Hierarchical Management Structures and Housing the Poor: An Analysis of Habitat for Humanity in Birmingham, Alabama.

AuthorHaeffele, Stefanie
  1. Introduction

    Hierarchical management structures perform quite differently in the public and private sectors. In the public sector, these structures often encounter knowledge problems that impair their ability to learn about the effectiveness of their programs and the need to adjust their efforts. In the private sector, however, because they must attract customers or donors to remain in existence, these structures are epistemically well positioned to receive feedback on their operations. We analyze the ability of private versus public bureaucracies to reduce housing problems for the poor by examining the hierarchical management structure and feedback mechanisms of Habitat for Humanity in comparison to federal efforts. Specifically, this article examines the challenge of improving housing quality for the poor, the failures of past efforts by the federal government to overcome this challenge, and the efforts of Habitat for Humanity to improve not only the living conditions of its clients, but also their financial stability and well-being.

    To improve the living conditions of the poor, we must be able to (a) assess the problem of inadequate housing; (b) understand the interconnection between housing, financial stability, and well-being; (c) develop programs that provide housing while also incentivizing these interconnected factors; and (d) adjust such programs when circumstances change. In other words, any effort to remedy inadequate housing must overcome the knowledge problem and be incentive-compatible to promote sustainable progress. Different bureaucratic structures will be more or less likely to overcome these epistemic and motivational challenges. Even similar hierarchical structures situated within different institutional settings will perform differently because they rely on different feedback mechanisms.

    Many cities in the United States and throughout the world have inadequate housing for the poor. While defining and quantifying inadequate housing is difficult, (1) a 2017 study by the US Department of Housing and Urban Development (HUD) noted that over 8.3 million US households had "worst case" housing needs as low-income households not on government housing assistance who spend more than half their income on housing (HUD 2017). The poor are the most affected: two-thirds of the people in inadequate housing earn less than 80 percent of the median income of their area (National Low Income Housing Coalition [NLIHC] 2004). (2)

    In America, inadequate housing includes high relative costs, poor physical quality, and overcrowding, as well as the complete lack of shelter. According to HUD, over twelve million households, comprised of both renters and homeowners, spend more than 50 percent of their annual incomes on housing. (3) Poor-quality housing may lack utilities, have incomplete or nonexistent bathrooms or kitchens, and have unsafe building structures. Further, the Census Bureau found that severe crowding, when there are more than 1.5 individuals per room (total rooms in the dwelling, not just bedrooms), occurred in 2.9 million housing units in 2000 (the most recent year of data available). (4)

    An array of academic literature captures the burdens of unstable and inadequate housing on an individual's health, education, and prosperity. People, particularly children, living in inadequate housing are more likely to have disabilities, mental illnesses, or behavioral issues (Marsh et al. 2000). Children in improper housing conditions experience more viral and bacterial infections, respiratory illnesses, anemia, and stunted growth (Sandel et al. 1999; Harker 2006). Additionally, children lacking proper shelter attain less education and are more likely to be impoverished as adults than are their peers living in better housing conditions (Harker 2006).

    In contrast, the benefits associated with maintaining and owning a house are substantial, including better building quality and reduced neighborhood crime rates (Saegert and Winkel 1998). The children of these households are more likely to stay in school, get better grades, and be in better health, and are less likely to have behavioral problems and teen pregnancies (Green and White 1997; Haurin, Parcel, and Haurin 2002). (5) Additionally, homeowners are more likely to be actively involved in politics and community organizations (Rohe, Van Zandt, and McCarthy 2002).

    Whether these benefits of homeownership are associated with the home itself or with the homeowner's more secure financial and social position is unclear. For instance, McCabe (2016) argues that residential stability appears to be more correlated with these benefits than homeownership. Consequently, it is uncertain whether the poor currently residing in inadequate housing can simply achieve these benefits by owning a home. In fact, low-income homeowners often purchase older homes of lesser quality that are in relatively more volatile neighborhoods (McCarthy, Van Zandt, and Rohe 2001). In the absence of consistent employment, income, and home maintenance, homeownership may exacerbate their financial burden rather then get them on the path to financial security (Rohe, Van Zandt, and McCarthy 2002).

    The self-perpetuating path-dependency of poverty must be overcome in order to achieve the benefits and prosperity of adequate housing and homeownership. It is by this goal that one must judge the current efforts by public and private bureaucracies to improve housing conditions for the poor.

    A substantial amount of literature discusses the performance of housing initiatives, cataloging and analyzing the failures of federal programs to address the problem (for instance, see Crane 1991; Dreier and Atlas 1996; Erickson 2009; Oakley and Burchfield 2009; Chaskin and Joseph 2011; Drew 2013) and cautioning against new government programs (Blair 1981; Varady et al. 2005; Oakley and Burchfield 2009; Sinha and Kasdan 2013; Talen and Koschinsky 2014). (6) Other studies have noted the ability and limits of nonprofit organizations to provide alternative housing options for the poor. (7) This strand of literature often makes appeals for partnerships between nonprofits and government (Schwartz et al. 1996; McDermott 2004; Koschinsky 1998; Bratt 2009; Thomas 2015). While these studies have emphasized the scale and scope of the housing issues facing the poor and have examined current affordable housing initiatives, there has been relatively little research on the actual capabilities of government, nonprofits, or public-private partnerships that provide sustainable housing options. (8) This article attempts to fill this gap.

    This article, thus, proceeds as follows. Section 2 briefly discusses the likelihood that differently situated bureaucracies will be able to access different feedback mechanisms, and so will be more or less effective at solving certain challenges, including housing the poor. Section 3 briefly describes the housing needs in Birmingham, Alabama, and the key government bureaucracy in Birmingham charged with housing the poor as well as the research methodology employed for this analysis. Utilizing interviews with various stakeholders, we explore the practices, effectiveness, and limitations of Habitat for Humanity Greater Birmingham (Habitat Birmingham) in improving housing conditions. Section 4 reviews the structure and effectiveness of Habitat and its Birmingham affiliate, and section 5 analyzes the capabilities of Habitat to improve housing conditions in Birmingham. Section 6 offers concluding remarks.

  2. Differently Situated Bureaucracies: A Brief Discussion

    Max Weber ([1922] 1978) defined a bureaucracy as a hierarchical system of governance where trained specialists with technical expertise perform certain roles within the organization and are controlled by rules. Bureaucracies, Weber explains, are an efficient system for organizing complex activities. Although Weber (p. 957) did not believe that the "character of bureaucracy" changes "whether its authority is called 'private' or 'public'," Mises ([1944] 2007) contrasted private enterprises driven by the quest for profits with bureaucratic management insulated from the profit motive that drives competitive capitalist enterprises. According to Mises, bureaucratic management is inherently inefficient.

    Neither the public nor the nonprofit sectors, which operate through bureaucratic management as Mises articulated it, can utilize the effective structure and feedback mechanisms of the market--the price system and the signals of profit and loss--that allow market actors to overcome knowledge and incentive problems. The private sector outperforms public and nonprofit bureaucracies because "markets offer far tighter feedback mechanisms (regarding the extended order) than do polities. Agents in market environments are equipped with prices as ex ante signals to guide their conjectures and profits as ex post selection mechanisms to separate that wheat from the chaff' (Martin 2010, p. 219). As Skarbek (2012) argues, commercial enterprises enjoy a privileged epistemic position compared to public and nonprofit bureaucracies. Yet, as Boettke and Coyne (2009) point out, there are proxy mechanisms available to nonprofits that guide actions and signal social approval (see also Boettke and Prychitko 2004; Chamlee-Wright 2004; Chamlee-Wright and Myers 2008). Unlike public bureaucracies, nonprofit enterprises have access to close substitutes for the knowledge-generating institutions that commercial enterprises rely on (see Storr, Haeffele-Balch, and Grube 2015).

    The success of nonprofit initiatives depends on the level of coordination of dispersed knowledge and resource allocation that proxy mechanisms achieve. For example, constraints on funding, in addition to open competition, can provide an incentive toward more accountable behavior. Funding obtained through donations is determined and sustained by the organization's reputation as well as its expected and actual...

To continue reading

Request your trial