The low-rent housing market in Houston
Custer, Wiley Eldridge
Master of Arts
The basic problem investigated in this thesis is that the free rental housing market in Houston has functioned in the past in a way that is not completely satisfactory to society; that is, it has permitted or perhaps caused the existence of some housing which does not meet the standards of acceptability. The problem of substandard housing may be solved in one or both of the following ways: 1) the free market may be encouraged to function more effectively at low rents, so that a greater supply of adequate low-rent housing may be created, or 2) the public sector may intervene in the housing market in order to enlarge the present subsidization of the city's poor and thereby to include a larger portion of the inadequately housed segment of the population. An analysis was made of the first alternative by examining the main determinants of the supply of acceptable low-rent housing in order to discover the sources of friction or the existence of barriers to efficient market functioning at low levels of rent. The principal sources of friction that were considered in this analysis were those that arise from attitudes and capabilities of owners, builders and lending institutions. Furthermore, the effects of the building code upon the private market were examined. First, it is found that the contribution of the owners of substandard housing to the problem is more a reflection of the economic situation in which they find themselves than the result of malicious neglect. Therefore, it is suggested that conditions be improved by initiating a program of civic encouragement and by changing the present tax laws that are relevant to the problem. Furthermore, it is found that, although builders are striving to provide lower-cost housing, they are not yet capable of building for profit for the low-rent market. Lending institutions, moreover, represent a direct control on the lower limit of effective, financed demand because of their requirements for credit eligibility. It is found that lowering credit requirements, even if this results in higher borrowing costs at the lower limit, would improve the quantity and quality of low-cost housing by increasing the effective demand for it. From our examination of the Houston Building Code, it is concluded that because some of its requirements may be excessive an impartial review of the code should be made by experts for the express purpose of enabling builders to construct less expensive housing for low-income families. The enforcement of the building code has been lax, as witnessed by the chronic substandard conditions in certain areas of the city. Although stricter enforcement of the code is recommended as a necessary tool for combating the problem, the effect of this action would be a reduction in the total low-rent housing supply. Therefore it is mandatory to complement this action with programs designed to increase the supply of adequate low-rent housing. The major conclusion of the thesis is that the most direct way to solve the problem is by public intervention in the market. Although public housing may be subject to criticism if it competes with private enterprise, it is shown that public housing cannot compete with private under present regulations. Furthermore, the expansion of public housing is seen to be the most effective way of meeting the problem in compacted areas. The need for more subsidized housing in Houston at levels which are virtually inaccessible to private enterprise points to its important role in any serious attack on the substandard housing problem.