government partnership to reclaim these properties could help stabilize the land market and generate a revenue stream for the city and the other overlying taxing jurisdictions (including the state government via the state education tax). Property value recovery in combination with downtown reinvestment, continued efforts to improve Detroit’s tax-service package and remove blight, and long-run investment in Detroit’s human and social capital are essential elements of a sustainable Detroit recovery.
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Box 1: Targeting Nonresidents for Revenue
Detroit’s revenue streams have become increasingly dependent on external sources, including nonresidents, as its population and economic base have declined. This shift occurred in part because over time Michigan state legislatures empowered the City of Detroit to use tax-exporting strategies to help shore up weakening fiscal conditions and deal with massive structural changes to the regional economy. While there were periods during which it appeared that Detroit was on the cusp of recovery, various forces prevented “escape velocity.”
Today, the City of Detroit relies on the income tax, property tax, casino wagering tax, state revenue sharing, a utility user’s tax, federal grants, and various fees and licenses to fund public services. Of these, the casino wagering tax and the city income tax were adopted to bolster fading revenues from more traditional sources.
The casino wagering tax, based on gamers’ winning receipts, has become particularly important to the City of Detroit over the last decade, as shown in figure 2, which summarizes trends in the city’s major revenue sources from 1960 through 2012. The state legislature authorized casino gaming activity and the wagering tax in Detroit in 1996, to help the city address its fiscal challenges. By 2001, casino construction had been completed. The $180 million in additional annual revenues helped to stave off financial pressures even as other sources, such as income taxes and state shared revenues, were in decline. Up to 85 percent of gamers at the three major Detroit casinos are nonresidents, according to recent reports and interviews with gaming experts (Miklojcik 2014).
Since 1963, the city income tax has represented Detroit’s largest and, for a number of years, fastest-growing revenue source. At the time of adoption, the majority of the income tax was paid by city residents. As Detroit’s population has declined, however, the income tax on nonresidents who work in the city has become an increasing share of the city income tax base, composed of wages and salaries earned at a city-based job. The tax rate is 2.4 percent for city residents, whereas nonresidents pay 1.2 percent. While corporations and partnerships also pay an income tax, it is a very small portion of total revenues collected. According to Scorsone and Skidmore (2014), about half of the city income tax revenue in Detroit is paid by nonresidents.
State revenue sharing continues to play a critical role in Detroit’s finances, though population loss has diminished even this income source. In Michigan, state government collects a statewide sales tax and then shares a portion of the proceeds with municipal governments. Sales tax revenues are allocated to local governments based on constitutional provisions as well as state statute. The constitutional portion of revenue sharing is based on each jurisdiction’s share of the total state population. Given the dwindling number of Detroit residents, this portion of state revenue sharing has been falling for decades. The city experienced significant growth in total revenue sharing funds through the 1970s and 1980s, due to increases in statutory revenue sharing, which is distributed by formulae that have been changed by legislators many times in recent decades. But new changes to the statute combined with stagnation in the sales tax led to declining growth and eventual decline in revenue sharing for cities across the entire state in the 1990s. As Michigan entered a decade-long recession, this decline continued for most local jurisdictions, including Detroit, through the 2000s.
Some have pointed to revenue sharing reductions as a major source of stress for the City of Detroit, and a major catalyst for the bankruptcy. However, these declines affected all cities that received revenue sharing in Michigan; while cuts to revenue sharing likely influenced the timing of Detroit’s bankruptcy, they were not the ultimate cause. Further, it is important to note that revenue sharing for Detroit represents a net positive transfer of funds from the rest of the state to the city. According to the 2007 economic census, retail sales in the City of Detroit were $3.2 billion, or about 2.9 percent of the $109 billion in the State of Michigan.
In 2012, total state revenue sharing to all municipalities in Michigan was about $1 billion, and Detroit’s share of the total was $172 million, or 17.2 percent. Given that Detroit represents just 3 percent of total state retail sales in Michigan, one can conclude that the majority of state revenue sharing that flowed to Detroit originated from retail transactions that occurred outside the city.
As of 2014, the City of Detroit had approximately a $1 billion General Fund, considerably lower than in 2002 when revenue peaked at $1.4 billion. A 30 percent drop in revenues over time without a commensurate cut in expenditures led to the Detroit fiscal crisis and the eventual declaration of bankruptcy in 2013. By 2012, Detroit had borrowed more than $1 billion in an attempt to stave off default and a liquidity crisis (Michigan Department of Treasury 2013).
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About the Author
Mark Skidmore is professor of economics at Michigan State University, where he holds the Morris Chair in State and Local Government Finance and Policy, with joint appointments in the Department of Agricultural, Food and Resource Economics and the Department of Economics.
References
Alm, J., T. Hodge, G. Sands, and M. Skidmore. 2014. “Detroit Property Tax Delinquency—Social Contract in Crisis.” Lincoln Institute of Land Policy Working Paper.
Austen, B. 2014. “The Post-Apocalyptic Detroit.” New York Times, July 13. http://nyti.ms/1mFu3Jn
Center for Educational Performance and Information. Accessed in July 2014 from www.michigan.gov/cepi/0,4546,7-113-21423_30451—,00.html
City of Detroit. 2013. Comprehensive Annual Financial Report. www.detroitmi.gov/Portals/0/docs/finance/CAFR/Final%202012%20Detroit%20Financial%20Statements.pdf
Christie, Les. 2014. “I’ve Been Priced Out of Downtown Detroit.” CNN Money, May 27. http://money.cnn.com/2014/05/27/real_estate/downtown-detroit/index.html
Detroit Future City. 2010. Detroit Future City Strategic Framework Book. http://detroitfuturecity.com/framework
Forbes. 2014. “World’s Billionaires.” www.forbes.com/profile/daniel-gilbert
Hodge, T., D. McMillen, G. Sands, and M. Skidmore. 2014a. “Tax Base Erosion and Inequity from Michigan’s Assessment Growth Limit: The Case of Detroit.” Lincoln Institute of Land Policy Working Paper.
Hodge, T., G. Sands, and M. Skidmore. 2014b. “The Land Value Gradient in a (Nearly) Collapsed Urban Real Estate Market.” Lincoln Institute of Land Policy Working Paper.
Landsdorf, K. 1973. “Urban Decay, Property Tax Delinquency: A Solution in St. Louis.” The Urban Lawyer 5: 729–748.
MacDonald, C. 2013. “Half of Detroit Property Owners Don’t Pay Taxes.” The Detroit News, February 12.
Michigan Department of Treasury. 2013. Supplemental Documentation of the Detroit Financial Review Team. www.michigan.gov/documents/treasury/Review_Team_Report_Supplemental_2–19-13_411866_7.pdf
Michigan Department of Treasury. 2010. Real Property Tax Forfeiture and Foreclosure. www.michigan.gov/taxes/0,4676,7-238-43535_55601—,00.html
Miklojcik, J. 2014. President of Michigan Consultants. Information shared in personal interview with Eric Scorsone.
National Public Radio. 2014. “Chinese Investors Aren’t Snatching up Detroit Property Yet.” www.npr.org/2014/03/04/285711091/chinese-investors-arent-snatching-up-detroit-property-yet
Sands, G. and M. Skidmore. 2014. “Making Ends Meet: Options for Property Tax Reform in Detroit.” Forthcoming in Journal of Urban Affairs.
Scorsone, E. and M. Skidmore. 2014. “Blamed for Incompetence and Lack of Foresight and Left to Die.” Response to William Tabb’s “If Detroit Is Dead Some Things Need to Be Said at the Funeral.” Forthcoming in Journal of Urban Affairs.
Turbeville, W. 2013. “The Detroit Bankruptcy.” Demos, November 20. www.demos.org/publication/detroit-bankruptcy
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Vivienda inclusiva: La creación y el mantenimiento de comunidades equitativas
Por Rick Jacobus
En diferentes ciudades, como Seattle, San Francisco, Chicago, y Portland, Maine, se ha desatado un debate sobre la vivienda inclusiva, es decir, el requisito de que los desarrolladores reserven un porcentaje de los nuevos desarrollos residenciales para viviendas asequibles. Algunos sostienen que esta política desalienta el desarrollo o, con alegación más polémica que podría llegar a la Corte Suprema, que constituye una amenaza a los derechos de propiedad. Mientras tanto, el alcalde de la ciudad de Nueva York, Bill de Blasio, se enfrenta a críticas desde ambas partes: que su propuesta de vivienda inclusiva va demasiado lejos, o que no es suficiente.
En este nuevo informe titulado “Vivienda inclusiva: Creación y mantenimiento de comunidades equitativas”, Rick Jacobus separa la realidad de los mitos y traza el camino a los gestores de políticas, mostrando cómo la vivienda inclusiva puede usarse de manera eficaz para reducir la segregación económica.
“En las ciudades con mercados inmobiliarios muy activos, el aumento de los precios de la vivienda, obliga a los residentes de clase media y de bajos ingresos a alejarse de los empleos mejor remunerados, del transporte confiable, de las buenas escuelas y de los barrios seguros”, sostiene George W. McCarthy, presidente y director ejecutivo del Instituto Lincoln. “La vivienda inclusiva por sí sola no solucionará nuestra crisis de la vivienda, pero es uno de los pocos baluartes que tenemos para contrarrestar los efectos del aburguesamiento, y únicamente si preservamos las unidades que tanto nos cuesta construir”.
Mediante un análisis de la bibliografía sobre el tema y casos de estudio, Rick Jacobus, de Street Level Urban Impact Advisors, ofrece soluciones para superar las principales barreras políticas, técnicas, legales y prácticas que enfrenta todo programa de vivienda inclusiva para tener éxito.
“Más de 500 comunidades han utilizado las políticas de vivienda inclusiva con el fin de mantener la vitalidad y diversidad de los barrios en transición, y hasta ahora hemos aprendido mucho”, señala Jacobus. “Según investigaciones realizadas, si los programas se diseñan e implementan concienzudamente, pueden llegar a ser una herramienta valiosa en tiempos en que la vivienda inclusiva se necesita desesperadamente”.
En particular, el autor se refiere en este informe a la preocupación de que la vivienda inclusiva podría impedir nuevas construcciones debido a que el desarrollo tendría un rendimiento económico menor. Según el informe, muchas ciudades han evitado dicho impacto otorgando flexibilidad a los desarrolladores para cumplir con las normas y ofreciendo incentivos, como la posibilidad de construir unidades con mayor densidad.
Otras conclusiones y recomendaciones clave que surgen del informe son las siguientes:
Durante muchos años, el Instituto Lincoln ha desarrollado estrategias para apoyar la vivienda permanentemente asequible, mediante, por ejemplo, el establecimiento de fideicomisos de suelo comunitarios y otros acuerdos de capital compartido. Estas medidas se han tomado teniendo en cuenta la actual crisis de acceso a la vivienda existente en muchas ciudades. Los precios estratosféricos de los precios de alquiler y compra de viviendas en los mercados inmobiliarios muy activos han ido desplazando a los antiguos residentes y cambiando el carácter de ciudades y barrios.
Para encargar ejemplares: http://www.lincolninst.edu/pubs/3583_Inclusionary-Housing.
Rick Jacobus, es experto nacional en vivienda inclusiva y en acceso a la propiedad de viviendas asequibles. Es director principal de Street Level Urban Impact Advisors (StreetLevelAdvisors.com). Fundó Cornerstone Partnership y actualmente es asesor estratégico en Cornerstone.
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Una versión más actualizada de este artículo está disponible como parte del capítulo 2 del libro Perspectivas urbanas: Temas críticos en políticas de suelo de América Latina.
Muchos gobiernos latinoamericanos han mejorado el proceso de legalización de los asentamientos periféricos, y han reconocido el derecho a la vivienda y la postura de las Naciones Unidas que condena los desalojos forzosos como violaciones de los derechos humanos. Así y todo la práctica del desalojo persiste, con repercusiones devastadoras para familias, vecindades, y para con los esfuerzos de mejoramiento de grandes áreas urbanas. Al perpetuar un clima de miedo e incertidumbre, esta amenaza hace a la gente perder las ganas de invertir recursos y mano de obra en sus hogares y barrios.
Los desalojos en América Latina surgen del fenómeno de ocupación ilegal, el cual a su vez resulta de factores como la urbanización incontrolada, la falta de recursos financieros por parte de la población pobre y de los gobiernos municipales, y la carencia de títulos de propiedad legales o debidamente registrados. En tales circunstancias, la necesidad de supervivencia impulsa al pobre urbano a valerse de una variedad de mecanismos -incluyendo subdivisiones ilegales, invasiones y viviendas autoconstruidas- a fin de satisfacer sus necesidades de alojamiento y de comunidad.
Los moradores de Chapinero Alto, al noreste de Bogotá (Colombia), han enfrentado 30 años de intentos de desplazamiento y desalojo. Muchas de las familias que viven en esta periferia urbana montañosa son descendientes de los trabajadores de haciendas situadas en la región de la sabana (altos llanos). Conforme las haciendas se fueron cerrando y vendiendo para dar paso a la expansión urbana, los trabajadores no tuvieron más alternativa que quedarse a vivir en las colinas, cuyo valor era considerado despreciable por los promotores de mediados del siglo XX.
A principios de la década de 1970, los anuncios del plan de construcción de una autopista generaron una oleada especulativa y varios intentos de expulsión. Los moradores y sus aliados en universidades e instituciones religiosas formaron un frente social masivo que impidió varios desalojos, pero que no pudo detener la especulación. Para la época de finalización del proyecto (mediados de los ’80) pocas familias habían tenido que salir para dar paso a la carretera, pero los barrios tuvieron que volver a hacer frente a otra oleada de intentos de desalojo.
A principios de los ’90 la amenaza surgió nuevamente, esta vez en nombre de proyectos de desarrollo sostenible y de las denuncias hechas por el gobierno y varios grupos privados, que afirmaban que los barrios pobres atentaban contra el frágil medio ambiente circundante. Desde ese entonces los ocupantes se han visto obligados a luchar de mil maneras para defenderse contra los intentos de desalojo, y tal clima de inestabilidad ha desalentado cualquier proyecto de mejora bien sea por parte de los moradores como por parte del gobierno.
Refugiados del desarrollo
Las causas de los desalojos son variadas, pero típicamente se atribuyen directa o indirectamente a proyectos de renovación urbana. Debido a la creciente escasez de terrenos urbanizados, la competencia y las evicciones obligan a los moradores de los asentamientos informales a trasladarse a la periferia. En Bogotá, la expansión de la ciudad ha convertido a Chapinero Alto en uno de los predios más codiciados de la ciudad. A las víctimas de los desalojos (llamadas también “refugiados del desarrollo”) se les suele acusar de obstaculizar el progreso cuando protestan, y raramente se les ofrece una indemnización o participación en programas de reubicación. En los casos de especulación, a menudo las familias se ven obligadas a pasar el trago amargo de ser despojadas de sus hogares prácticamente sin previo aviso.
Los gobiernos locales desempeñan un papel principal en los procesos de desalojo, junto con propietarios de tierras, empresas urbanizadoras, cuerpos policiales y fuerzas armadas. Sacar a los pobres de los predios deseables no sólo facilita emprender proyectos de infraestructura e inmuebles de lujo, sino que también libera al rico del contacto diario con el pobre. Gobernantes y promotores suelen defender sus acciones en aras del embellecimiento y mejoramiento de la ciudad, o aseveran que las barriadas pobres son un caldo de cultivo de problemas sociales. Además, cada vez más se justifican los desalojos tras el escudo de la protección ambiental y el desarrollo sostenible. Todas estas razones han sido utilizadas por funcionarios gubernamentales y propietarios de títulos para eliminar los barrios pobres de Chapinero Alto.
Cuando las familias se ven obligadas a salir de sus predios, no sólo pierden sus tierras y sus hogares, sino también sus vecinos, comunidades y círculos sociales. El estrés sicológico y los daños a la salud causados por meses de incertidumbre pueden ser terribles. Frecuentemente los niños pierden meses de escuela, y sus padres deben viajar distancias considerables para llegar a sus trabajos. Los resultados de estudios antropológicos han demostrado que al dispersarse la población, se desmantelan las redes de ayuda mutua y los círculos sociales, los cuales son herramientas críticas de supervivencia para los pobres urbanos, quienes a menudo afrontan problemas económicos e incertidumbre. Estas redes de protección son irremplazables, incluso en los casos en que las familias reciben una indemnización. Por último, el desalojo entraña un alto riesgo de empobrecimiento, especialmente para las personas carentes de títulos de propiedad, puesto que generalmente no reciben indemnización.
En 1992 el gobierno de Bogotá desalojó a un grupo de 30 familias tras una violenta disputa con un propietario. La ciudad trasladó a las familias a una escuela abandonada, donde vivieron durante varios meses esperando las viviendas de interés social prometidas por el alcalde. A medida que pasaron los meses y se evaporó la promesa de las viviendas, los problemas de estrés, salud y pérdida de ingresos y educación ocasionaron efectos graves en las familias. Varios de los hombres abandonaron sus familias; hubo incidentes de violencia doméstica; y se desintegraron las relaciones sociales. Para el año 1997 las familias se habían dispersado y estaban viviendo dondequiera que pudieron conseguir dónde vivir en la ciudad.
Una de las consecuencias más dolorosas del desalojo es la repercusión negativa que tiene esa permanente inseguridad sobre todos los asentamientos irregulares. Sin importar si al final se hace o no realidad, la amenaza constante del desahucio afecta vastas zonas de ciudades en desarrollo y frena las inversiones en viviendas y servicios, tan necesarias para resolver los problemas de las barriadas. Ésta es una de las razones que imponen estudiar la práctica de los desalojos forzosos dentro del marco de los derechos humanos. El problema continuará hasta tanto la seguridad de tenencia y de una vivienda adecuada no sean protegidas como derechos humanos.
Desalojos y derechos humanos
Dadas las consecuencias sociales de amplio efecto que tienen los desalojos forzosos, no es de sorprender que los mismos quebranten un buen número de derechos humanos. Para empezar, obviamente comprometen el derecho a la vivienda, defendido por el derecho internacional en forma cada vez más explícita. El derecho a la vivienda fue establecido por vez primera en el artículo 25 de la Declaración de las Naciones Unidas sobre los Derechos Humanos de 1948. La Declaración sobre el Progreso Social y el Desarrollo, la Declaración de los Derechos del Niño, la Declaración de Vancouver sobre los Asentamientos Humanos y otros congresos también afirman el derecho a la vivienda, así como lo hacen más de 50 constituciones, entre ellas la Constitución Colombiana de 1991.
Además del derecho a la vivienda, el desalojo forzoso entraña comúnmente una violación al derecho a la libertad de movimiento. La violencia o el asesinato de líderes o miembros de la comunidad que protestan los desahucios constituyen claras violaciones al derecho a la vida y a la seguridad de las personas, así como también a la libertad de expresión y de afiliación. Cuando un niño es retirado de su escuela debido a un desalojo forzoso, se quebranta su derecho a la educación. Cuando los cuerpos policiales o militares irrumpen en los hogares a la fuerza, las familias pierden sus derechos a la vida privada. El derecho al trabajo es una de las violaciones más frecuentes del desahucio. Finalmente, las repercusiones psicológicas y físicas que acarrean los desalojos forzosos infringen el derecho a la salud.
Incluso en aquellas regiones donde los gobiernos han ratificado las declaraciones de las Naciones Unidas sobre el derecho a la vivienda, se siguen cometiendo violaciones. Las Naciones Unidas y muchos otros organismos observadores responsabilizan claramente al Estado como ente encargado de prevenir los desalojos, y han declarado que si un gobierno fracasa en sus intentos de garantizar la disponibilidad de viviendas adecuadas, tampoco puede aseverar que la eliminación de los asentamientos ilegales cumpla con las normas de derecho internacional. Dado que prácticamente todos los desalojos forzosos son planeados, y dado que existe un conjunto de estipulaciones reconocidas internacionalmente que condenan la práctica, tales desplazamientos deberían efectuarse en seguimiento a políticas sociales y dentro de un marco de trabajo centrado en los derechos humanos.
Consideraciones de política
Basado en varios estudios sobre desalojos forzosos y en nuestro propio estudio de investigación realizado en Bogotá, seguidamente expondremos varias sugerencias para mejorar las políticas de vivienda y de prevención de la violencia mediante el cumplimiento de las normas de derechos humanos. Los puntos siguientes deben ser el objetivo de las políticas que se proponen eliminar los desalojos forzosos:
Los problemas asociados al desalojo forzoso -violencia, empobrecimiento y estancamiento del desarrollo urbano- podrán prevenirse con más eficacia únicamente implementando mecanismos eficaces para extender los derechos de tenencia a la población urbana pobre. El mejoramiento de las actuales directrices de los derechos humanos requiere extender los derechos de protección contra desalojos forzosos y los derechos al reasentamiento adecuado. Aunque las directrices actuales se cumplen con más eficacia en los proyectos de desarrollo que cuentan con financiamiento internacional, los estados deberían valerse de directrices similares para aplicarlas a toda forma de desplazamiento. Al extender las directrices de los derechos humanos y mejorar los mecanismos de ejecución y cumplimiento, los organismos nacionales e internacionales podrán cumplir mejor con las necesidades de la población pobre urbana.
Margaret Everett es profesora asistente de antropología y estudios internacionales en Portland State University en Portland, Oregon. Su estudio de investigación para este artículo fue parcialmente financiado por el Instituto Lincoln. El informe completo, “Desalojos y derechos humanos: un estudio etnográfico de disputas de desarrollo y tierras en Bogotá, Colombia”, está publicado en la sección de América Latina del sitio Web del Instituto Lincoln (www.lincolninst.edu).
Leyendas de las fotos
Una vivienda del barrio Bosque Calderón de Bogotá muestra los mensajes ‘Respeten nuestros derechos de posesión y vivamos en paz’ y ‘Más de 30 años de posesión es una razón’. Sus habitantes se enfrentaron a intentos de desalojo desde principios de los años ’70, y finalmente recibieron los títulos legales a principio de los ’90.
Los moradores de Bosque Calderón participan en un proyecto de vivienda comunitaria tras finalmente adquirir el permiso de tenencia legal.
