A Natural Right to Housing (part 5 and final)

I started this series of posts defining "rights" into three categories: natural, social, and economic. I chose to focus on natural rights in particular. Then, I stepped back to look at what three of the big thinkers from western civilization, namely Hobbes, Locke, and Rousseau, had to say about natural rights. This final post will summarize my own thoughts on the natural right to housing (or shelter), which admittedly have evolved over time as I have considered the issue.

The first and most basic premise that seems to underlie all discussions of natural rights is the right to self-preservation so long as others' right to self-preservation is not harmed. This seems logical and reasonable to me. Suicide is viewed negatively in many societies not just because of its effect on those that remain behind, but because it is the most blatant form of violation of this premise. Of the items needed for self-preservation, none are more basic than food and shelter (probably clothing too but that's a different argument).

Saying that a right to food and shelter is fundamental to self-preservation is not the same as saying that any one has a right to "take" it from someone else or that any one should be "given" these things. Instead, it is saying that every one has a right to provide these things for themselves. This is inalienable, it cannot be done away with by majority rule, by law, or even by one's own consent.

Which brings me to a tough question regarding property - what happens if we have either titled all land to private ownership, restricted the use of public (common) land in such a way that it cannot be used to provide food and shelter, or restricted the use of private property such that it cannot provide subsistence shelter (e.g. building codes or zoning)? In such a setting, common in today's world, then we have alienated the natural right of humans to provide their own shelter and food. This then is where a right to housing becomes critical to today's society and must take on mitigating policies.

What kind of mitigating policies can offset the alienation of such a right? It is difficult to do because implied in this right to shelter is autonomy, self-reliance, and choice. Most attempts to create mitigating policies will be a compromise of these features at best.

One example of a mitigating policy is fair share housing. Under this type of policy, every community must provide a portion of housing that is set aside for those that otherwise cannot afford housing. Why is this fair? Because the community's restrictions are in large part what prevents humans from sheltering themselves. It seems to me that the less common land that is available or the more restrictive the use of private property, the more broad the policy should then be.

A second, and more controversial, public policy response is squatting or homesteading. In this case, private property that is not being "used" can be used by, or even titled to, an active resident. This is similar to some of the writers noted above referencing that it is "labor as applied to things" that create property and so if it is not being used then it is not really property at all. I have more difficulty with this type of policy given that simply not using property is not the same as saying it is not useful to the owner.

Am I in favor of a right for all people, regardless of their behavior, to be housed? As far as the housing part of that question, yes (i.e. human is human and carries with it a right to be sheltered). But, that does not also make all behavior acceptable (i.e. drunk is drunk and does not also carry with it a right to be housed). It seems to me these are two separate questions - what is the right to housing and what is acceptable behavior? There are many other examples that come up as well (e.g. mental illness, substance abuse, victims of crimes, etc.) and I would conclude in a similar way.

Should we simply create more shelter beds? No, I am not suggesting a right to congregate living. In fact, in a state of nature, it is exactly not congregated living. Rather, the right to housing must reflect humanity's desire for autonomy (hey, I am a Midwesterner, we are nothing if not libertarians at heart). Perhaps shelter beds are appropriate for some temporary and emergency settings, but not as a matter of long standing policy.

Other forms of supply (e.g. tax credits for housing, government insured mortgages, etc.) or demand (e.g. Section 8 vouchers) subsidies are also possible. These all hold the potential for ensuring the right to housing but each must be evaluated on its merits (i.e. efficiency, effectiveness at addressing the local housing issue that is causing some to be unsheltered, etc.).

In summary, yes, a natural right to housing exists. We have committed the most egregious of sins by both alienating this right and not offering sufficient mitigating policies to offset the violation. Continuing to violate this natural right harms our community and must be addressed as a question of economics and justice.

A Natural Right to Housing (temporary sidenote)

Just in case you were thinking "he's out of his mind to be thinking about a 'right to housing' as a public policy issue that should be carefully considered," cut/paste this link to the article from www.slate.com. Two steps crazy or two steps ahead?

http://www.slate.com/id/2214544

A Natural Right to Housing (part 4c): Rousseau

In part 4a, I outlined Rousseau's thoughts about the natural state of humans, namely that we are equal by nature, that we form societies initially for social purposes, that the division of labor introduces the concept of property, and that governments are formed by the wealthy to protect their property. In part 4b, I outlined Rousseau's thoughts about the role of government - government should avoid the arrangements that allow for the creation of inequality, let alone be progressive about reversing it. Now, in part 4c, I'll discuss his On Social Contract, the primary work for which he is known and which outlines what he considers a legitimate government to be.

Rousseau reestablishes an earlier claim that the persons are endowed with a desire for self-preservation (and that this endowment is inalienable), that power or strength is not a legitimate source of governance, and that agreements are the basis of authority among persons. He claims that legitimate authority comes when "each of us puts his person and all his power in common under the supreme control of the general will, and, as a body, we receive each members as an indivisible part of the whole." In this way, Rousseau argues that a "houses make the town but that citizens make the city."

On the issue of property, Rousseau's perspective regarding governments becomes more assertive. Previously, he argued that government was unjustly formed to protect the property of the wealthy. In the Discourse on Political Economy his emphasis shifted to a more active and assertive role for government in creating equality. In On Social Contract, he argues that every man has a right to what he needs, no man is just in claiming more, and that the community governed by laws assures us all of possession of at least something. But, he argues that such possession is always subordinate to the community's right to everything (e.g. imminent domain).

Rousseau then goes on to discuss issues less applicable to my subject (i.e. executive power and legislative power). He concludes by saying that good government can be measured and ranked very easily - look at where the population increases naturally ("statisticians, it is now up to you; count, measure, compare.").

So where does Rousseau conclude on my question of a natural right to housing? Given his explicit earlier writings regarding shelter as being something that is freely available from nature, he seems to believe it is a "natural right" but also something that has already been provided and therefore needs no intervention from human kind. Many of his arguments lean towards economic equality, with government being the institution that provides the foundation for this to occur. In this sense, to have a person ill-housed while others are well-housed would be counter to Rousseau's philosophy.

In part 5, I'll conclude this topic with a summary of my own thoughts.

A Natural Right to Housing (part 4b): Rousseau

In part 4a, I described Rousseau's Discourse on Inequality. Rousseau uses the Discourse on Inequality to describe humans in a state of nature where people are "savages" bound only by self-preservation and a "do as little harm as possible" rule. He then walks through how societies are formed initially for social purposes, but ultimately begin to use a division of labor to increase material well being. This eventually leads to the creation of property, laws, and an "unnatural" inequality. I will now turn to his Discourse on Political Economy and then in part 4c, I'll conclude with a review of On Social Contract, Rousseau's main thesis about how government should be formed.

Rousseau argues that "since all society's commitments are reciprocal by nature, it is impossible to put oneself above the law without renouncing its advantages, and no one owes anything to anybody who claims to owe nothing to anyone else." This reciprocity is central to Rousseau's thinking about the role of government and the basis of society. He says "is it not the commitment of the body of the nation to provide for the protection of the least of its members with as much care as for that of all the others?" Rousseau is even more radical in economic terms, arguing that it is not for government to create economic equality by taking wealth away from the rich or by creating subsidies for the poor, but rather government should eliminate the means that allow the rich or the poor to come into being.

Rousseau is moving away from his view of government in Discourse on Inequality where he viewed government solely as a means of furthering the wealthy's self-interest in protecting property. He is now promoting a view of government that protects the rights of citizens but also requires providing for basic needs (public education already having been defined as a basic obligation of government). He spells out three issues to consider when developing tax policy that underline this change: 1) proportional taxation (i.e. those with more should pay more), 2) subsistence exemptions (i.e. that basic necessities should not be taxed at all), and 3) the benefits derived from government (i.e. that the rich benefit more than the poor).

Next, in part 4c, I'll address Rousseau's primary treatise, On Social Contract, where he more explicitly spells out how he thinks government should be formed.

A Natural Right to Housing (part 4a): Rousseau

Previous posts a) defined "natural" rights, as opposed to other types of rights, b) reviewed Hobbes's Leviathan, and c) reviewed Locke's Two Treatises of Government. We now to turn Rousseau.

I am going to break this discussion into three parts, Rousseau's Discourse on Inequality (1755), Discourse on Political Economy (1755), and On Social Contract (1762).

Rousseau starts the Discourse on Inequality by stating this his purpose is determine when "right" replaced violence and "nature" was subjected to law. While Rousseau acknowledges that true equality may never have existed, he felt that understanding equality conceptually helps us to understand what is meant by natural rights and our current status. In summary, Rousseau believes inequality is wrong and generally did not exist in nature, to know why there is inequality we must understand humans, to understand humans we must understand human nature, and to know human nature we must strip away their current environment, circumstances, and society.

Rousseau reduces human nature to two features (one of which will sound familar): 1) the desire for self-preservation and 2) a repugnance at seeing others suffer or perish. In this way, Rousseau claims that humans are naturally good and that all persons should be governed by a sort of golden rule - "do what is good for you with the least possible harm to others."

One quick note regarding shelter - Rousseau believed that the Earth provided sufficient shelter for humans without any necessary modification. In such a world, humans live a simple, uniform, and solitary life. If they don't have shelter, it is because they do not need it (i.e. have learned or been so endowed as to survive without it).

Rousseau then passes from a state of nature (i.e. life without society), through a state of simple society (i.e. where people may live together for social purposes but each person tended to themselves), to a state of current society identified by its division of labor. Property is introduced due to the division of labor and human misery (i.e. avarice, ambition, and wickedness) begins. And so, natural endowments that lead to inequality and may have been imperceptible in a state of nature become more obvious through a division of labor and the establishment of property.

Rousseau then says that those with property (i.e. the rich) devised a scheme of protecting their property by deceiving others into thinking that it was for everyone's good to have laws. These laws became the basis of society, destroyed natural liberty, and subjected the whole human race to labor, servitude, and misery.

Rousseau concludes with an argument about inequality - moral inequality (i.e. inequality founded upon laws) that does not result from physical inequality found in nature is contrary to the law of nature. In other words, Rousseau believes it is not right for a few persons to be abundantly wealthy while multitudes lack bare necessities. In part 4c, Rousseau will describe a new kind of social contract designed to address these issues.

What are Public-Private Partnerships?

Public-Private Partnerships are sometimes referred to as PPPs or P3s. E.R. Yescombe (Public-Private Partnerships: Principles of Policy and Finance, p.3) describes project-based or contract-based PPPs as having the following elements:

1. a long-term contract between public and private entities,
2. for the design, construction, financing, and operation of public infrastructure by the private sector,
3. with payments over the life of the contract made by either the public sector party or by the general public as users of the facility, and
4. with the facility remaining in public sector ownership (or reverting to the public sector at the end of the contract).

But I am interested in a slightly different version of P3s, though perhaps applied to the same types of issues:

1. an entity created with two types of "owners", one that is profit-motivated (i.e. private sector) and one that is mission-motivated and controlled through a political process (i.e. generally public sector),
2. by "owners", I mean that the entities have a claim to the assets of the entity (i.e. "owners" can provide debt, equity, or various hybrids financial sources), and
3. the mixed "owner" arrangement is often evidenced through Board structure, staffing, etc.

In this sense, I am talking about true legal partnerships, not just contractual arrangements between parties with differing motives. A good example of this was Fannie Mae and Freddie Mac where they had private common stock owners, but their Board was composed of 18 members, 5 of which were appointed by the President of the United States. Further, while the entity had common stockholders, it also had access to implicit and explicit forms of borrowing from the U.S. Treasury.

Economists describe this mix of motives as having mixed or dual "objective functions." For example, profit-motivated companies have an objective function to maximize profits (i.e. revenues less expenses), subject to the production function (i.e. the combination of labor and capital that produces output). Public, or non-profit, entities have an objective function to maximize quality or quantity, subject to the constraint of resources. Obviously, when both motives are combined into the same entity, there is opportunity for both conflict and synergy.

Furthermore, the role played by each type of entity is evidenced by the type of capital they provide (i.e. debt or equity). In this sense, a theory of P3s can use some of the same tools as used by Modigliani and Miller's (M&M) theory of capital structure. It is this combination (i.e. entities with mixed motives plus capital structure theory) that intrigues me about P3s and offers an opportunity to create a new theory of P3 capital structure and how it can be used to result in more effective partnerships.

More to follow...

The "Natural" Right to Housing (Part 3): Locke

(this post is in draft form, it is going to take a lot more work and my head hurts)
The next stop in considering a natural right to housing is John Locke, author of Two Treatises of Government. This book, written at the end of the 17th Century, provided a foundation for private property rights and challenged the concept of monarchies.

Locke describes a State of Nature that has the following properties:

1. all persons are free to behave and use their possessions as they see fit
2. all persons are equal with no one having more power than another
3. the State of Nature is governed by the "law of nature", or reason
4. no person should harm another person's life, health, liberty, or possessions
5. all persons have the power of execution of all laws and of using reason and no person can appeal to a judge or arbitrator

Locke sees three weaknesses in the State of Nature:

1. lack of settled law (i.e. common consent to right and wrong)
2. lack of an indifferent judge of law
3. lack of a power to execute and enforce the law

Similar to Hobbes, Locke expressed a "fundamental law of nature" regarding self-preservation. This Fundamental Law of Nature comes about when a State of War exists such that one person tries to subject another to his/her will. Society is formed when people, desiring to avoid the State of War, are willing to quit the State of Nature and join into community for the mutual preservation of their lives, liberties, and estates (i.e. property). Even though people may consent to be governed by the majority in community, no person gives up (or can give up) the Fundamental Law of Nature (i.e. the preservation of mankind).

Similar to Hobbes, Locke believes that people have a right to property that they apply their labor to and can use (i.e. property necessary to preserve and enrich one's own life). By use, Locke means "not wasted or perishing unused" so that "used for trading something else that is then used" is reasonable and within the right of property. In fact, the combination of natural resources and labor is the basis of Locke's definition of property. Locke sees all mankind as benefiting from this type of property because the application of man's labor increases the common stock of all mankind.

In this way, Locke defines and confines property to things that are "not wasted" as opposed to things that are traded or stored up (e.g. the use of money as a holder of value from one time period to the next). When people increase, and introduce money as a store of value, land becomes scarce. And so, communities settle the boundaries of their territories and use law to regulate private property among their members.

What then would Locke say of our current situation where some have 20,000 square foot houses, some have 2,000 square foot houses, and some have none at all? Locke's ideas about property were bounded by a combination of "use" (meaning not wasted) and "labor" (meaning effort on the part of people). In this sense, I believe Locke would have found that a society containing unused houses (or portions of houses) to be a violation of the State of Nature, but that no person by right deserves to be housed if they do not apply their own effort to being so.

Next stop, Rousseau...

The (Natural) Right to Housing (part 2): Leviathan

Any conversation about natural rights has to consider a basic text of political science, the Leviathan by Thomas Hobbes. For those that have been out of school for a while, the Leviathan was published in 1651 and is an essay (a long essay) regarding how and why governments are formed.

Here's a quick summary of what I find in Leviathan that is applicable to this question of whether there is a natural right to housing. Hobbes line of logic is:

1. All persons are born equal in nature.

2. Without government, life is solitary, poor, nasty, brutish, and short (this is one of Hobbes's famous quotes). Everyone is at war with everyone.

3. The "laws" of nature are what men agree to as articles of peace due to a fear of death from war. Laws determine and bind persons from action.

4. The "rights" of nature are that each person has the liberty to pursue self-preservation (liberty being the absence of external impediments). Rights are the liberty to do or forbear doing some thing.

5. Some rights are inalienable under any circumstance, such as self-defense against force.

6. The sum of the laws of nature are "do not unto others that which you would not do to yourself." This is an interesting twist on the Golden Rule to "do unto others as you would do have them do unto you." It reflects Hobbes's emphasis on liberty (i.e. the right to act or not act).

So, where does that lead us regarding a right to housing? The following reflects one way to interpret Hobbes with regard to this subject:

1. Self-preservation is a right of nature, fundamental, inalienable, and common to all persons.

2. Among the physical things needed for self-preservation are food and shelter, at least at subsistence levels. Without laws to the contrary, persons would create subsistence shelter on their own (or they would perish in many climates).

3. The ability to shelter ourselves is not possible unless the titling of land into ownership by law incorporates a way to ensure all persons hold title to some land suitable for human habitation (e.g. a common area available to all).

4. Further, zoning ordinances and building codes prohibit the creation of some forms of shelter that would be suitable at a subsistence level, thereby reducing some persons to the absence of shelter.

5. Because the right to self-preservation in alienable, no law that prohibits the provision of subsistence shelter without providing an equivalent alternative is unjust.

6. To do otherwise violates Hobbes's sum of the law of nature.

Hobbes's political philosophy leads me to conclude he would be in favor of a right to housing. However, Hobbes's most well known quotation (i.e. "life is solitary, poor, nasty, brutish, and short") and his belief that persons are naturally at war with one another unless they form a government bound by laws suggest that even our worst prisons or shelters would probably look luxurious to Hobbes. After all, the right to self-preservation is not a right to equality and would more likely reflect bare subsistence at best (i.e. that which people would create in nature if otherwise unobstructed by laws).

Next stop, John Locke's Two Treatises of Government...

Letter to the Editor of CFA Magazine

Below is the text of a "Letter to the Editor" of CFA Magazine that I submitted in response to a recent article regarding the role of regulation in the current financial crises.

Raymond Niles's Point/Counterpoint in the Jan-Feb 2009 issue of CFA Institute Magazine misleads readers about the Community Reinvestment Act (CRA). He claims that regulation caused the financial crisis, which is an appropriate expression of opinion given that it was an opinion piece. However, his claim that the CRA is a regulation that caused the financial crisis, that CRA was a principal factor in the housing bubble and related collapse, and that CRA is an example of government's repeated violation of our individual rights is not supported by evidence within his article and runs counter to evidence presented elsewhere.

CRA legislation was passed in the 1970s to ensure that entities using federal insurance to gain deposits subsequently made loans in those neighborhoods where deposits were obtained. CRA is not new, it was not implemented just prior to or concurrent with subprime lending and the financial crises. There are also specific studies that challenge his argument:

1. Regarding the financial crisis and CRA's role, an analysis conducted by Federal Reserve staff in November 2008 indicates that "only 6 percent of all higher-priced loans in 2006 were made by CRA-covered institutions or their affiliates to lower income borrowers or neighborhoods in their [CRA] assessment area" (see Glenn Canner and Neil Bhutta (2008). "Staff Analysis of the Relationship Between the CRA and the Subprime Crises" at http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf).

2. Regarding CRA's role in the housing bubble and related collapse, two studies found no conclusive evidence that CRA-related loans are more likely to have performance issues than comparable non-CRA-related loans (see Glenn Canner and Neil Bhutta (2008). "Staff Analysis of the Relationship Between the CRA and the Subprime Crises" at http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf and see Elizabeth Laderman and Carolina Reid (2009). “CRA Lending During the Subprime Meltdown,” Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act, pp. 115-133).

3. CRA was not forced upon anyone; the choice was simple, any entity that felt the bargain was unfair could choose not to be federally insured (i.e. not be a bank). In fact, many lenders made such a choice. An analysis of the 2006 Home Mortgage Disclosure Act (HMDA) data indicates that roughly a third of applications were taken by independent mortgage companies rather than depository financial institutions or their affiliates (see Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner (2007). "The 2006 HMDA Data," Federal Reserve Bulletin, vol. 93 at http://www.federalreserve.gov/pubs/bulletin/2007/articles/hmda/default.htm).

One thing I can agree with Niles about is that we have to understand root causes of the current situation before developing appropriate responses or else we are doomed to repeat our mistakes. Towards that end, our assessment of root causes must be based on available evidence and not just ideological opinion.

The Right to Housing (part 1)

There's a topic that has been bothering me recently as I considered the 2009 Taylor Symposium topic - the American Promise and housing - namely, is there a "right to housing"? That issue is/was too broad for the limited time available at the Symposium so I am going to try to work through that issue in a couple of posts, of which this is the first (don't be surprised if you come back and I've revised/edited as it is a thought-in-process).

Let's start with what is meant by "right(s)". Have you ever looked the word up in the dictionary? Lot's of entries. I am not a political scientist and will probably violate a dozen issues in that field, but I find a discussion of rights can generally broken down into three types:

1. Natural rights that are absolute, common to all persons, and inalienable except when taken by unjust force. An example of such rights in the Declaration of Independence are the rights to life, liberty, and the pursuit of happiness. Violations of these rights are often enforced through criminal law.

2. Social or civil rights that are provided through law, enforced by the community as a whole (often through a police and/or judicial process if necessary), and are transferable through contract. By "civil", I mean "established by law" as opposed to the more common "Civil Rights Act of 1964" as used in the United States. An example of such rights are the bundle of rights included in fee simple title to real estate. Violation of these rights are commonly litigated through civil law. Natural rights are sometimes embodied into social rights by law as well.

3. Economic rights that are relative and evolving over time. Examples of these rights are policies/programs known as "entitlements" (e.g. social security payments that are available to all persons who are disabled, meet certain age requirements, etc.). Economic rights are always(?) embodied into social rights by law as well. The term "economic rights" is sometimes used to describe what I've defined as natural rights above.

For the purposes of these posts, I mean the following (Webster's Ninth New Collegiate Dictionary) by "right":

"...something to which one has a just claim...the power or privilege to which one is justly entitled..."

Clearly, the concept of "just" (i.e. "...acting or being in conformity with what is morally upright or good...") is closely tied to this definition of rights. And, from the three types of rights noted above, it is most closely tied to natural rights.

In short, is there a natural right to housing? Dust off the college textbooks boys and girls, this will be a trip back to the basics of western civilization, more to come...

CRA v2

o.k., I have to admit it, I began feeling bad this week that maybe my last post re: CRA in Indianapolis was a little harsh. In that post I compared what percentage of mortgage loans in the Indianapolis MSA were made by banks vs. what percentage of deposits they held. The more I thought about it, the more I realized that a lot of of the mortgage market is made up of non-deposit lenders (in this case for 2007, over 60 percent of the market was made of lenders other than those listed as the top deposit institutions) that I should take a second look. The chart below shows a revised calculation that looks solely at the mortgage loans made within the existing group of deposit institutions compared to the percentage of deposits made by those lenders. A couple of noticeable differences (yeah 5/3rd!!), too much of the same...

CRA Info

If you are interested in learning more about the Community Reinvestment Act, see the following links:


http://www.frbsf.org/publications/community/cra/revisiting_cra.pdf

http://www.federalreserve.gov/newsevents/speech/duke20090224

2007 Indianapolis MSA Lending Data

Cut/paste the link below to connect to a spreadsheet that summarizes mortgage lending in the Indianapolis Metropolitan Statistical Area (i.e. Boone, Brown, Hancock, Hamilton, Hendricks, Johnson, Marion, Morgan, Putnam, and Shelby Counties).


http://spreadsheets.google.com/ccc?key=p6zfId0QFa9Dlx-IdoRqnew&hl=en#