Fed Gov. Duke: Housing Crisis Requires "Full Spectrum of Policy Actions"
The housing boom and bust have left the United States with an "extraordinary" level of vacant homes, said Federal Reserve Governor Elizabeth Duke during an October 5 speech in New York. Speaking at a conference cohosted by the New York Fed and the Rockefeller Institute, she detailed the causes and problems associated with the large volume of vacant properties.
Not everyone seeing upward trends
Although the aggregate housing market has shown signs of improvement, including a pickup in home sales and higher sales prices, these positive trends "do not apply to all neighborhoods equally," Duke noted. "Our housing crisis has many dimensions and will require a full spectrum of policy actions to restore health to the housing market, our economy, and most importantly, to neighborhoods and communities across the country," she said.
The characteristics and causes of vacancies vary, but the problems they cause are much the same, including blight, lower property values, crime, and lower property tax revenue. Drawing on research conducted by staff at the Federal Reserve Board, she identified three broad categories that include most concentrations of vacant homes:
- "Housing boom" tracts have a large share of homes built after 2000, as well as higher median incomes and home values. Orlando and Las Vegas have a large number of tracts in this category.
- "Low-demand" tracts have a large share of older housing stock built prior to 1960 and are characterized by persistent job loss and low demand for housing. Detroit and Cleveland have a large number of tracts in this category.
- "Traditional suburban" tracts are less dense than the other two categories and have high shares of owner-occupied and single-family housing units. Many of the vacancies in these areas are not associated with the foreclosure crisis. Rather, they are symptoms of longer-term issues. Parts of Charleston, West Virginia, and Des Moines fall into this category.
One solution doesn't fit all
The characteristics and sources of high vacancy rates differ. "Taking account of such differences will be important in crafting solutions to the problems caused by those vacancies," Duke noted. For instance, the private market will play a starring role in many neighborhoods, especially in "housing boom" areas, whose relatively high median incomes and newer housing stock have already begun to lure investors. In contrast, some neighborhoods will need the government to step in with solutions.
"Doubtless, there will be costs associated with solving these problems," she said, adding that "ultimately, a policy of neglect will be just as—or even more—costly than finding and implementing constructive solutions to the vacancy issue."
October 24, 2012