A response to Schill and Wachter's 'The spatial bias of federal housing law and policy.' (article by Michael H. Schill and Susan M. Wachter in this issue, p. 1285) (Symposium - Shaping American Communities: Segregation, Housing & the Urban Poor)

• Author: Galster, George

In their article, The Spatial Bias of Federal Housing Law and Policy: Concentrated Poverty in Urban America,(1) Professors Michael Schill and Susan Wachter provide a careful, scholarly critique of palpable policy relevance. Their analysis reflects the consistent pattern that their past productive collaboration has established: a thoughtful amalgam of legal, historical, economic, and statistical expertise that yields provocative conclusions. It is thus my privilege to have the opportunity to comment upon it.

The fundamental claim of Schill and Wachter's article is that past and current federal housing law and policy (especially as they relate to public housing and mortgage markets) intensify the concentration of low-income families in inner-city neighborhoods, either intentionally or unintentionally.(2) Fortunately, they argue, many of these mistakes are capable of remediation through new federal initiatives.

Much of the historical evidence Schill and Wachter offer to support their claim is compelling. Although this is familiar territory to scholars, as Schill and Wachter's footnotes show, the authors present the material succinctly and powerfully. To their credit, they bring to bear econometric methods to supplement the historical analysis, and find evidence related to the geography of public housing and the rejection patterns of mortgage lenders that they claim buttress their case.

My response to Schill and Wachter's analysis essentially is that important aspects of their argument are either conceptually and/or empirically inconclusive. Furthermore, their discussion of "current" federal housing policy pays insufficient attention to recent initiatives of the Clinton Administration that go a long way in the directions advocated by the authors. I will first consider Schill and Wachter's arguments that relate to public housing, then those that relate to the Community Reinvestment Act. Finally, I will discuss policy implications.

1. PUBLIC HOUSING AND NEIGHBORHOOD EXTERNALITIES

   Schill and Wachter note several plausible means by which past public-housing siting, tenant, and maintenance policies could have intensified the concentration of poor families in central cities. One set of reasons is almost tautological: given that high-density public-housing complexes were built in neighborhoods that already had above-average poverty concentrations and were inhabited predominantly by poor families, observed rates of poverty must be higher in such neighborhoods.(3) The other set of reasons is behavioral and involves unsubsidized households. At root, Schill and Wachter argue that concentrations of public housing create a variety of negative externalities for the surrounding environs. Such externalities might reasonably be expected to induce nonpoverty families to move from the area and deter others from moving in, depress property values, and encourage property owners to defer maintenance and to subdivide dwellings into smaller rental units. All this should lead to an increase in the proportion of poor families residing in the private housing stock near public housing.(4)

   To test this proposition, Schill and Wachter specify and estimate a logit model for post-World War II Philadelphia census tracts. They find that, ceteris paribus, tracts with a larger share of...