Starting today and throughout this week, the Cato Daily Podcast (Subscribe!) will drill down into issues related to immigration. First up, Alex Nowrasteh and I discuss the persistent myths surrounding immigrants and crime. Put simply, if you’re going to worry about crime rates among groups, worry relatively more about your fellow Americans and relatively less about immigrants, both legal and illegal.

Private schools are the preserves of rich, white people, and if they weren’t around education would be more racially integrated. That’s probably the assumption many people have, and it could be what people reading about a recent Shanker Institute report on segregation in Washington, DC, might have gathered.

“It’s no secret that the District’s public schools are highly segregated, with a recent analysis showing that nearly three-quarters of black students attend schools where they have virtually no white peers,” began a Washington Post story on the Shanker analysis. “But a recent report examines the role that enrollment in private schools, which are disproportionately white, plays in the city’s segregation woes.” Similarly, a story on WAMU—a DC NPR affiliate—intoned: “‘In a very loose sense,’ the authors explain, ‘D.C.’s private schools serve as the segregation equivalent of a suburb within a city.’ That’s because white students in D.C. tend to enroll in private schools.”

So are the city’s private schools really preserves of white people? And are they a big impediment to integration? The answer appears to be “no” to both questions.

Importantly, the Shanker report, while saying that a disproportionate share of private school students are white, also noted that African-American students in private schools had greater exposure to white students than black children in public schools, an indicator that for African-American kids in private schools the racial mix is less isolating. The typical black student in a DC public school (traditional and charter) goes to an institution in which only 3.5 percent of students are white. For the typical black private schooler, the student body is 24.5 percent white.

Those numbers indicate greater exposure to whites for African American private schoolers, but that the latter is not a much higher number also indicates that many African Americans attend private schools that are predominantly minority, which the WAMU story notes at the very bottom: “While there are fewer students of color in private schools, when they do attend private school it’s usually with students who look like them. 65 percent of an African-American student’s peers in D.C. private schools are also African-American.”

Contrary to what many people likely imagine, DC’s private schooling sector is not lily white: private schools serve all sorts of kids. Breaking down the city’s 63 private elementary and secondary schools using National Center for Education Statistics and GreatSchools​.org data indicates that almost half—31 schools—serve predominantly minority student bodies, defined as more than 50 percent black and Hispanic. Roman Catholic schools—which have traditions of serving first dispossessed Catholics, then other poor and marginalized groups—disproportionately serve such populations, with 58 percent of Catholic schools doing so. Catholic schools, especially diocesan institutions, also tend to be less expensive than non-Catholic schools, making them more affordable to African Americans and Hispanics, who tend to have lower incomes.

This brings us to a powerful, underlying factor in school selection: where one lives. People typically do not want their children traveling long distances or durations to get to school, and will tend to choose schools—public, private, or charter—fairly close to home.

The map below plots the percent white in each DC private school on top of median household income by census tract. (It also indicates Catholic or non-Catholic). What is seen pretty clearly is that the predominantly white private schools are largely found in the wealthier parts of the city, the less white in the poorer. Racial stratification in DC private schools, then, does not appear to be a private school problem, but a wealth and housing issue.

There is one other, even deeper possibility to consider, and the Shanker report notes it: absent predominantly white private schools, many white families might not even be in DC, or they might move to catchment areas with predominantly white public schools. It could be that the ultimate factor in segregation, then, is neither public nor private, wealth, nor housing, but that white people tend to prefer to live with other white people, and for that matter African Americans with other African Americans, and Hispanics with other Hispanics.

That said, private schools may actually have the key ingredient, at least within education, to erode those tendencies. They are free to espouse strong, coherent values and offer unique communities, which could attract diverse students and, via their shared values and school cultures, create new, lasting identities that bridge racial divides. Of course, price would still be a major obstacle, but not if public policy were to move in the direction it should: attach education funds to students and empower families to choose.

The Republican tax bill’s reduced corporate tax rate is a boon for many companies. But reducing the corporate rate lowers the value of tax credits and may negatively affect businesses that rely on them. The New York Times recently described one such case and argued that the value of the Low-Income Housing Tax Credit (LIHTC) would fall and the supply of affordable housing would fall along with it.

The Times article focuses on San Francisco and reports that the falling value of LIHTC increases building costs for affordable housing. In San Francisco housing is already in short supply, so increased costs are a real concern for low-income residents and city officials.

But this concern is misplaced; LIHTC is a complex and costly tool that should be eliminated. As Vanessa Brown Calder and Chris Edwards explain, the convoluted process which housing tax credits are distributed through creates large federal and state administrative costs, results in complicated application procedures and compliance efforts, and mostly benefits corporate interests rather than low-income tenants. The program is also susceptible to fraud and abuse.

These issues contribute to significant efficiency losses. As a result, LIHTC projects are more costly on average than equivalent private projects. In the end, the program’s intended recipients may receive just 24 percent of the LIHTC subsidy. Corporate interests capture the rest.

Considering the program’s inherent problems, officials should contemplate other strategies to increase housing affordability. One option is to eliminate project-based assistance, including housing tax credits, and rely more heavily on tenant-based assistance (e.g. housing vouchers).

In the summer 2015 issue of Regulation, economist Edgar O. Olsen suggests this approach. Olsen contends that project-based assistance is more costly than tenant-based assistance, and as a result contributes to longer waits for low-income units. That means fewer of the lowest income families receive assistance.

Since 70 percent of households receiving rental assistance receive project-based assistance, there are major gains to be gained by shifting resources toward tenant-based assistance. Olsen estimates that increasing tenant-based assistance would cost 10 percent less and serve 75 percent more people than the status quo.

That’s helpful, but addressing the underlying causes of housing affordability issues would be even more effective. One cause of housing affordability issues is restrictive land use regulations and zoning. In a recent analysis, Calder found that in 44 states more intensive land-use regulation is associated with increasing home prices. 

Unfortunately, regulatory barriers to affordability continue to grow. In San Francisco and other heavily regulated coastal cities, removing regulatory barriers could substantially increase housing supply and lower costs.

And if zoning reforms were combined with replacing programs like LIHTC with tenant-based assistance, officials could increase housing supply, lower housing costs, and more effectively provide subsidies to people who need them. Unfortunately, the Times article suggests damaging proposals like increasing the size of LIHTC and applying rent controls.

That is not an effective solution if improving housing affordability is the objective. Instead, officials should cut regulations that create supply shortages and move towards more effective forms of housing assistance. LIHTC isn’t one of them.

Written with research assistance from David Kemp.

Last week I published an article critiquing Secretary Ben Carson’s disappointing first year at the Housing and Urban Development Department. It outlined some of the areas where Carson’s efforts have fallen short.

Last year, Senator Mike Lee introduced a bill addressing one of the issues Carson fell short on — facing an Obama-era rule called Affirmatively Furthering Fair Housing (AFFH).^[1] Congressman Paul Gosar later introduced companion legislation in the House. Both bills would eliminate the HUD rule if passed.

That’s good news for legislative process, since the Obama-era rule that makes HUD an overseer of local demographic information seems to be only loosely based on the 50-year-old Fair Housing Act it claims to interpret. The rule is probably an example of the agency getting creative about ways to expand its mission. 

In other words, if legislators like the rule they should pass new legislation rather than abdicate legislative authority to HUD. Conversely, if legislators don’t like the rule Congress should pass legislation to nullify it.

The latter is precisely what Senator Lee and Congressman Gosar’s bill does — eliminate the controversial rule outright. And despite the bill’s rather unfortunate name, the “Local Zoning Decisions Protection Act,”^[2] it is encouraging that Congress is taking deliberate legislative action.

After all, legislators are supposed to create laws, not agency professionals and not even political appointees. Regardless of how one feels about the HUD rule’s particulars, more legislating in Congress and less in the executive branch is a model everyone should be able to get behind.

Basic economic logic still applies to rent control. Earlier this week, the National Bureau of Economic Research (NBER) circulated a study that provides strong evidence of rent control’s damaging effects.

The study’s findings should be unremarkable to students of basic economics. As students learn in the first days of class, when regulation limits prices, quantity supplied decreases and quantity demanded increases. The resulting mismatch creates a shortage.

San Francisco is a veritable poster-child for housing shortages, and the NBER study focuses on the city’s rent control policy, which exacerbates housing shortages and associated housing affordability problems there.

San Francisco’s rent control policy caps rents for units built in 1979 or earlier. It remains in effect today and “covers most rental property,” according to the San Francisco Tenants’ Union.

The NBER study finds damaging impacts for this feel-good policy. The authors find rent control “reduced rental housing supply by 15 percent,” which consequently raised rents by more than 5 percent city-wide.

The study also estimates that 42 percent of rent losses were “paid by future residents,” while current residents bore the other 58 percent of losses. But because current residents also benefited from rent control, the losses were offset for them “at the great expense of welfare losses from future inhabitants.”

The adverse effects of San Francisco’s policy don’t stop there. Rent control also “increased renters’ probabilities of staying at their addresses by nearly 20 percent.” This is arguably undesirable, given geographic mobility’s recent decline and critical importance in a healthy economy.

Although the direction of the results are predictable given a rudimentary understanding of economic principles, rent control’s effects are clearly not widely understood enough. For example, Illinois, Oregon, and California are “considering repealing laws that limit cities’ ability to pass or expand rent control.” Legislators in these states would probably think twice if they were better acquainted with basic economics.