William J. Collins and Katharine L. Shester’s outstanding 2011 paper, “Slum clearance and urban renewal in the United States,” published by the National Bureau of Economic Research, discusses the regional and local impacts of a highly controversial federal program for slum clearance and urban redevelopment known as Title 1 of the Housing Act of 1949, or urban renewal for brevity.
The extensive and highly contentious program of slum clearance and urban rebuilding that the United States undertook following World War II was the subject of fresh data developed in this study regarding its local economic impacts. By providing federal funds for locally conceived redevelopment initiatives, Title I of the Housing Act of 1949 sought to reinvigorate American central cities.
Aim of the study | Slum Clearance
The paper’s primary goal was to examine the factors that assisted cities in redeveloping the land, renovating buildings, completing city planning, and enforcing building codes. The program’s impacts on indicators of income, property values, employment and poverty rates, and the population at the municipal level were estimated using an instrumental variable method.
The estimated effects on income, property values, and population were positive and economically significant. They were not driven by changes in demographic composition. The estimated impact on poverty reduction and employment was positive but imprecise. The results were consistent with a model in which local productivity is enhanced.
The legality of the issue
One must fully understand the definition of “eminent domain” before engaging in a heated debate about the moral rightness or wrongness of this disputed issue. Eminent domain is the legal authority granted to the government to seize private property and make it available for public use, often referred to as a taking. According to the Fifth Amendment, the government may only use this authority if it compensates the property owners fairly. Does this strike you as fair or unfair? In the United States, the use of eminent domain and subsidies to encourage private redevelopment is still quite controversial. Although, at that time the State government thought it was rather reasonable because they soon combined subsidies and eminent domain rights that they provided. Local agencies were then able to gather, clear, and then sell chunks of property in “blighted” urban areas for redevelopment. Additionally, funding was provided to cities for planning, enforcing the law, and renovating buildings and areas.
An Overview of American Urban Renewal and Slum Clearance
Commencement of the program
After the Second World War and the Great Depression, housing and urban concerns dominated discussions about domestic policy in the United States, with the eradication of slums and the revitalization of central cities emerging as key goals. Plans for slum clearance and urban reconstruction with federal support were first presented in 1941 by the Federal Housing Administration (FHA) and economists Guy Greer and Alvin Hansen. Blight, in the opinion of urban regeneration proponents, was “contagious” because it was anchored in strong negative externalities. They also argued that transaction costs prevented private enterprises from assembling and redeveloping land in central cities. City governments lacked the legal and financial means to carry out extensive clearance and renewal projects and that the issues associated with slums should be a top priority for national policy, they claimed. Congress granted the Housing and Home Finance Agency (HHFA) permission in 1949 to provide subsidies for locally planned urban renewal initiatives.
The Procedure | Slum Clearance
In order to move forward with specific project planning within an urban renewal area, the Local Public Agency (LPA) would first identify the area (which was typically marked by “blight” or signs of deterioration), hold public hearings, request approval from the local government (such as the city council), and then seek approval from HHFA.
Plans for the project would detail the present and projected land use, improvements to streets and utilities, assistance for displaced people and businesses, and estimates of costs. Once approved, the project might move forward with the aid of federal loans and grants. Many projects took several years to finish, and the protracted pace of development was a constant cause of aggravation.
Over 300,000 families had to relocate due to the more than 400,000 approved dwelling units that had been cleared (or were scheduled to be cleared) after nearly a decade and a half.
The Controversy
Although the urban renewal initiative had some political backing at first, it grew more divisive over time. An unresolved empirical topic was whether the urban redevelopment program actually had an economic impact on American cities.
In most American central cities, the early post-war decades, particularly the 1960s and 1970s, were anything but optimistic as people and economic activity stagnated.
Because the urban redevelopment initiative did not halt or stop the economic deterioration of cities, several critics saw it as a failure right once. Concerns over the costs suffered by the displaced and the slow pace of reconstruction, along with the growing perception of failure—punctuated by riots, rising crime rates, and local economic crises—led to the program’s political downfall.
Data and Empirical Framework Strategy
In order to discover some evidence, a formula was used to analyze the extensive literature on urban renewal, which is highly critical yet strikingly deficient in econometric evidence about the program’s outcomes. Therefore, this paper’s main empirical question was whether the growth trajectories of cities that were observationally similar in 1950 varied with the level of urban renewal activities. An instrumental-variable approach that addressed issues with the endogeneity of funding and measurement error in the actual intensity of urban renewal work was used to analyze this.
As potential program effects, changes in a number of housing, population, and economic characteristics at the municipal level were examined. The value of the owner-occupied property, family income, employment rate, economic characteristics, and poverty rate were the primary outcome variables of interest.
Conclusion | Slum Clearance
All in all, the goal of the Slum Clearance Program was to improve the living conditions of Americans living in poverty and substandard housing. However, while having good intentions the program had mixed results, and in some cases, had the unintended consequence of displacing residents and destroying the vibrant communities that existed around the slums. This was due to the focus of the project being on improving physical housing, rather than the neighborhoods and communities that existed around the slums in the United States.
Overall, this research article discusses the problems, the method, and the outcome in great depth. It is excellently done by using an instrumental variable approach to derive equations, use data and analysis to comprehend every last detail, and so on. A must-read without a doubt!
Sources
Eminent domain (no date) Legal Information Institute. Legal Information Institute. Available at: https://www.law.cornell.edu/wex/eminent_domain (Accessed: January 17, 2023).
Collins, W.J. and Shester, K.L. (2011) Slum clearance and urban renewal in the United States, NBER. Available at: https://www.nber.org/papers/w17458 (Accessed: January 18, 2023).
