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supposedly for their own good. However, all this activity, expense,
and disruptions of lives, is based on the crucial”and unsubstanti-
ated”assumption that third parties who pay no costs know better
The Economics of Housing 117

what is good for low-income tenants than those tenants them-
selves do.
Slum clearance programs in the nineteenth century created no
new housing and urban renewal programs in the twentieth cen-
tury created fewer low-income housing units than they destroyed,
with rents on many of these new units being beyond the price
range that the displaced tenants could afford. The net result was
that these programs restricted, rather than expanded, the options
available to low-income tenants. However disagreeable the pre-
existing housing may have looked to journalists or social reform-
ers, the tenants who lived there would obviously have been living
in better housing if they could have afforded it”consistent with
their other goals and desires.
Even famed nineteenth-century crusading journalist Jacob
Riis noted in passing that Jewish immigrants packed into
crowded slums on New York's lower east side saved a substantial
proportion of their incomes. Clearly they had other goals besides
maximizing the space, comfort, or amenities of the housing in
which they lived. When slum clearance forced them to move
into housing more pleasing to third-party observers, the costs of
this upgrading had to be paid by the tenants, not the observers,
and it would come at the expense of the tenants' other goals and
desires. Among these other uses of their incomes was sending
money to family members in Europe who were often suffering
both economic deprivation and social persecution, including
mob violence.
Most of the Jewish immigrants to America came with their pas-
sage across the Atlantic paid by family members already living in
the United States. In an earlier generation, the same was true of the
Irish, who likewise lived in slums and yet came up with the money
to pay to rescue their families in Ireland from the great famine
there in the 1840s and to bring millions of them to America.
118 APPLIED ECONOMICS


There is no question that early Jewish immigrants lived in over-
crowded tenements under conditions that most other Americans
considered appalling. When the lower east side of New York was a
predominantly Jewish slum, it contained three times as many peo-
ple per square mile as it did when it was a low-income ghetto for
other groups a hundred years later. Half of the Jews in this nine-
teenth century ghetto slept three or four to a room, and nearly
one-fourth slept five to a room. Moreover, mid-nineteenth century
slums had toilets in the yards and alleys behind the building. Only
later in that century did running water come into the buildings
themselves, to be shared by the tenants, who jointly had access to
the same water faucets and toilets. In 1894, there were only 51 pri-
vate toilets in nearly 4,000 tenements and only 306 persons out of
more than a quarter of a million had bathtubs in their homes.
There was no question that the housing in which these people
lived left a lot to be desired. But there were other things that they
also desired”such as saving their families abroad from starvation
and from death at the hands of anti-semitic mobs. Moreover, they
were also thinking beyond their immediate circumstances to a bet-
ter future for themselves and their children in America. Their sav-
ings helped prepare for that future, which turned out to be far
better than most people might have imagined at the time. What
slum clearance did was force these and other slum tenants to use
some of their hard-earned incomes to finance housing that left
third-party observers feeling better, though these tenants could
have moved into such more expensive housing before if they had
considered it worth the other things they would have to sacrifice to
do so.
During the same era, Italian immigrants”mostly men”lived in
housing that was at least as appalling in New York and in other
cities in Europe and South America. Yet, by enduring miserable
living conditions, and often skimping on their own food, these
The Economics of Housing 119

men were able to save, enabling them to send money back to Italy
to maintain their families there until their savings reached the
point where they could either return to Italy to make a better life
there or else bring their families over to join them in America. In
both cases, they and their families rose economically over the
years. But that rise was not helped when social reformers, armed
with the power of government, forced them to buy more or better
housing than they wanted at the time. In a later era, it was differ-
ent minority groups who were displaced by urban renewal. A
landmark study of urban renewal programs in the 1950s found
that more than three-fifths of the people displaced were either
blacks or Puerto Ricans.
It is always possible to make people better off in one dimension,
such as housing, at the cost of making them worse off in other di-
mensions that are not so visible to third-party observers. Where
this must be done against their will, by imposing the power of
government through slum-clearance programs, it is by no means
clear that the supposed beneficiaries of these programs are better
off on net balance. Would the slums never have been cleared oth-
erwise? One way to test this would be to consider another nine-
teenth-century poverty-stricken group living in substandard
housing whom housing reformers overlooked at the time”the
newly freed blacks in the South.
When the Civil War ended, blacks were still living in the same
log cabins with dirt floors that they had lived in as slaves. Such
amenities as window panes were nearly unknown among the for-
mer slaves at this point. Yet, without anyone crusading for better
housing for blacks, the ordinary pressures of the marketplace led
to improvements in the housing that blacks lived in. This happened
not only where blacks owned or rented their homes but also where
they lived in housing supplied by white landowners for whom they
worked as laborers or as sharecroppers. Competition for labor
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forced whites who were supplying the housing for some of the
blacks who worked for them, and enabled other blacks whose in-
comes were gradually rising over the years, to slowly but surely im-
prove the housing that black families lived in. Log cabins were
replaced by frame houses, dirt floors were covered by planks and,
by the turn of the century, glass window panes began to appear.
The kind of housing which blacks had inhabited at the end of the
Civil War had almost totally disappeared by the turn of the cen-
tury”without any slum clearance or other housing crusades.
The houses that blacks lived in at this juncture were still lacking
many amenities that would come later but both the previous and
the future improvements would come without the intervention of
social reformers and the government, unlike what was happening
in Northern immigrant slums. As of 1896, urban blacks”still
mostly living in the South”had an average of three rooms per
family. This was crowded in that era of large families, though less
crowded than among the Jews or Italians in New York at that
same time. The bottom line is that bad housing improved over
time as people's productive capacity, and consequently their
incomes, rose”with or without social reformers and slum clear-
ance programs. The only people who unequivocally benefitted
from these programs were those who ran them and social reform-
ers who promoted them, making themselves feel both good and
important.


Racial Segregation

The residential clustering or segregation of particular groups has
been the rule, rather than the exception, in countries around the
world and over the centuries. While this has been strikingly visible
to the naked eye when the groups were different in appearance, as
with blacks and whites in the United States, the same phenome-
The Economics of Housing 121

non has been common where the differences could not be seen
with the naked eye.
Sometimes the groups cluster spontaneously and sometimes they
are found clustered because they have been rejected by other
groups, who don't want them living in their neighborhoods, and
sometimes governing authorities assign them to separate living ar-
eas. The term "ghetto" originated centuries ago in Europe, to de-
scribe the neighborhoods where Jews were confined, sometimes
behind walls that were closed off at night. But Ibos from southern
Nigeria were likewise confined to separate neighborhoods in
northern Nigeria, even though both groups were black Africans
whom others might have had difficulty telling apart. In earlier cen-
turies, the Chinese minorities in Southeast Asia were often like-
wise confined to neighborhoods prescribed by the ruling
authorities, rather than being allowed to live at random among the
indigenous populations or among their European overlords.
In late-twentieth century Brazil, where racial distinctions were
broken down into "browns," "blacks" and "whites," the browns and
blacks were more residentially separate from one another than the
browns were from the whites. However, this was not a result of or-
ders from political authorities. In late-twentieth century America, it
was found that "51.65 per cent of the population of Southern Euro-
pean origin would have to be redistributed in order to achieve full
integration with the Northern European population."
The term "segregation" has often been used to describe both
spontaneous residential group clustering and residential separa-
tion imposed by authorities. In its strict sense, the term is used to
refer to the latter. An intermediate pattern is group clustering due
to an inability of a particular group to find acceptance”or per-
haps even toleration”in communities of other groups. There are
also combinations. For example, for most of the twentieth century,
blacks in Manhattan were largely confined to Harlem because
122 APPLIED ECONOMICS


they were not welcome in other neighborhoods. However, within
Harlem, there were further clusterings of people voluntarily, ac-
cording to their incomes, education, and times of arrival from the
South, the more fortunate blacks living on the outer regions of
Harlem and leading the expansion of the community into sur-
rounding white neighborhoods. It was much the same story on
New York's lower east side during the immigrant era, when Polish,
Hungarian, and Romanian Jews lived clustered separately within
the larger Jewish enclave.
Many lament racial or ethnic residential clustering and see it as a
"problem" to be "solved." However, affinities of culture, kinship, and
language have led many people to prefer to live among their own
groups, even when opportunities were available to live elsewhere.
The immigrant generation, still speaking a foreign language, tended
to cling to neighborhoods where they could communicate with oth-
ers from the same country, even after they had moved up economi-
cally and could afford to move on to more prosperous neighborhoods
inhabited by the native born or indigenous population. Second and
later generations, who tended to be more acculturated, could more
readily move out of ethnic enclaves and into the mainstream of the
larger society”which was correspondingly less resistant to their
moving into the new neighborhoods.
In other words, there may not be a fixed amount of "racism" or
other aversions restricting the residential housing of a given group.
Changes within the group itself over time can change the degree
of acceptance or resistance, as the costs of associating with them
change. Perhaps the most telling example of these changes in-
volves the history of the black population of the United States,
especially in urban areas. Long before slavery ended, there were
individual blacks who became free in one way or another and there
were about half a million of them in the middle of the nineteenth
century. As they changed, their housing options changed. Many of
the blacks living in Northern cities were escaped slaves or their
The Economics of Housing 123


children, lacking in acculturation to the world in which they were
now living. As of the middle of the nineteenth century, these free
blacks in the North as well as the South were socially unaccepted,
not only as regards housing but also in terms of being denied ac-
cess to public accommodations open to others. With the passing
years and generations, however, these blacks became more accul-
turated”and faced declining resistance to their participation in
the life of the larger community.
By contemporary accounts, the Northern black communities
were becoming cleaner, safer, and more self-supporting in the
nineteenth century. Jacob Riis reported at the time "a distinct and
gratifying improvement" among blacks in New York City and a
modern historian has noted that blacks in New York were better
off at this point than most recent white immigrants, with black
waiters receiving higher pay than Irish waiters and black construc-
tion worker employed building the Croton reservoir receiving
higher pay than Italian workers on the same project. W. E. B.
DuBois reported similar progress in nineteenth-century Philadel-
phia, where black cooks and waiters had graduated into the ranks
of some of the leading caterers in the city, winning "respect for
their people" in the process.
DuBois also noted in 1899 "a growing liberal spirit toward the
Negro in Philadelphia," in which "the community was disposed to
throw off the trammels, brush away petty hindrances and to soften
the harshness of race prejudice," including "a greater freedom of
domicile" in more recent times. There were parallel developments
in Chicago, Detroit and other Northern communities, so that "an
unprecedented period of racial amity and integration" developed in
the period from 1870 to 1890, and there was much optimism that
race relations would continue to improve, in the North at least, in
the twentieth century. In reality, however, this era was followed by
an era of dramatic retrogressions in race relations in the North.
These were not just inexplicable swings of the pendulum in white
124 APPLIED ECONOMICS


public opinion. In both the era of progress and the era of retrogres-
sion, realities changed and opinions changed in their wake.
Just as the unacculturated blacks who first settled in the North in
the pre-Civil War era had met with negative reactions from the
white population, so too did the vastly larger numbers of largely
unacculturated blacks who formed the great migration out of the
South that began at the end of the nineteenth century and contin-
ued for decades into the twentieth century. The most striking
example of this retrogression was the development of black ghettoes
that continued to exist on into the twenty-first century. Such ghet-
toes had not yet begun to develop in most Northern cities at the end
of the nineteenth century. It was not just that these cities did not yet
have the massive black populations that they would have after the
great migrations from the South. Whatever black populations they
did have tended to live dispersed among the white population.
As late as 1910, more than two-thirds of the black population in
Chicago lived in neighborhoods that were predominantly white
and as early as 1860, while most blacks in Detroit tended to live
clustered in a particular area, even within that area there was no

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