Housing as a Financial Weapon of Mass Destruction: Homeownership ideology & self-interest trump responsible housing for low-income households

The prosperity of a few years ago, such as it was — profits were terrific, wages not so much — depended on a huge bubble in housing...”  -- Paul Krugman, NY Times, Dec. 22, 2008

'What an ideology is, is a conceptual framework with the way people deal with reality... Everyone has one. You have to - to exist, you need an ideology. The question is whether it is accurate or not."  

-- Alan Greenspan, former chairman of the Federal Reserve, from 1987 to 2006, at the Congressional House oversight and government reform committee on 23 October 2008

Who would think that housing speculation, aided by government subsidies and tax policies, would be one of the "financial weapons of mass destruction"?

Something so simple as ensuring that all people have an adequate place to live became a financial weapon, a means for some to get rich quick, for some to collect votes, and for some to collect consulting fees for spouting conventional wisdom.

There is no "magic bullet" financial formula to close the gap between the cost of adequate housing and the low incomes of many households. Housing is expensive. There is no such thing as cheap housing -- unless it is unfit and in declining unsafe neighbourhoods.

Given that housing is expensive, why pursue policies that make housing even more expensive - measures that inflate house values by encouraging speculation?

All warnings were ignored. The unfettered, free-market ideologues, the money-grubbers and 

the ignorant in positions of power and influence went with the conventional wisdom of not only relying upon but also deregulating housing and related financial markets.

Encouraging homeownership is popular and profitable (for some). Advocates for directly helping low-income households were ignored. These "fuzzy thinking folks" favour the "inefficient" and "failed" method of providing housing subsidies directly to those in need rather than relying on market trickle down.

To save money Liberal Fiance Minister Paul Martin ended the social housing supply programs in 1993, a move the defeated Tories promised to do. His party promised to do the opposite. Since then, the neoliberal market ideology ruled in a knee-jerk fashion.

One Canadian example: In his September 30, 2002 column, “For rent: a tired out policy, no view, high price,” the Globe and Mail’s John Ibbitson complained that the federal government was about to spend some money on social housing. “Saints preserve us. The feds want to get back into public housing… the lessons of past failures forgotten.”

What is the answer for Canada? Follow the United States.

“So how should the state help these people? Build an apartment building, and charge them below-market rents? That may be best for a politician's ego, but not for the people in need.

“They need to find a way to buy a home, to start building equity and financial independence. They need tax credits or loan guarantees. One idea might be a federal program compelling banks to issue mortgages without down payments, amortized over 40 years, say, instead of 25, with Ottawa guaranteeing the mortgage in its early years.”

Fortunately, Canada did not follow the United States, though it did not provide much new social housing either.

Instead of trapping people in house payments they cannot afford in poor quality neighbourhoods in which people with options choose not to live, as in the United States, new social housing housing directly meets needs and helps build communities and neighbourhoods.

The crucial problem with social housing, which its opponents do not use in their policy arguments, is that it is non-market housing. No one can speculate with it or play financial games with it. It is simple. Build it and people live in it. Its purpose is to house people, not to be a financial investment -- other than as a long term societal investment in infrastructure, as good places to live for those who canot afford what the market has to offer.

The United States increased its homeownership rate temporarily by more than five percent, with Canadian government and private sector actors encouraging similar policies. It did so by turning every conceivable aspect of the house into a market commodity.

The New York Times is publishing a series of helpful analyses on the financial collapse. One conclusion is that during the Bush years all warning signs were ignored in order to push the deregulation let-the-market-alone ideology. In addition, the warnings about giving special tax breaks to homeowners, as Clinton did in 1997, proved to be correct.

Every step down the road to the financial collapse was taken in spite a clear warnings to the contrary. Canada only went part way down the road and may escape some of the worst outcomes. 

(1) NY Times: White House Philosophy Stoked Mortgage Bonfire

"Eight years after arriving in Washington vowing to spread the dream of homeownership, Mr. Bush is leaving office, as he himself said recently, “faced with the prospect of a global meltdown” with roots in the housing sector he so ardently championed.... But the story of how we got here is partly one of Mr. Bush’s own making, according to a review of his tenure...

"Today, millions of Americans are facing foreclosure, homeownership rates are virtually no higher than when Mr. Bush took office, Fannie and Freddie are in a  government conservatorship, and the bailout cost to taxpayers  could run in the trillions." NY Times, December 20, 2008

In June 2002, President Bush unveiled a plan to increase the number of minority homeowners by 5.5 million. Instead of directly engaging in a prograam to assist lower income people his administration relied on market incentives and special mortgages, such as no money down and adjusable rate mortgages. This was during a period in which the incomes of most families remained relatively stagnant and house prices skyrocketed. We now know the outcome.

(2) NY Times: Tax Break May Have Helped Cause Housing Bubble

“Tonight, I propose a new tax cut for homeownership that says to every middle-income working family in this country, if you sell your home, you  will not have to pay a capital gains tax on it ever — not ever.”

This was Bill Clinton at the 1996 Democratic Convention, making a campaign promise to counter a tax cut proposal of his opponent.

The housing tax break, exempting most home sales from capital gains taxes, was approved by Congress in 1997. It did not apply to other investments such as stocks or bonds, which were all taxed at rates of up to 20 percent.

This special tax treatment of the nation's housing stock exphasized the house as a investment vehicle. Again, we now know the outsome.

By itself, the change in the tax law did not cause the housing bubble, economist say. Several other factors — a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall — probably played larger roles.But many economists say that the law had a noticeable impact, allowing home sales to become tax-free windfalls.

A recent study of the provision by an economist at the Federal Reserve suggests that the number of homes sold was almost 17 percent higher over the last decade than it would have been without the law.

Vernon L. Smith, a Nobel laureate and economics professor at George Mason University, has said the tax law change was responsible for “fueling the mother of all housing bubbles.”

By favoring real estate, the tax code pushed many Americans to begin thinking of their houses more as an investment than as a place to live. It helped change the national conversation about housing. Not only did real estate look like a can’t-miss investment for much of the last decade, it was also a tax-free one.

Together with the other housing subsidies that had already been in the tax code — the mortgage-interest deduction chief among them — the law gave people a motive to buy more and more real estate. Lax lending standar and low interest rates then gave people the means to do so. NY Times, December 18,2008

Toronto: Poor city beside rich city

PAUL LACHINE/NEWSART

The now well-documented rise in income inequality, income polarization and ethnocultural and skin colour segregation are city-destroying trends, writes David Hulchanski.

Loss of middle-income jobs creates urban map with swathes of poverty and pockets of wealth

Toronto Star,  Nov 20, 2008

http://www.thestar.com/article/540066 

DAVID HULCHANSKI 

"We heard as well about parents whose struggle to hold down two or three jobs leaves them with no time or energy to parent, of youth being humiliated by the obviousness of their poverty, of the impact of precarious and substandard housing on their ability to study and learn and engage with friends, and about the numerous other daily stresses of living on the margins of a prosperous society." –Review of the Roots of Youth Violence, Vol. 1, p. 31.

We learned last week that among the roots of youth violence is the lack of good jobs – jobs that support a family, jobs that support an average lifestyle, jobs that support good quality housing. Though we already knew this, as a society we need to stop moving in the opposite direction.

It wasn't too long ago that our language did not include terms like "good jobs," "bad jobs" or "the working poor." How could you work and be poor?

Many people today are working more than full-time and are poor. They have no choice but to live in the growing number of very poor neighbourhoods. Money buys choice. Many neighbourhoods are becoming poor in the sense that most of the residents are living in poverty, and poor in the sense that housing, public services and transit access are all inferior relative to the rest of the city.

The growing polarization between rich and poor is happening in part because of the loss of average, middle-income jobs.

There used to be far fewer concentrations of disadvantage in Toronto. In the early 1970s about two-thirds of the City of Toronto's neighbourhoods (66 per cent) were middle-income – within 20 per cent of the average individual in-come of the metropolitan area. By 2005, the middle income group of neighbourhoods had declined to less than one-third (29 per cent).

The trend is the same in the communities around the city's boundaries – the 905 area. The number of middle-income neighbourhoods declined by 25 per cent, from 86 per cent to 61 per cent, during the same period. Now 20 per cent of the neighbourhoods in the 905 area have very low average individual incomes, compared to none in 1970.

This income polarization – the decline of the middle group with growth in the two extreme poles – is not only a general trend among Toronto's population, but it also is the basis of where we live.

The City of Toronto is now divided into increasingly distinct zones. One zone of tremendous wealth and prosperity, about 20 per cent of the city, is located mainly along the Yonge corridor and stretching east and west along Bloor and Danforth. Average household income was $170,000 in 2005, 82 per cent of the population is white, only 4 per cent are recent immigrants (arriving 2001 to 2006), and only 2 per cent are black. Some of these neighbourhoods are more white and had fewer foreign-born residents in 2005 than in 1995.

In contrast, there is a huge zone of concentrated disadvantage. It is still located in part in the traditional inner-city neighbourhoods, but now is also in the inner suburbs, the car-oriented areas built during the 1960s and 1970s. This is 40 per cent of the city, about 1.1 million people. Close to one-third of residents live in poverty (are below the low-income cut-off measure used by the federal government). Only 34 per cent are white, 15 per cent are recent immigrants, and 12 per cent are black.

Federal and provincial economic policies, while seemingly abstract and high-level, play themselves out on the ground in our neighbourhoods. Paying a growing segment of the population wages that do not support individuals, let along families, at a basic standard of living and a fundamental level of dignity is not sustainable.

The now well-documented rise in income inequality, income polarization and ethnocultural and skin colour segregation are city-destroying trends. They are trends produced by commission and omission, by public and private sector decisions.

We need to use our regulatory power for the common good to focus on improving the labour market through measures like a living wage and providing people with a voice in working conditions via a fairer path to unionization. One-sided policy-making is not only generating greater disadvantage, it is destroying the city as a great place to live and work. Nothing is trickling down. The city is increasingly segregating itself as the social distance between rich and poor increases.

Immigrants are arriving in a very different economy than they did 30 and 40 years ago. A recent Statistics Canada study concludes, for example, "that the wage gap between newly hired employees and other employees has been widening over the past two decades," the "relative importance of temporary jobs has increased substantially among newly hired employees," and that compared with "the early 1980s, fewer male employees are now covered by a registered pension plan." In short, policies have allowed fewer jobs to pay a living wage with good benefits. This did not happen by accident.

It is not only possible but essential that we have an economy with good jobs with at least a minimum living wage for all. We need public policies that support the goals of a just and inclusive society, and we have to ensure that the use of political power benefits the common good. These are key goals of the Good Jobs Coalition and form the agenda for Saturday's Good Jobs Summit. They are essential to reversing the city-destroying trends at work in Toronto today.

David Hulchanski is a University of Toronto professor and author of the report The Three Cities within Toronto. This is one of a series of essays created for the Good Jobs Summit, which takes place Nov. 22 in Toronto.

www.goodjobscoalition.ca

Toronto’s Persistent Neighbourhood Polarization Trend: One-third of neighbourhoods on a 25-year income spiral, 9% going up, 25% going down

by David Hulchanski and Richard Maaranen, Cities Centre, University of Toronto, November 2008   

One-third of the City of Toronto’s neighbourhoods (census tracts) have a consistent pattern of either increasing or decreasing in average individual income over the past 25 years compared to the Toronto area average.  This trend leads to the creation of more higher income and more lower income neighbourhoods, at the expense of average or middle-income neighbourhoods.  

For PDF of map, click here.

On the way up. 

Nine percent of Toronto’s census tracts have been increasing in average individual income.  These 46 areas are joining or have joined the ranks of the city’s higher income areas. Most are also located adjacent to Toronto’s already higher income neighbourhoods – a further clustering and consolidation of a demographic that is not only financially well of, but also mainly white with a relatively small share of Toronto’s celebrated ethnocultural diversity.

On the way down. 

Many more neighbourhoods, however, 128 census tracts (25% of the city), have been consistently declining in average individual income for the two and half decades.  These formerly poor and middle-income areas are now much poorer. Most are in the car-oriented inner suburbs built in the 1950s to the 1970s.  These areas are mainly and increasingly non-white with a disproportionate share of newcomers.

Still in the middle.

Two-thirds of the city’s neighbourhoods (341 census tracts) do not have a persistent direction of change but many are still better off  or worse off now compared to 25 years ago. Of these, 88 are 10% or more better off in 2005 than 1980 (17% of the City) and 130 are 10% or more worse off over the same period (25% of the City). Relative stability, that is, income is neither 10% higher or lower in 2005 than 1980, only occurred in the remaining 123 census tracts (24% of the City).

The map shows only persistent change among Toronto’s census tracts over the past 25 years. It is not a map of rich and poor areas. It is a map of change. 

What is significant, in addition to the fact that fully one-third of the city has a consistent upward or downward income trajectory over such a long period, is that there is a high degree of geographic concentration within the trend.  The pattern is not random.  Wealthy and poor areas are consolidating.  Those who have choice – enough money to choose their neighbourhood, are abandoning parts of the city. 

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Note on Method

How was the change calculated?  The map is based on an analysis of census average individual income for five census years (1981, 1991, 1996, 2001, 2006).

For each census tract in each of the five years, the extent to which the census tract’s average individual income was above or below the Toronto CMA average was calculated. We use the Census Metropolitan Area (CMA) average rather than the City of Toronto average as an income baseline because the urban labour and housing market has grown much larger than the City itself over the past 25 years. In addition, there is very little difference between the CMA and City average individual income.

Census Tracts that were geographically larger in years prior to 2001 have had their income estimated to their smaller subdivided 2001 census tract boundaries assuming equal incomes in each part. This is necessary in order to hold the number of census tracts in the City of Toronto fixed over time.  From this set of census tracts we produce and map the list of the census tracts that consistently went up or down.

Individual income is the census category for income of persons 15 and over from all sources. It has an advantage over household income for determining the socio-economic status of people living in an area as it controls for differences in household size. The number of persons in each household with income is increasingly uneven across the City with a large divide between the downtown area and the suburbs. Median income is not used here because it has the disadvantage of hiding the extent of the high and low incomes, since most neighbourhoods have at least a few high or low-income people. Use of any of the income categories in the census, however, produces similar results.  This is discussed further in: J.D. Hulchanski, The Three Cities Within Toronto: Income polarization, 1970–2000, CUCS Research Bulletin #41, December 2007.

from ... The New Yorker: When owning isn’t better: What was a savings plan is now pushing some into indentured servitude

By James Surowiecki  The New Yorker, March. 3, 2008

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In March 2008, about half a year before the global economic crisis broke, caused in part by the US housing bubble and all the bad mortgage lending practices, The New Yorker published the following brief note. 

 

It correctly pointed out that owing a house is a risky way to have a savings plan and that long term mortgages were a form of indentured servitude. It failed, as we all did, to see how thoroughly the housing market could wipe out the savings of so many millions of lower income American homeowners.    --jdh

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Americans may disagree about nearly everything, but few contest the idea that owning your home is a good thing. Paeans to homeownership are a commonplace for American politicians, and, since the nineteen-thirties, public policy has been designed to make home buying cheaper and easier. Homeownership, the argument goes, has tremendous social benefits, stabilizing neighborhoods and making people more willing to invest in their communities. And it has economic benefits, too, serving as a forced-savings program that allows people to leverage their incomes and build wealth. Homeownership “provides financial security for families,” Mel Martinez, the former H.U.D. Secretary, has said, and it “generates economic strength that fuels the entire na

tion.”

That never seemed more true than in the years from 1994 to 2005, when the percentage of Americans who own homes rose by almost ten per cent, and the amount of wealth tied up in property soared. But our veneration of homeowning has blinded us to the fact that, along with the benefits, it has some very real costs — costs that only get bigger as the ranks of homeowners swell. The housing boom undoubtedly helped the economy’s growth rate and made lots of first-time home buyers happy. Unfortunately, it may also end up prolonging and deepening the current downturn.

In part, this is due to the nature of the boom, which was stoked by cheap credit and lax lending standards. Buying a home used to require a sizable down payment: in 1976, the average for a first-time buyer was eighteen per cent. By contrast, a National Association of Realtors study of first-time buyers between mid-2005 and mid-2006 found that almost half put down nothing at all, and that the median down payment was just two per cent. If you earn eighty thousand a year, no one will lend you four hundred thousand dollars to buy stocks, but plenty of people were willing to lend you that money to buy a house. As long as home prices were rising, all this leverage seemed like a good thing: it let people buy homes that they couldn’t otherwise afford, and maximized their return on investment. But, with home prices sinking — in the final quarter of 2007, they were down almost 9 percent from the year before—the downside has become clear: as many as fifteen million homeowners now owe more on their mortgages than their homes are worth. Homeownership isn’t building wealth for these people; it’s locking them into indentured servitude.

The problem was exacerbated by an explosion in home-equity loans, fuelled by our faith that house prices can only rise. According to a recent study by the Federal Reserve, homeowners took out more than six hundred billion dollars in home-equity loans between 2004 and 2005 alone — ten times as much as they had a decade earlier — and are spending much of it on personal consumption. That destroys the forced-savings aspect of homeownership, since people are using up their home equity instead of saving it for the future. And it means that many homeowners have to devote more and more of their income to paying off home-equity debt, contributing to the current slowdown.

Even without lending and borrowing excesses, though, our high rate of homeownership would likely create problems as the economy slows. To recover from recession, economies need prices to fall until they reflect genuine supply and demand. With certain kinds of assets, like stocks, these adjustments take place quickly, sometimes viciously so. Buying and selling houses, though, is a far slower process. The good thing about this is that housing prices never suffer crashes on the scale that you sometimes see in the stock market. The bad thing is that it can take a long time for housing prices to reflect reality. Homeowners, as economists have shown, tend to remain unreasonably optimistic about the value of their homes, and they hate to drop their asking price. As a result, existing-home sales in the U.S. are now at a nine-year low.

Home ownership also impedes the economy’s readjustment by tying people down. From a social point of view, it’s beneficial that homeownership encourages commitment to a given town or city. But, from an economic point of view, it’s good for people to be able to leave places where there’s less work and move to places where there’s more. Homeowners are much less likely to move than renters, especially during a downturn, when they aren’t willing (or can’t afford) to sell at market prices. As a result, they often stay in towns even after the jobs leave. That may be why a study of several major developed economies between 1960 and 1996, by the British economist Andrew Oswald, found a strong relationship between increases in homeownership and increases in the unemployment rate; 10 percent increase in homeownership correlated with a two-per-cent increase in unemployment. (In the U.S., it may be worth noting, the states that have the highest unemployment rates — states like Alabama, Michigan, Mississippi — are also among those with the highest home ownership rates.) And reluctance to move not only keeps unemployment high in struggling areas but makes it hard for businesses elsewhere to attract the workers they need to grow.

This doesn’t mean that the U.S. should become a nation of renters—even if both New York City and Switzerland show that high rates of renting are compatible with great prosperity. With the bursting of the housing bubble, though, it’s time not just to scrutinize the excesses of our home-buying process but to recognize the risks and costs inherent in owning a home. Sometimes the price—for the home buyer and for the economy as a whole—is too high to pay.

 

 

Australia’s Housing Affordability Crisis -- Similar to Canada's: What to do about it?

Australia’s Housing Affordability Crisis

by Judith Yates, professor, economics, University of Sydney 

The Australian Economic Review, June, 2008

This very helpful and insightful overview, written just before the global financial crisis, provides an excellent analysis of what is meant by the popular / media term "housing affordability crisis" and what should be done aout it.

The Canadian and Australian housing systems are very similar.  Much, if not all of what Professor Yates writes about Australia is relevant to Canada's housing situation.

While some home owners face financial hardship due to the large gap between their incomes and housing costs, it is mainly renters who have difficulty accessing appropriate and adequate housing within their household budgets.  

"Although affordability problems for purchasers tend to receive most media attention, the largest group of households experiencing affordability problems are not purchasers but are households in the private rental market. For many of these households, home ownership is not something they can even aspire to."  p.201

"While 16 per cent of all households had high housing cost ratios in 2002–03, more than 28 per cent of lower income households were in housing stress.For lower income private renters, however, the incidence of stress was 65 per cent. For lower income purchasers it was 49 per cent." p.207

While the problem is not new, it is worse now than in the past.  The global financial crisis will likely make it even worse for most renters and for recent house purchasers.  

The key part of the solution is to deemphasize the investment use of residential real estate.  Providing special tax breaks for ownership helps inflate the housing market, harming many, especially lower income households.  

Housing policy in most countries has not been tenure neutral -- which means that ownership and rental are not treated equally by the regulatory, tax and subsidy systems of all levels of government. 

Housing policy needs to focus on inceasing "the supply of wel located affordable rental housing to meet the needs of those on lower incomes who are likely to be long-term renters." Profesor Yates concludes: "A strategic rental housing policy framework is essential to foster adequate and stable levels of investment in rental housing."

The full article is available on the internet.

From the conclusion:

      "This suggests that the most effective long run solutions to housing affordability problems lie in addressing the underlying determinants of demand and supply. With continued pressures from increased population growth and real per household incomes, demand is likely to be reduced only by reducing the attractiveness of housing as an investment asset. Demand side subsidies, such as the untargeted first home owners grant to first homebuyers are unlikely to be effective.

       "The second key observation is that the media tendency to define affordability problems by high or increasing housing cost ratios for purchasers is largely misplaced. Most home purchasers have relatively high incomes and are not forced into the undesirable trade-offs that lower income households face when their housing costs increase. There are significantly more renters than purchasers in housing stress and the incidence of housing stress is significantly greater among private renters. Many of these households face the prospect of never being able to gain access to the economic an social advantages provided by home ownership. 

        "This suggests that a change is needed in the direction of Australia’s housing policies away from those that focus on home ownership and towards those that increase the supply of well located affordable rental housing to meet the needs of those on lower incomes who are likely to be long-term renters. A strategic rental housing policy framework is essential to foster adequate and stable levels of investment in rental housing."

The Ghettoization of "Toronto the Good"?

The "elephant in the room" during discussions of most any socio-economic and demographic trend relating to Toronto is the growing geographic, ethnocultural, and skin colour (white, non-white) polarization of the city.

Is Toronto creating its own version of ghettos? If so, they will not be American style ghettos. Those arose from U.S. specific historical circumstances and at a different time.

A ghetto, as urban planning professor Peter Marcuse (Columbia University) notes in his studies of divided cities,

“is a spatially concentrated area used to separate and to limit a particular involuntarily defined population group (usually by race) held to be, and treated as, inferior by the dominant society.”

A careful definition of ghetto, then, would necessarily include three elements: spatial separation; discrimination; and an involuntary (imposed) definition of identity, usually as racial.

Ghettos must be distinguished from voluntary enclaves. An enclave is a spatially concentrated area in which members of a particular population group, self-defined by ethnicity or religion or otherwise, congregate as a means of enhancing their economic, social, political, religious and/or cultural development.

Enclaves are healthy and normal aspects of urban growth and change. Though they represent concentrations of a particular group, they are voluntary, they are not based on an imposed definition of identity, and they are non-exclusionary (the majority in an area does not discriminate against others). Others can and do chooe to live in the same area.

Toronto Star columnist Royson James helps raise the issue of the potential ghettorization of Toronto is his column (below).

With the recent release of most of the 2006 census data we can begin detailed analysis of Toronto's neighourhoods and reach some conclusions about areas that are voluntary enclaves and areas that may be on their way to becoming ghettos of exclusion.

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Alarms ring in tale of three cities

The Toronto Star

by Royson James, urban affairs columnist, 24 May 2008

For many years, urban thinkers have opined about the "hole in the doughnut" – a condition particular to America where the downtowns of major cities are abandoned by the middle class and left to criminal elements, the poor and urban decay.

Except for a central business district and the daytime vibe it brings, the core becomes a wasteland as the middle class, usually white, moves out to the suburbs.

Accompanying this flight is the capital of taxes and school funding, and the repetitive, predictable outcome: abominable inner-city schools, denuded infrastructure, and huge pockets of Third World conditions.

Throughout our history, Toronto's managed to avoid this trend. Waves of ethnic groups moved through working-class neighbourhoods downtown, out to neighbouring boroughs and cities, then to the 905 region. But living in the city was kept viable and attractive thanks to social housing, strong social agencies and a safety net.

There were also good-paying manufacturing jobs close enough to sustain the dream.

The upwardly mobile of the 1950s and 1960s found homes in the new suburbs. Ontario Housing and Metro Housing projects sprang up for low-income folks, with little protest and concern. Senior governments were paying for them, so the individual municipalities shrugged and approved the plan.

While the social housing endures – much of it crying out to be remediated, a la Regent Park – a disturbing trend demands attention. David Hulchanski, director of urban and community studies at the University of Toronto, calls it the "elephant in the room that no one is talking about. Everybody knows it is the lived reality of the city."

Middle-income earners are a dying breed in the city of Toronto as income polarization takes root. Not only are the poor losing ground, so is the middle class.

It's not that they are pulling up stakes and moving out – though some do. Rather, the natural progression from apartment to house in Scarborough or North York is no longer the norm.

Newcomers can't afford the move because their incomes have stagnated or regressed. Those who can afford it and want a suburban lifestyle are choosing the 905 region and beyond instead of the inner suburbs.

As the old guard of middle-class suburban residents dies off, they are being replaced by residents who have little or no economic choice as to where they live.

One Hulchanski study shows Toronto has become three cities. City One has residents who are wealthy, live close to the subway lines and have watched their income rise by 20 per cent or more in real terms between 1970 and 2000. They occupy 20 per cent of the city.

City Two has seen little change and represents 43 per cent of the city's neighbourhoods.

City Three comprises 36 per cent of the city. Residents here have seen incomes decrease over the last 30 years. Where are these? Primarily in the inner suburbs, north of the 401, away from the subway.

Not surprisingly, City One is predominantly white; City Three is predominantly non-white.

South of the border, wherever there are concentrations of non-whites under economic distress, there is a term for it: ghetto.

We haven't had to use that term in Toronto the Good. Somebody ought to be obsessed with this issue so we never need to use it.

Email: rjames@thestar.ca

What is "social mix"? Why are "inclusive" neighbourhoods desirable? Are they desirable?

On May 15, 2008 a public forum and a specialized seminar were held on the theme of “Social Mix” & Inclusive Communities, International Perspectives: A Discussion of Experience & Recent Research from Australia, England, France & Canada.

These events were organized by the five-year neighbourhood change community university partnership between St Christopher House and the University of Toronto’s Cities Centre (formerly Centre for Urban and Community Studies). See: www.NeighbourhoodChange.ca

A research team (described below) happened to be meeting in Toronto. For the forum and seminar, they were joined by one of Australia’s leading researchers on social mix and public housing revitalization, Kathy Arthurson.

The following is taken from the presentation the visiting team made at a special seminar of the Toronto Neighbourhoods Research Network (see : www.TNRN.ca).
_______________________________

Project title
‘Social mix’ and neighbourhood revitalization: linking globalized policy perspectives to locally embedded experiences – towards a transatlantic comparison

Funding
Social Sciences and Humanities Research Council of Canada, International Opportunities Fund Research Grant (2006-2008)

Research team
Tom Slater and Gary Bridge, School of Policy Studies, Univ. of Bristol
Marie-Hélène Bacqué, Yankel Fijalkow and Lydie Launay, LOUEST, CNRS, Paris
Annick Germain, Amy Twigge and Damaris Rose, Centre Urbanisation Culture Société, INRS, Montréal

Project rationale
Since mid-1990s, marked resurgence in attention and apparent international convergence around value of ‘social mix’ / ’mixed communities’ as urban policy tool

• Why has this happened?
• Is there a shared vocabulary and similar rationale and goals?
• Are there differences in values and objectives between national contexts, and between local actors in a given context?

Research Objectives

• Explore international circulation of ideas regarding the merits of ‘social mix’ / ’mixed communities’
• Explore links between national, sub-national and local scales of policy thinking
• Decode different local actors’ narratives of social mix in inner-city neighbourhoods undergoing ‘revitalization’: what does ‘mix’ mean? what is a ‘mix’ policy meant to achieve? how do ‘mixed neighbourhoods’ work out in practice?

Progress
The team is currently producing their findings.

_________________________________
Preliminary Conclusions

(1) The changing paradigm of social mix?

• Historically, 2 phases of advocacy for social mix:Phase 1 (c.1900): utopian vision of social class reconciliation through sharing of urban space
• Phase 2 (post-WW2 welfare state): egalitarian ideal of spatial justice

Today, a seeming international convergence toward…

• Phase 3: a neoliberal tactic for shifting responsibility for aiding the poor onto non-state actors; e.g., funding affordable housing via private-sector dominated developments; poverty deconcentration to achieve social integration by ‘the community’ or via middle-class influence

(2) Themes for further exploration

• Implicit or emerging agenda: social mix = ethnic mix?
• Ethno-cultural cohabitation issues?
• The commodification of cosmopolitanism?

Is social mix ultimately a real estate compromise?

• This conceptualization opens up space for exploring competing discourses, in particular, the gap between romantic visions of social mix and the reality of negotiations ‘on the ground’

Op-ed: Violent Schools in Divided City -- Toronto school board's report on school violence

Violent Schools in Divided City

School Board has little real power to overcome social divisions based on economic inequality

Toronto Star, January 13, 2008

David Hulchanski

The murder of a student in one of our schools caused, at best, if we want to be honest with ourselves, a modest amount of concern in the City of Toronto and very little beyond Toronto. "The fact of the matter,” according to Ontario Premier Dalton McGuinty, “is that there are millions of children who attend school every single day in Ontario and they do so safely and without incident.” This is only a problem in “some communities.”

The Toronto District School Board appointed a panel whose recently released report is as good, if not better, than one might expect in such a situation. Yet, as the panel mentions in passing, the problem is bigger than the school and the school board. The context matters. And the context is not pretty.

The City of Toronto, as a huge municipality created through forced amalgamation with a population of 2.5 million, is not one uniform city. It never was and is much less so now thanks to two decades of federal and provincial budget cuts affecting the poor, tax cuts helping the well off, and the downward shift in wages in a new economy that provides precarious employment at the bottom end of the wage scale. These trends are dividing us. A divided society produces divided cities.

There are three major partitions – three distinct cities -- within what is officially called Toronto. People with choice in the housing market do not choose to live in the neighbourhoods like the ones the school board panel focussed on.

Very few of the teachers in those schools, the panel found in its survey, live in those neighbourhoods and, by a wide margin, do not ever want to live in those neighbourhoods. These neighbourhoods, in what I call City #3 in my research, are now 60% non-white and very, very poor.

In the 1950s and 1960s they were new suburban middle income family neighbourhoods. It is an area that today we generally view as a sprawling bleak and desolate landscape. It lacks appropriate social services and even rapid transit. The average income in City #3 fell by 34% since 1970 relative to the Toronto average. In comparison, in City #1, the 20% of neighbourhoods where people with enough money choose to live, average incomes over the same period increased by 71%.

The panel’s report makes an unfortunate starting assumption: “While the TDSB did not create poverty, racism, sexism or classism, it has the power and opportunity to shelter youth from its harshest effects." Is this true? Where is the evidence to support the claim that a school board has the "power" to effectively "shelter" students from these very big and very bad contextual issues?

On racism the panel found “strong evidence that racism is a major concern of many black students” and that “the majority of black students perceive racial bias with respect to grading and disciplinary practices and feel that teachers treated some students better than others.” In addition: “Many black students also perceive racism outside of the school environment – especially with respect to policing activities and employment opportunities."

In contrast, their survey found the opposite among the teachers: “few teachers feel that unfair grading, unfair punishment and racial discrimination by teachers against students is a problem” and “few teachers support the hiring of more racial minority teachers.”

So what should be done about perceived and real racism in the schools? Here the panel fails us. The word racism appears only a few times in the 126 recommendations. I wonder what students think about recommendation #24: “Student and teacher surveys should be conducted every five years” to gather information about “perceptions of racism at school.” Or recommendation #31: “Multicultural, anti-racism staff development should be provided to teachers, administration, and school staff at every school.”

All of the most important recommendations require one thing: money. The panel recognizes the failure thus far of the provincial and federal governments to do more than sit on committees and help coordinate efforts. “Coordination and planning without resources are not only ineffective, they hold out the false hope that governments are making significant progress toward addressing the conditions of marginalized youth and communities." Yes, but … how and when will this change?

The denizens of Toronto’s City#1, where all the power, not just the money, resides, have a decision to make. Will 40% of Toronto be abandoned, as the research literature predicts, to become Toronto’s vast “ghetto of the excluded”? Will parts of Toronto begin to become similar to parts of Detroit and Paris?

The panel members should have been more explicit in their reference to the contextual problems of poverty, racism, sexism and classism. These issues explain why the range of very serious problems that exist in City#3, including the shocking reality of murder in our schools, but do not exist in City #1 or even City #2.

Though the TDSB cannot effectively address this bigger societal issue, the provincial and federal governments have both the power and, now, another opportunity, thanks to the panel’s recommendations, to begin making a difference. This is not simply a Toronto problem. This is a Canadian problem. Progress will be made when Canada’s senior governments make progress on narrowing the income gap, implementing a national housing strategy, which will help build better neighbourhoods, and begin funding the “urban agenda.”
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David Hulchanski is director of the University of Toronto’s Centre for Urban and Community Studies and the author of The Three Cities within Toronto: Income Polarization among Toronto’s neighbourhoods, 1970 to 2000 (see: http://www.gtuo.ca/).