Saturday, June 18, 2016

Should government subsidize artist housing?

The Minneapolis Star Tribune had an editorial recently calling-out upward redistribution in affordable housing policy, specifically the implementation of subsidized artist housing:
Those waiting for housing are disproportionately people of color — in part because of one of the nation’s worst income equality gaps. 
That’s why a report from the University of Minnesota’s Institute on Metropolitan Opportunity is so troubling, with its findings that precious federal tax credits originally intended for low-income housing instead have gone to costly rehabs of historic buildings housing mostly white artists. Lobbyists in 2008 got artists’ lofts exempted from the requirement to use affordable housing tax credits for the general public, kicking off a boom in such housing.
The editorial makes good points about racial inequality and target efficiency, but shies away from critiquing the core notion that artists--as opposed to other types of workers--deserve special housing assistance.

On its face, the justification for a specific benefit to artists seems questionable. Art is great, but it's obviously inseparable from human culture. Eliminating subsidies might change the quantity and style of art, but wouldn't eliminate it altogether. What's more, the opportunity costs are significant: truly impoverished people receive less assistance because of art subsidies. Even if we allow for some government support--museums, the NEA, etc.--subsidies administered via housing policy is extremely kludgey and misguided.


I'm fairly cynical about the actual motivations of many artist housing policy advocates, and most likely policymakers are engaging in a perverse negative-sum subsidy competition to attract artists and enhance their city's status. It feels similar to what we've seen with the outrageous subsidies provided to filmmakers or sports teams, and overall it makes the US poorer and less dynamic. Certainly developers see an advantage over other affordable housing requirements: artists are low-income, but they are higher-class compared to the typical impoverished resident.

But even the most generous analysis of the rationale for artist housing subsidies is weak. According to advocates, artists have historically played an important role in revitalizing rundown industrial neighborhoods by creating positive externalities for urban economies. Since artists can't capture the totality of these spillover benefits in the form of monetary rewards, the market undersupplies urban pioneer artists, reducing total welfare and justifying corrective government action.

I think this economic story overstates the magnitude and certainty of artist housing as an independent driver of revitalization, in part by understating the degree to which hip artist lofts might simply be an effect or symptom of other factors. The pioneer benefits of artists are crucially dependant on mobility and first-mover effects: artists go where housing is cheap, because they have to. Not coincidentally, these places have depressed demand. Artists increase demand by creating neighborhood buzz, and also shifting the retail mix to higher-status things.

Making a building artificially cheap for artists will attract more artists, but if a neighborhood's underlying economics or architecture isn't conducive to these sorts of spillover effects--if retail rents are already expensive, for example--the logic of artist pioneering isn't there. Cheap neighborhoods all across the country are constantly being tested by artists for their potential. Some of them snowball and become hip, but most of them don't. Planners tend to see the successes ("every revitalized neighborhood starts with artists") but overlook the failures.

The takeaway message isn't so much that artists are an important group to attract via subsidies, but rather that low prices combined with density and adaptable architecture seem to make neighborhood revitalization more likely. This is obvious when we consider the relative non-artsiness of suburban communities, many of which are blighted and impoverished (but cheap!). Sadly, zoning, parking minimums and other land-use regulations overwhelmingly prevent depressed neighborhoods from allowing these sorts of buildings. Subsidizing artist housing is a solution in search of a problem, and policymakers should stop privileging politically charismatic groups at the expense of everyone else.

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