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What's the alternative to mixed-income housing? The US tried segregated low-income housing for decades, and the result was a disaster. The new system, called Section 8, is a privatized voucher system; it doesn't give tenants lower rents, but by subsidizing rents directly, it has the same fairness impact.

I think the issue in most US cities is capture of zoning boards by property owners and developers. They have made it impossible for supply to meet demand.

For example, new apartment buildings in New York are required to include parking if they are taller than a certain height (I think 6 stories). That drives up the cost unnecessarily, in my opinion.

Mixed-income housing is not the problem, the implementation is: earn a bit more, pay a lot more. There's a similar argument against unemployment benefits: in some cases, unemployed people can earn less by accepting a job.

I don't have a solution, but I think a basic income would set better incentives.

Why not set a gradient percentage of income against the cost of social/public housing?

The hard cut off for social housing benefits incentivizes keeping income below that threshold to maintain the benefit.

Basic income does nothing to increase housing supply, so urban rents would increase as a result.

Presumably the people who set these hard-cuttoffs aren't totally oblivious to the results, Australia has a similar problem with social welfare payments.

My suspicion is this is by design because a certain level of unemployment is required to keep labour costs down - or so the theory goes.

I've met a lot of people who don't want to work, some because they're slackers and some because they'd have to get full time employment because anything casual they're likely to get wouldn't be worthwhile as it eats in to their welfare payments. So the system 'works' for some definition of the term 'works'. It probably also catches a lot of people unnecessarily too.

The government should actively maintain an over supply of housing. This works for food; prices have been consistently low for a long time now. If you can reduce the amount people pay on housing, they'll spend it on items that actually grow the economy (instead of simply enriching land owners).

Just FWIW, Section 8 (in combination with depressed rents) is why for a good portion of the past decade I was constantly awoken by sirens: police, fire and ambulance services coming to take care of the folks renting a condo near me.

Y'know, I really do feel for poor folks, but I'd be just as glad if thieves, prostitutes and dysfunctional alcoholics would live somewhere else (financiers, escorts and functional alcoholics may be just as immoral, but at least they are discrete). It's nightmarish to have one's home turned into a disaster area.

I live on a block with several Section 8 renters, and they all seem like perfectly nice people with families.

We all want the thieves to live somewhere else, but the previous strategy we had for isolating them also involved segregating millions of low-income people and trapping them in neighborhoods without opportunity, child care, safe schools, or, in some cases, even grocery stores.

This way is better for everyone.

For the most part, the US is still income-segregated. Detroit is the classic example, where the city houses poor, often dark-skinned inhabitants while their lighter-skinned counterparts live in the surrounding suburbs.

The greatest irony now is that traditionally undesirable areas like Oakland are being reclaimed, further marginalizing those low-income people who are unable to adjust to the increased cost of living.

It's true we all want thieves to live elsewhere, but at some point elsewhere runs out, and you're left with a class of people that are permanently enserfed as the underclass.

I'm not sure which way is better.

If you take SFBA out of the picture, the story behind gentrification and its impact on minorities gets very blurry. There are studies showing that gentrified neighborhoods have lower minority turnover than non-gentrified neighborhoods: people leave poor non-gentrified areas more often than they do gentrified ones.

This sort of makes sense when you realize that people who don't make much money aren't a different species, and like many of the same benefits and services as rich people: parks, grocery stores, schools accountable to active and engaged (busybody) parents, &c.

The alternative is a system in which you aren't penalized for earning slightly more. The current system disincentives work in all sorts of silly ways. Just give everybody money directly (i.e. a basic income).

Basic income without rent controls will just be a transfer from taxpayers to landlords.

The UK experience of social housing was less bad than in the US, probably because it was a much larger proportion of the housing stock. There were still some terrible housing estates and I do think mixed-income housing is desirable.

Going from building half of new homes as social housing to subsidizing rents through housing benefit turned out to be horribly expensive. With many fewer new homes being built rents have increased and ever increasing subsidies are needed.

Interesting radio programme on this the other day: http://www.bbc.co.uk/programmes/b06bnbpx

More background: http://www.lrb.co.uk/v36/n01/james-meek/where-will-we-live

Notwithstanding my above comment, this is a valid concern that governments need to address if they move to a 'untied rent subsidy' approach. In my opinion, the best way to address this problem is to take measures that increase the elasticity of housing supply, and reduce distortions in housing and land markets.

So things like: replacing transfer duties with land value taxation, relaxation of zoning regulations, removal of any unnecessary regulations on dwelling density/height etc.

Hell, they could probably achieve a pareto improvement (though probably a lower one) by completely separating government supply of additional housing stock and provision of rent subsidies. In other words, it would be better, relative to current social housing schemes, if the government just built and sold houses at market value while separately providing rent subsidies to the financially disadvantaged.

Social housing schemes are very inefficient and, ironically, further entrap their participants in poverty. I can't speak for Germany, but in Australia most state social housing schemes are heavily oversubscribed, and so are rationed. A new participant can spend years on a waiting list before finally getting access to rent-subsidised social housing.

And once you're in your rent-subsidised government owned dwelling, you're tied to that location. If you're offered a higher paying job that would require you to move, chances are you wouldn't because you'd either:

(a) have to go to the back of the rationing queue, or (b) lose access to social housing entirely

In other words, the effective marginal tax rate on additional earnings are well over 100% if relocation is required. Therefore, the rational financial decision is to stick with your lower paying job (or unemployment) to hold on to your rent-subsidy. Hence the social housing 'poverty trap'.

From a 'whole of economy' perspective it's even worse. In the aggregate, social housing impedes labour mobility, in turn lowering economic output and increasing the rate of structural unemployment/under-employment. Furthermore, it saps land market efficiency, as older social housing locations (that were previously on the outskirts of the CBD) are now in 'inner-city' areas (due to metropolitan expansion). As a result, land that could be put to much more productive use is tied up by social housing tenements.

Although the above is a bit of a simplification, in the final analysis social housing is a complete policy disaster that creates bad economic outcomes for both the financially disadvantaged and society overall.

It would be far better if social housing (and the land it is situated on) was sold on the private market (at market value) and the money put towards direct rent subsidies (that taper as income rises). Although this still causes higher effective marginal tax rates (due to payment tapering), the system can be designed so that EMTRs do not come close to 100% and there are actually positive incentives for those receiving rent subsidies to relocate if offered a higher paying job.

This is really true. Also what is really bad for all the startup people in here that you are in the worst bracket to be.

You cannot get a social housing -- you earn too much. But than again you (mostly) cannot afford going over 70-80sqm, especially if you are only earner in the family.

This means you're in the most competitive area and for every flat viewing it's you against 30, 40 or even 100 other suckers.

What source are you using for the housing shortage? I lived there for a while and in my experience this was not the case - interested to learn more.

Edit: did some searching: http://www.thelocal.de/20150819/germany-building-homes-in-wr...

Quite interesting stuff.

If the article does not make it clear, in East Germany there are many many cities with a shortage of citizens - not a shortage of houses.

http://www.welt.de/wirtschaft/article146994158/So-schnell-en...

Five Bundesländer there had the population reduced from 14.5 Million down to 12.5 million...

I'm surprised they made the basic mistake of not making the benefit progressive vs. binary.

It has a shortage, but a very recent shortage. Compared to other cities in Europe - Stockholm, London, Paris it's still very easy to find somewhere to live here. Especially if you have money to pay.

Only if you have money to pay.

If you earn average IT salary you need to prepare for weeks, maybe even months searching for a flat.

I voted against developing on tempelhof because there are 101 better places in the city to do it that won't take away green space. Berlin could start building up a bit more for one.

Meh. It's not like Berlin currently has actually a shortage of space to build. Remember, Berlin currently has about the same land area as NYC, at less than half the population.

It also has about a million less than pre-war Berlin.

The only thing is during those times the city was criticized for being an overcrowded concrete (well, cobblestoned) dump with many slums.

The city needs to build out instead of up. Current infrastructure can barely hold population density as it is today.

I don't exactly agree with the rationale, but I don't think your analogy about luxury housing accurately portrays the problem. Larger, better built housing with extra amenities will cost more and almost certainly gentrify the neighborhood. I think the idea against allowing luxury housing is more that this would only help the already affluent population while simultaneously driving up housing costs in the area.

Larger better built houses means those people who want that will give up their current place for that. It will even out and works better than the current system. Granted I'm not from Berlin, but our situation (Stockholm) is exactly the same and the only way out is taking on the risk of buying property in an already over-heated bubble.

edit: There is an alternative and that is to find a second hand contracts where you will have to move out in a year because most co-op boards won't allow the owner to rent out for more than a year.

Problem is that their old place will go back to the market on a new lease and, in popular areas, twice the rent.

Also, if you've been in your current apartment for 5+ years, changing apartments effectively means double rent for you. Everybody I know who has an OK apartment in Berlin stays there, because an extra room etc. would mean 500-1000 Euros rent increase.

If there is sufficient supply, the old place won't go back on the market for a much higher rent. What you describe is what happens when you build a handful of units in the midst of a major shortage.

Have you been following the events surrounding the problems with rising rents in San Francisco? What you're describing is what has already happened here. I cannot overstate the importance of avoiding the mistakes of SF. Refusing to build in a place people want to live in will not lower rents. It only drives gentrification, evictions, and higher rents.

This is precisely the mistake San Francisco has made. I strongly suggest not repeating it.

The problem is that the fallback position tends to be building no new housing at all. This results in the same new people with more money moving in, driving up housing costs and gentrifying the area. No amount of not building housing makes rents low.

> This is precisely the mistake San Francisco has made.

What is that mistake? Permitting new, nice housing?

If this is your opinion, I cannot agree with it.

Firstly, something like 10->20% of all new residential construction must either be set aside for "affordable housing", or enough money must be given to The City to construct those units on behalf of the developer. Secondly, San Francisco's mistake is to -through a variety of screwups- make it nearly impossible to build new, dense residential buildings in the city.

If a district is able to build enough housing to meet current and expected near-future demand, rents will usually remain stable. See footnotes 0 and 1 at [0] for some info on long-term trends in the area.

[0] https://news.ycombinator.com/item?id=10556534

SF's mistake has been not allowing much of any housing to be built. This is what I'm suggesting needs to be avoided at all costs.

Ah. It wasn't clear from your prose that this was your intended statement. The statement about the fallback position substantially muddied the waters, as it seems that the fallback position described is more-or-less the situation in SF right now. Oh well. :)

It happens! On with life. :)

Yup, yup!