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Roberts Report: Dream hoarding is bad for business

Alexander Roberts.

A senior fellow of the Brookings Institution says it’s not just the top 1 percent of Americans by income who are responsible for growing income and wealth inequality.  It’s the top 20 percent, labeled “Dream Hoarders,” in a new book by the same name authored by Richard Reeves of the Brookings Institution.

In a recent interview on NPR, Reeves said, “They are members of the American upper-middle class, who, through various ways of rigging the market … are essentially hoarding the American dream.”

In education, students who come from families in the top 20 percent of wage earners are overrepresented at the most competitive public colleges, with just 8 percent of students coming from the bottom quintile. It’s worse, of course, at the exclusive private colleges, where, according to a paper published in January by Raj Chetty of Stanford, “Children whose parents are in the top 1 percent of the income distribution are 77 times more likely to attend an Ivy League college than those whose parents are in the bottom income quintile.”

And yet overall, children from low- and high-income families earn about the same incomes after graduation, depending on the college they attend.

“Dream Hoarders” points out that only 25 percent of income tax filers take the mortgage interest deduction, with most of its $71 billion in benefits going to families earning over $100,000.  The resulting inequality, says Reeves, poses a challenge to the principle of equal opportunity on which the nation was founded.

Reeves identifies the greatest “opportunity hoarding mechanism” as exclusionary zoning — the misuse of land use regulations by communities to limit housing and stifle growth. He writes:

“We do not generally want power plants mixed in with residential apartments and houses. But zoning becomes exclusionary when it operates simply to separate households based on their economic resources.”

The 2009 federal consent decree with HUD forced Westchester County to build 750 units of affordable housing in overwhelmingly white, affluent areas.  However, it has done little to dent the self-delusion of the privileged 20 percent, even as it may vote Democrat and think of itself as liberal. The Westchester county executive has for eight years refused to admit to the “disparate impact” on minorities of exclusionary zoning in the 31 of 43 Westchester communities targeted by the federal court order.

Now, he may never have to, as HUD accepted his eleventh analysis that failed to find exclusionary zoning in Westchester. HUD relented even after the U.S. Court of Appeals in April accused the county of engaging in “total obstructionism.”  Instead of looking at the actual implementation of the zoning, HUD turned a blind eye to the reality that even if a community has areas that permit some multifamily housing, they’re either built out or a developer gets clobbered by local boards once he or she applies.  It’s like rights in Communist China — they’re available only until you open your mouth.

The nefarious interference with market forces perpetuated by such zoning has curtailed economic growth, as shown by two prestigious economists, Chang-Tai Hsieh at the University of Chicago and Enrico Moretti at the University of California at Berkeley, in their paper published in May. They blame restrictive housing policies in high productivity metro areas like San Francisco and New York for “misallocation of labor” that has reduced national economic growth. “We find that the increased spatial misallocation of labor due to housing supply constraints in cities with high productivity growth rates lowered aggregate growth by almost 50 percent between 1964 and 2009,” they wrote.

Fortunately, in Westchester and Fairfield counties, business groups are waking up to the reality that dream hoarding and exclusionary zoning are not only bad for society, they’re bad for business, too.

Alexander Roberts is executive director of Community Housing Innovations Inc.,  a fair housing organization headquartered in White Plains. He can be reached at aroberts@chigrants.org or 914-683-1010.


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