W. Paul Strassmann

Housing Market Interventions and Mobility: An International Comparison

Government interventions in housing markets usually have a strong side effect of lowering residential mobility. Interventions tend to raise the price of owner-occupied dwellings and to lower rents compared with household incomes. An index of these two tendencies is calculated for major conurbations of 16 countries. Among these, Switzerland, South Korea, Sri Lanka and the former German Democratic Republic are of particular interest. The rank order correlation of the index with residential mobility appears to be strong, 0.962, and with an elasticity of -0.815 three-quarters of the variance is explained. No correlation was found with the home-ownership rate. In so far as lower mobility impairs housing welfare, market interventions should be avoided, but it is recognised that such interventions primarily reflect concern for equity and externalities.

The timing of urban infrastructure and housing improvements by owner occupants

Abstract Housing in developing countries depends primarily on improvements and expansion by owner occupants. A survey of Lima households suggests that economic ability to improve matters less than willingness which, in turn, is inspired by access to water and sewerage systems. Opportunities for installing a home workshop may also be important. Seventeen types of improvement in squatter settlements and ‘popular urbanizations’ are examined using a variety of econometric tests. Differences in income mainly determine which type of improvement households choose to make. The rate of improvement, however, roughly doubles with access to infrastructure, and the effect far outweighs access cost. Consequently, the earlier that infrastructure is installed, the faster will housing conditions in general improve. This conclusion is confirmed by smaller surveys in Lusaka, Medellin, Nairobi, Rawalpindi and Tunis.

Types of Neighbourhood and Home-Based Enterprises: Evidence from Lima, Peru

Home-based enterprises are likely to proliferate for decades in developing countries, but their productivity depends on access, cost of space, density of settlement, and other neighbourhood characteristics. Over a thousand households and home enterprises were surveyed in Lima, Peru, in 1980 and 1983, to explain why the frequency and composition of these enterprises varies with seven types of neighbourhood. The enterprises both cause and reflect dwelling and neighbourhood improvement or deterioration. Enterprises are classified by types of product, markets, and the family members in charge. Income and employment effects are stressed. Among the findings was that conventional neighbourhoods had fewer but more lucrative home enterprises than did irregular settlements.

Mobility and Affordability in US Housing

In the US, affordability is changed by some housing policies that are set nationally and by others set locally. Since interventions tend to change rents and prices from market equilibrium levels, they usually lower the volume of transactions, hence mobility. Upon close examination, however, data from the 25 largest US cities do not support the (negative) association of mobility with intervention as strongly as do data comparing different countries with one another. National intervention affects cities uniformly; and local intervention, while important, is usually outweighed by other factors in the US. What matter most are the economic fortunes of particular industries that spur the growth of some cities and hold back others. The more households proliferate or migrate in, the more will a city develop new neighbourhoods and generate chains of moves or turnover of the entire housing stock. Variations in growth rates thus dominate differences in the degree of intervention as spurs or blocks to mobility.

Land Prices and Housing in Manila

For decades, exceptionally high land prices in Metropolitan Manila have co-existed with much vacant urban land. A 1991 survey of 3003 households suggests, however, that, by the standards of other countries, neither dwelling prices nor rents are high in Manila compared with family incomes. Relatively high land prices have instead led households to spend much less on structures and to accept low housing welfare although the availability of skilled construction labour, materials and finance has been fairly good and improving. Households must also endure much settlement insecurity and residential immobility worse than international norms. High land prices are related to negligible property taxation and to impediments to land markets and infrastructure development.

The rise, fall, and transformation of overseas construction contracting

Abstract A transformed international industry for exporting construction services has emerged from events associated with the oil shocks of 1973–1983. The market is mainly in developing countries, but LDC contractors have themselves been last-in and first-out as exporters. State financial support in various forms best explains the rise of Japanese, French, and Italian exporters. Among the displaced were American firms, except perhaps temporarily for the largest whose scale and technological lead with data processing gave them enough flexibility to be vertically integrated in some fields and to specialize in other tasks as designers, construction managers, joint venture partners, and in other roles. They were no longer ordinary construction firms with some sites abroad.

Creative Destruction and Partial Obsolescence in American Economic Development

With the growing emphasis on structural change and Schumpeterian innovation in economic development, the paradoxical concept “creative destruction†has come into wide use among economists and economic historians. It is an appealing concept because it recalls the death and birth cycles of nature and various tribal myths of gods shuttling between ferocity and compassion. But the concept has been applied to economic situations rather casually. This paper suggests that “creative destruction†is not an apt description of the way dominant production methods succeeded one another in the United States from 1850 to 1914, even though the term is applled to this era more than to any other. Data are presented to show that apparently obsolete methods survived and grew in the face of novel competition. An explanation of the staying power of partially outdated production methods is attempted.

Oversimplification in housing analysis, with reference to land markets and mobility

Abstract Market empowerment is an important means toward better urban housing conditions but is not a universal solution to housing problems. Policy should not blindly aim at a progressive phasing out of government intervention because problems that markets cannot solve at all are likely to gain, not lose importance in the course of development. The complexity of housing and urban communities naturally leads to a number of such environmental, social, and equity problems. Land availability is particularly difficult. The Philippine case, among others, suggests that government intervention may also be needed early in the course of development to ensure that the right kind of market develops. Forward-looking, creative buying, selling, investing, and contracting are not a bottled up resource that just has to be uncorked. Markets have to be nurtured and guided in very specific and adapted ways. Simplifying housing analysis for developing countries has often led to the omissions and distortions that retard progress.

Technology: A Culture Trait, a Logical Category, or Virtue Itself?

During the 1940s anyone who tried to coax economists into meditations about technology was either naive or a follower of Karl Marx, Joseph Schumpeter, or Clarence Ayres. Among these three, Ayres remains least well known; yet it seems to me that his approach to technology and human progress nevertheless will overtake class struggle determinism and entrepreneurial glorification. I am not predicting rising sales for The Theory of Economic Progress or Toward a Reasonable Society,1 but certain mutually sharpening trends and potentialities in philosophy, economics, and anthropology do exist; these will keep fusing and evolving even if Ayres does not receive his rightful share of citations. But as he himself noted, given the trends in the arts of shipbuilding and navigation of 1492, someone was bound to have discovered America within a decade or two.

Limits to Market Empowerment for Housing in Developing Countries: The Case of Land

The problem with neoclassical economics is insufficiency: no full deck for economic players. In spades, they get aces and face cards for efficiency, but in hearts, some cards are missing for coping with inequities and externalities. This paper illustrates again the familiar deficiency with the great problem of finding sites for housing in developing countries. No problem in urbanization has seemed more intractable, although land is seldom physically scarce around cities. Building roads, subdividing farms, and equipping land with infrastructure can usually be done at a pace that could keep square meter prices steady at around four times their purely agricultural level. Even overdevelopment and long real price declines are possible and have indeed been observed in some countries [Gilbert, 1992, 440421.