Tag Archives: New Orleanians

The Downside of “Better” Housing

Earlier this week President Obama visited the of New Orleans to see a city that, four years after Hurricane Katrina, still has not recovered from the damage.  Most of the homes in the Lower 9th Ward where he spoke at a middle school remain vacant.

November’s issue of The Atlantic includes an article about new housing developments in New Orleans — the efforts of social entrepreneurs who have stepped in where government has failed to provide the new housing that it promised. Journalist Wayne Curtis points out that one of the many problems in recovery after Katrina has been policy makers’ misunderstanding of residents culture and preferences. Curtis quotes Andres Duany, co-founder of the Congress for New Urbanism:

Many of the shotgun houses in New Orleans were built by the fathers and grandfathers of people living in them today, and few of them meet building codes.  But no one worries about paying mortgages or insurance. “The situation is that the housing is essentially paid off, and it allows people to accumulate leisure,” he said. “What’s special about New Orleans is that it’s the only place in the United State where you can have a first-rate urban life for very little money.”

One of the first lessons in economics is that we respect consumer preferences, making no judgment about differences in subjective tastes and utility. Unfortunately this often does not carry over to economic policy making. While federal agencies are busy developing plans to allow people to obtain home mortgages, they are ignoring that some people would prefer not to take on and debt — inexpensive housing allows them to work less and to enjoy more hours of leisure.

Policy makers may think that housing standards requiring higher quality construction make people unambiguously better off, but in that case they fail to take into account the unseen consequences such as higher rates of homelessness and requiring that people devote more of their scarce time to earning money to pay for housing. From the point of view of lawmakers, higher building standards improve safety and neighborhoods’ appearance, but it also leads to higher costs, and this tradeoff may not be in line with the subjective preferences of many New Orleanians.

An unseen consequence of housing policy after Hurricane Katrina may be alterations to the culture and sense of place for which the city is widely known. Policymakers should consider the unique cultural attributes that give each city unique flare when dictating legislation that will result in lifestyle changes.

The Super Bowl as Economic Remedy

It seems obvious that when a city is chosen to host a major event — political convention, Super Bowl, Olympics — this provides a natural economic boost to the city’s economy. If any city is deserving of such a boost it is New Orleans, which will be hosting the 2013 Super Bowl for the first time since Hurricane Katrina. (It will be the 10th time the city has been the site of the championship.)

And like many governments that find themselves chosen for a major sporting event, the Louisiana legislature is deciding if it should spend $85 million in Superdome upgrades. However, the boost is largely symbolic: while New Orleanians may feel a sense of pride over the selection, and the stadium will get another make over, economic gains are very likely to be fleeting and possibly negative.

Much academic work has been done assessing the impact of sporting events on regional economies. The findings generally show little lasting impact on host cities. Robert Baade finds the primary beneficiaries of taxpayer subsidies for stadiums are team owners, and players, not local residents.

That has not stopped cities from competing for the honor. 

University of Maryland economist Dennis Coates, writing in The American, finds since 1990 Major League Baseball has opened 19 new stadiums, the NFL opened 17, and the NBA over 20. These projects are highly subsidized on the federal, state and local levels, with the public bearing as much as 63 percent of the cost.  Coates and fellow economist Brad Humphreys find in an analysis of  of wages between 1969 and the 1990s in metro areas where these stadiums reside is that incomes actually decreased.

Why? Consumer spending on sports replaces consumption of other kinds of entertainment, and the spending patrons undertake has a relatively small multiplier effect in real the local economy. Athletes get the income boost. And to top it off, increased local subsidies to the franchise redirect tax revenues from other use, making the local economy less efficient.

While local and state governments might like to think otherwise, being chosen as a host city may be as much an economic drain as a publicity boon.