Rebuilding Public Housing, Reshaping Neighborhoods

- Hello, everyone. My name is Richard Green. I'm director of the USC Lusk Center for Real Estate. And this is "Lusk Perspectives," a reasonably regular podcast about issues involving or at least tangential to real estate. And I'm really pleased to have with us today as my guest, Lizhong Liu. Lizhong received her PhD in public policy from the University of Southern California's Price School. Before that, she was a student at the Harris School at the University of Chicago, and before that, Renmin University in China. And her dissertation was about a number of things, but one of them was about the redevelopment of public housing. And so we're going to spend a good amount of time today talking about that. Lizhong, welcome to the podcast.

- Thank you so much, Richard, for the invitation. Very excited for our conversation.

- So Lizhong, I always start our conversations by asking our guests to spend about two minutes on their journey to where they are right now. So if you could just tell us a little bit about who you are and how you got here, and then we'll get into our conversation.

- All right, sounds good. First of all, thank you so much for the introduction. So I'm currently working at RAND Corporation as associate policy researcher. My research mainly focused on housing, housing policy, and eventually what I'm trying to get at is from using housing as a mechanism to understand how it shapes people's access to opportunity and then long-term socioeconomic well-being. So, with that being said, the thing that really sing with my heart is the idea of inequality of opportunity, and that's also my motivation for getting a PhD in the first place. The perfect story I want to tell is... I don't know if you're following the World Cup. So I was watching this game, which is, I believe, Spain versus CPV, so Cabo Verde. And what we see is, surprisingly, as a champion material like Spain actually got tied with CPV. The main reason is the gatekeeper at CPV are doing such a great job. So he stopped like seven goals from the Spain team. And what strikes me the most is I look into this person. He's 40 years old. He's playing World Cup, representing his own country. And before that, he's been playing for several second-tier leagues in the Europe. And then his personal value as a player is 50,000 euros. And then the kid that's trying to go has a personal value of 200 million euros. And that stark difference did not predict the results. So he, at the age of 40, is able to stop a bunch of 20-year-olds from going in the soccer team. And then that strikes me as a perfect example of inequality and of opportunity. Who's to say that he's not as talented as the other kids? But the problem is he was born in this African country with not enough access to resources or coaches that could have support him to be world-class players. So that's the type of thing that always get me excited to understand beyond just a number, the number of difference in their value. What is driving that differences? It doesn't seem to be predicted by their innate ability or their talents, but it probably is something bigger than that, like institutional, social environment, that sort of thing. So that's basically what I'm trying to understand. And that's also the area that I feel like policy actually can do something about.

- That's a really interesting way to start the conversation. I was thinking about the fact... So a game that one sometimes plays, I mean, it's more serious than a game, but you think about somebody born in Malawi, which I think is the poorest country in the world right now.

- Yeah.

- And was there an Einstein born there? Was there a Mozart born there? Sorry for using Western examples, but those are what I use know best. But real geniuses that we never knew about because they never had the opportunity to share their genius in a forum where people would get to know how brilliant they were. And I often think about how many people are there out in the world like that, that we'll never know about because of the circumstance of their birth, so.

- Exactly.

- Okay, so let's talk about public housing and a little bit about the history of it and attempts to reform it and make it better, which we'll get into HOPE VI in a bit. But there was a program called the HOPE VI Program that was put into place by Congress as a mechanism for improving the living conditions of those who live in public housing. But could we talk a little bit about what is it that led Congress and administrations to think we needed to try something like this?

- That's a really good question. I think to answer that, we'll have to look even at the history of public housing itself in the United States. It's not the only country that have a design like a public housing which is owned by the government, and the idea is to make housing affordable to a certain group of people. It's not anything new, but then for some reason, which we'll probably get into, it's somehow just poorly designed in the US, even from the beginning. Because if I remember correctly, I think the births of public housing, it's sort of like a consequence of political debate. So there's a lot of people strongly against it, but at the same time, it seems just at that time for some reason they believe that it's important to have a...

- It was the 1930s when that happened.

- Exactly. So it's important to have a program like that to support... Back then, the idea, I believe, is a working class. People who are not making enough money, but they have a decent job and then they need access to affordable housing. But because of the institutional design of the United States, the beginning of public housing is owned by the federal governments and then the maintenance of it is actually burdened by local governments. At least part of it is burdened by local governments. So this discrepancy between ownership and lack of funding, and then eventually the discrepancy in terms of sharing of responsibility make it to in the '70s and '80s that public housing become poorly managed. It has a lot of vacancy and also become the hotbed for crimes. So a lot of people would utilize those vacant units to commit crimes, to handle something that's illegal and then it's off the grid of police and then other surveillance system. And because of that, the public housing become really unpopular and also because of its location. A lot of public housing actually sits in the center of cities, which actually have the initial idea, I think, is at least partly good because it offers you good accessibility to amenities, to jobs. But then now because the physical condition of this public housing has deteriorated to the extent that it's just no longer habitable, and then it listens that critical location and makes even the surrounding environment unpopular as well. So it's just come to the place that governments of all levels trying to do something about it. It's like, "We can no longer have this physical sore to the eyes, stands in the center of those great cities like Chicago and New York. We have to do something about it." I think that's the inception of HOPE VI. So people are thinking about, "How about we redeveloped it, we redesigned this public housing system in the United States?"

- So I can't help but say that, well, much public housing in the US was indeed very badly designed. When you go look at a lot of social housing in Europe, you can't really say it was that much better. There are some... Vienna is always the exception that's used. And the interesting thing about Vienna as well as public housing, it's actually built and managed by the private sector with a limit as to the rents that can be charged and so on. But there does seem to be something about when government builds housing. If you go to the old Soviet countries and see the housing, I mean, it was the kind of housing everybody lived in. It was kind of awful. So I don't know that America was unique in how badly designed it was, but I think your point about management is really important. And I think we were, and I had thought about this, but the division of responsibilities led to a real deterioration in the management quality. And famously, the most famous or most notorious public housing in the US is probably Pruitt-Igoe in St. Louis, which didn't last 15 years, something like that. I mean, it was so bad. And a lot of that people talked about was, "Yeah, they were really ugly, the buildings," and it's undeniable that they were, but they also were really badly managed to the point where people at any kind of option would leave. And so you got a lot of vacancy in Pruitt-Igoe, and so it became uninhabitable. A lot of people don't know this: when Pruitt-Igoe first opened, it was mixed in terms of race, in terms of employment status, et cetera. It was supposed to be this idealized version of housing, but it fell apart pretty quickly.

- Yeah.

- Okay, so you have these projects that become quite notorious. Pruitt-Igoe is probably the most well-known because the implosion of it got covered on the six o'clock news around the country and was kind of a spectacular thing to look at, but also Robert Taylor Homes in Chicago, Ida B. Wells, Cabrini-Green, Detroit public housing, as you said, sort of here in Los Angeles, Jordan Downs. And sort of, again, I suppose these are subjective judgments to look at housing and think it was pretty bad, but it was pretty bad. So it comes along, and so now there's this view, "We need to do something about this." So tell us about, what was that thing that was done?

- Yes, so the HOPE VI program, the idea is basically to redevelop the physical structure of public housing into something more modernized and more habitable. And then I think it also have a component, especially for projects that are approved after 2000, have the component of- ameliorate, or, like, improving the surrounding environment of that housing. So I think that has somewhat tied to a literature that's very important, which is a neighborhood effect. So basically the neighborhood effects from sociology as well as economics is trying to say that where you live, who your neighbor with are very important for kids' long-term development. So the idea of HOPE VI redevelopment incorporates somewhat those idea from the neighborhood effect, trying to make the surrounding better. That's one way to deter crimes and second way to make people stay in the community that's actually feels like community and to strengthen basically the social networks for those people who are typically with not enough of resources accessible to them. So I think the HOPE VI, the physical component, it becomes pretty clear. I think most of the projects that are approved have that component of deteriorating, sorry, demolishing the original public housing and then build a new one on top of the original site. So that's a big chunk of the investments and there will be also investments into sort of a community program, even have those public housing but lead to homeownership program and also have something more like a community engagement, greening the community, and then even vocational training, that sort of stuff.

- Wasn't there another element of it where people were given the option to take vouchers and go into what are called high-opportunity neighborhoods?

- So I would say that's more like a separate program and not exactly built into HOPE VI because I know for the earlier ones they're not offered that, but then I think that specific one is actually the inception of the current design of voucher program. So they usually offer both, but not everywhere. So HOPE VI itself is more targeted at the structural, like physical structures. Yeah.

- Okay, so the idea is you have this housing, it's not good housing, it causes blight, it causes the neighborhood to deteriorate. Let's, before we get into how we're going to fix it, what do we mean by... So how do we measure neighborhood? How do we think about whether a neighborhood is a place people want to live or a place people might not want to live?

- That's a really good question. I actually think there's a lot of ways how scholars actually consider neighborhoods, right? But if we are just people living our life, then neighborhood, it's kind of hard to define in a sense that it doesn't have a physical boundary. It's really hard to put a boundary surrounding it, but I would generally consider it as a place that we live. We spend most of our time other than living, for example, groceries where our kids would go to school or where we'll hang out with friends. I'll consider that as sort of a neighborhood, idea of neighborhood. So we have a lot of those neighborhood defined... If we look into individual cities, like in LA, we have Koreatown, we have Beverly Hills, although it's actually a city by itself, and then we also have West Hollywood, North Hollywood, and same thing in Chicago. We have Hyde Park and among other stuff. So I think usually when we are considering a neighborhood for public housing, it actually has... So I think it's a way of the statistics, how the Census Bureau do their statistics data gathering. So usually a public housing would occupy a census tract by itself, and that's sort of the idea of neighborhood for...

- And tell us what a census tract is.

- Yeah, so census tract is a boundary, like an administrative boundary determined by the Census Bureau where they'll collect data. And then I think it's usually defined by either some natural boundaries like streets or other stuff like a river. And then I think that's a federal government's way of approaching neighborhood, the idea of neighborhood where people usually do most of their stuff. And then for public housing, it's usually consists... For example, a project like Jordan Downs, it has more than one housing, but then the census tract of Jordan Downs basically includes all the housing within the Jordan Downs project as well as something else like a Jordan Downs High School. So it's also in that census tract. So it has this idea of boundary where people live and then do most of their daily activities.

- Well, isn't there also an element of population? So the idea is that all census tracts should be kind of similar as a way we can look at... When you look at county lines, sort of like the red-blue maps, it looks very red but not so blue. Well, it's because the blue counties are very dense and the red counties aren't. And so census tracts are looked at a way to sort of characterize places of similar population size, yes?

- Yes and no. The reason why I would agree, I think that's like a textbook definition of census tract. We will on average have about 4,000 people in each census tract. But in practice, when I'm actually looking at the data, that number actually varies a lot. So we will have census tract that have about 8,000, 10,000 people. We'll also have census tract, say, near the airport that's about 1,000-ish. So in practice, it varies a lot. But yes, I think the goal is to have somewhat standard, consistent way of measuring population density as well. So in places that's very dense, like Manhattan, you will have a much smaller census tract because each of them will have on average 4,000-ish population. But then in areas like in states like Kansas or Louisiana, you probably have a much bigger census tract in terms of geographical area.

- Okay, so now we've defined the neighborhood. What are the metrics that we look at from the standpoint of determining whether that neighborhood is doing well or not? And I'm saying that so our audience are not full of data nerds like us, so that's why we need to sort of walk through each of these elements individually.

- Yeah, so that's also a very, very interesting question. And I know in academic research or in public discourse, there's a lot of measures or indicators that we usually use to describe whether this neighborhood is good. So we'll have something like socioeconomic indicators like income level, educational attainment. We also have crime, and sometimes people also use housing values as a bracket term that sort of reflects all the things I just said. And I think those are some of the main ones. Sometimes we'll also look into the demographic composition of it. And so yeah, those are a few things that's commonly used, and then it's first thing coming into my head as well.

- And so along with income, I mean, it sort of is

- Yeah.

- Parcel of income, but poverty, right?

- Yeah.

- Is do you have a high poverty rate or do you not? Do kids stay in school until they finish high school or not? These are the sorts of things. Crime, as you say, but of course, the problem with crime is measuring it is very difficult.

- Yes.

- And it is interesting that we had a postdoc at the Lusk Center named Johanna Lacoe, who is a criminologist, and she said there are really only two measures of crime that are accurate, and one is murders because people report murders. The other is grand theft auto, because when people get their car stolen, they report that. And so those are things where the reporting is pretty consistent across all geographies. Everything else is a little more difficult. But nevertheless, clearly, it matters to quality of life, right? I don't know anyone who would prefer, all else being equal, to live in a high-crime neighborhood to a low-crime neighborhood. Okay, so HOPE VI was about rehabilitating this stuff in a way that not only would provide better housing for the people who were living in it, but also presumably have a positive impact on the neighborhood. So let's start, and this is what you have studied, and I'm going to ask you to talk about your research strategy sort of step by step, but let's just start by maybe paint a picture for what did the stuff look like before it was rehabbed, and what does it look like after its rehab?

- Yes, so I have two very good examples. One is in Chicago. I think that one is much more famous. People know about it because it made it to national news, which is the Robert Taylor Homes. So before the redevelopment, it's practically empty. No one lives there anymore. And then if anyone, it's somewhat gang-related, and then they use it as the base for doing some illegal transactions about drugs. They also have shootings all the time. So it's very common that the gang members will fight over turf and then they would just shoot at each other. And on top of that, there are some pictures from the old days that shows the structure. It's basically like those Bauhaus big buildings stand alone in the middle of a city, but then it's so startling, you can just recognize it even from really, really far away. And then you walk into it, each unit is so tight, and then all the infrastructure kind of not functioning well. I remember they have pictures of those pipes for water and then sewage going along side by side with each other, and then they're all exposed in the hallway, so you can sort of see them. And then the heating is not working really well. I remember reading news about all that. And then imagine in the winter of Chicago not having heating is just a really, really big problem. And afterwards, right now, I'll say the Robert homes, I haven't checked it in person, but what I know is that I think they demolish the old housing. And then the new one, it's much lower density in the sense that they are shorter. And then so it actually holds fewer people, fewer households compared to before. And a lot of it, they just redevelop it into part of the park. So it's becoming really beautiful on the eyes. You can no longer tell it directly apart from the surrounding neighborhoods. And so it just become to the point that I lived in Chicago for two years, and I didn't realize that I actually walked past through that location multiple times until I'm actually studying it. So it's becoming so much better. I don't have the privilege to interview people who are actually living there anymore right now, so I don't know how their experience is. But then to say that, that comes to my second example, which is Jordan Downs redevelopment. So we actually have been to the site together. And then before, although it was originally a low-rise type of row houses.

- Yeah, it was supposed to be temporary, by the way.

- Yes, so it looks pretty temporary as well. The structure just stands there for decades. Instead of being temporary, it somehow just stays there. And right now, it looks more or less like a garden community. It's like they do so much in terms of greening the community and then repave the roads and put in those really good lights and also traffic lights and stop signs and all that. So the neighborhood become feeling of it is much safer. And then right now, if we go to Jordan Downs, we actually can still see some of the old housing because the redevelopment haven't finished. But compared to the new housing, they're completely different quality that we can just see it with our bare eyes. And so we even came across a couple who lived there, and then they are so ready to talk to any researchers or social workers about their experience. They consider it as their community. It's like, "Welcome to our community." And then I think they're really enjoying this improvement in infrastructure and then the quality of the housing.

- So I'm thinking about... I actually did see Robert Taylor Homes, and I'll never forget, I was driving on... So the Dan Ryan Expressway is a north-south expressway that goes from the Chicago Loop to Northwest Indiana. And I was driving down that expressway with a friend of mine, and actually he was driving, and I was looking out the window, and I did see these flashes of light in the Robert Taylor Homes, and I asked him what it was, and he said, "That's machine gun fire." So I saw it with my own eyes, folks. This is not any kind of urban legend. It really was kind of a war zone there. And the other place that's very stark to me is also in Chicago, is there was a project called Cabrini-Green on LaSalle Street, and it was, again, seemed like a very dehumanizing kind of place. It's been redeveloped. It's now beautiful. And then you start worrying about things like displacement, which is something that we'll get into in a bit here. But at least from the standpoint of physical improvement, all these places we've talked about, there's no question that they look better than they used to. Okay, but looks are only skin deep, right? And so tell us about... So you did a project where you looked at what was the impact of this redevelopment on the surrounding neighborhoods. So tell us about how you went about doing this project.

- Yes, so it's actually a pretty challenging project to do because we are trying to measure what we just discussed, neighborhood well-being. And I wanted to do it on a national scale because I believe there's a lot of hidden heterogeneity that would not be uncovered unless we go to a large scale of study. So basically, what I did is for each public housing project, I find not only what is currently standing, but also its historical locations. And then I try to identify which one of them actually receive HOPE VI to redevelop. And then I use the census tract level data to identify this neighborhoods, like what they used to look like and to current days what they currently look like. And then there are two comparison group that I'm using. So we know basically the tracts that are redeveloped. So these are our treatment group, and we want to know how they're doing. Then we cannot do this without comparing against something. So the comparison group, there are two. First are a bunch of public housing projects that actually apply for HOPE VI but did not get approved. And so this comparing with those that did not eventually get redeveloped, we kind of know sort of like in the alternate world when redevelopment did not happen, what's going to happen to them in 20 years. And then the other comparison group is basically I constructed that group using the census tract located within the same county as the treatment and then assign weight to these other neighborhoods in the sense that they eventually mimic what would have looked like for this redeveloped tracts. And then I look at, "Okay, these constructed control tracts are not redeveloped, and what happened to them in 20 years?" So regardless which comparison group I use, the findings are pretty consistent. So apparently receiving the HOPE VI funding made distance tracks much better in a lot of dimensions. So we see a significant increase in residents' income and significant increase in both the housing values and rents. So something important about the housing value here: because all the public housing are necessarily for rent as it was designed previously. So basically when we're looking at housing value, that's actually capturing housing that are not part of the public housing. So those are just owner-occupied housing that's surrounding the public housing and just be very, very close to them. So in urban literature, we know or first law of geography, it's like, "If you get closer to something, you're going to more likely to be impacted by it." So this is a story that I want to tell for housing that are not public housing, but just because they're very close, we look at what happened to them. We sort of know what happened to after redevelopment, what happened to the neighborhood. And overall, I think my finding are basically suggesting that HOPE VI are effective in terms of improving the neighborhood where the public housing are located.

- So, with the rents, some of it was mechanical, right?

- Yes.

- One of the things that happens in these new developments is you get, instead of all low-income housing, you get mixed-income housing, right? And so units that didn't have market rents, you're going to have now at least closer to market rents. And the other thing is units that had poor people will now have people who are making more money in them. And so you dealt with that, right? But even after you dealt with that, these results survived.

- Yes, that is exactly right. So I dealt with that by taking into account that exactly what you mentioned, the new housing now have composition for both public housing and also market-rate housing and some affordable housing that potentially charge higher rate than public housing. So even after doing this sort of decomposition exercise, I find that for market-rate housing, if we're just looking at market-rate housing, after redevelopment, they still have a significant increase in terms of the rent. So basically, it means if you are building apartments that's not public housing, but it just happened to sit next to a public housing, compared to the old days, right now you're making more money because the rent, you can charge higher rent.

- So let's talk about public safety. So people worry about it.

- Yeah.

- Maybe they- One of the things we talk about is one of the problems with cities: people think crime in cities is worse than it actually is because of salience. So because of density, if you'll live in a place where there are 10,000 people per square mile and there's one crime per 10,000 people, you're going to observe a crime within a square mile of you. Whereas if you're in, I don't know, South Dakota, where there are 600,000 people in the whole state, so you have to chop it up into 60, right? Chances are pretty good when a crime is committed, you're going to be miles, maybe hundreds of miles away from it. But nevertheless, there's no question that there are parts of big cities that are more dangerous than other parts of big cities. So when you redevelop like this, does it have an impact on crime?

- The answer is absolutely yes. But what's interesting about this, I think the listeners still disagree on which direction it can go. So if we are just talking about theoretically, what will happen after redevelopment? You could potentially be safer as, like you said, right now for public housing sites specifically, previously you have a high-density. There's a lot of households living in a relatively small area after redevelopment because the housing is now much lower rise. So you can, first of all, house fewer households, so the population density decreased. And second, on the other hand, it could be safer because the infrastructure now is better. So there's a lot of places that didn't even have a street light previously. Now after redevelopment, it's much brighter. You have better design of the street and also the housing. So it's just easier to spot to surveillance like the neighborhoods. And you can also have, they just directly invest in those surveillance or security measures that make it safer. But at the same time, there's always this concern about opportunities for crime. So previously for public housing, yes, it's high-rise. It's sort of like we know the prime example in Chicago, the hotbed for gang movement. But at the same time, if a housing just empty, then no one is there. What's there to steal? What's there to commit a crime of? Now you actually have people occupying those, and potentially people with higher income, or you put in new stuff like, say, grocery store, department stores there. Is it potentially creating more opportunities for crime? So those are all competing channels, why this question, at first bet, it's not very clear. And it sort of comes to the second study of my dissertation, which is specifically looking at the redevelopment of Jordan Downs. And then the outcome of interest for that study is exactly crime. So what we find is also this very niche story. So, just to preview our finding, we are looking at basically Jordan Downs, the redevelopment has two big components. One is the housing. So they demolish the old housing and then build really much better new housing and also improve the infrastructure surrounding the housing. So that's the first component. Second component is it used to be that Jordan Downs is a food desert. It has no grocery store. The nearby one is like miles away. So now they put in Jordan Downs a new sort of a retail plaza that have not only a new grocery store, but also have a bunch of other stuff like a Nike department store. So what we are looking at is, what we're trying to do is basically looking at these two components separately, and we also find different answers in terms of what happened to crime. For the housing component, just looking at right next to the old housing and the new housing, we see a significant decline in crimes. So potentially that has something to do with there's more eyes on the street. People have stronger sense of community. And it also, because the physical structure is now better, it's easier to spot crime and then it's easier to put in surveillance and security system. Because as a matter of fact, a lot of the housing now have cameras installed. And then on the other hand, we were looking strictly to what happened to the retail plaza. And this is also confirmed not just by our data, also anecdotally by LA Times that there's a surge in smash-and-grab type of crime. It happens several times a week for those new Nike stores because we are not trying to pinpoint who are the people who are committing crime, but it seems like just because the establishment of this new retail places, it sort of attracts criminal activities maybe from nearby even. Because when we expanded even outside of Jordan Downs, we see a decline in crime in slightly further away location, but then it seems like there could be a displacement of crime inside this new retail places. So yeah, I hope that answers the question.

- No, I mean, when there's nothing steal, you can't observe property crime, but when there's something to steal, you'll observe property crime.

- Yes, exactly.

- So let's talk a little bit about, so I don't know if you're familiar with Arpit Gupta's work on the New York City subway system, the new addition to the east side, but the thing that's striking about the work is that addition, which isn't even complete yet, has cost just billions and billions of dollars. Carl Sagan used to say, "Billions and billions of years." And yet what he found was it was worth it. And then if you look at the improvement in property values arising from access to this east side subway, you easily justify from a cost-benefit perspective, spending all this money. Now the problem, of course, is there are taxpayers who don't benefit from this who are still paying for it, but in principle, if you could do some sort of value capture, this thing even as bloated and too expensive as it was, and it's not an excuse for it being too expensive, it's still so valuable that it's worth it. Okay, these redevelopments are very expensive to do, yes. And yet they do clearly have spillover benefits. So I know you haven't done this study, but what's your gut or your mental math? Is it worth spending the money to do this? Are the spillover benefits sufficiently large?

- I think that actually gets to several questions that I've been thinking. First of all, if we're thinking from a normative perspective, is it worth doing a project like this? I would answer, "Absolutely yes." Just given the status quo is that bad, you have to do something to improve it in terms of the physical and also the neighborhood environment. So I'll say it's definitely worth it. But if we want to go down to more like accounting, like a financial perspective, it's really hard to say because as we discuss about this, about the Jordan Downs redevelopment, the cost of each unit is probably in the millions and that is insane. That's really, really expensive. And to think about it, it's at least part of it, maybe a large chunk of it is coming from taxpayers' dollars. So it's not very efficient at the very least in terms of the current patterns of the current models of redevelopment. They're probably not the most efficient ways of doing it. So I would say it gets to so many different levels of how we're thinking whether a project is worth doing it. First of all, I bet different people also have different answers because if we're weighing again, what are we weighing this cost like $1,000,000 against? Are we weighing against just the physical improvement, just like how much it improved the surrounding housing's value? Or are we also talking about how it improves people's long-term outcomes, especially for the kids, for people who live there? And then, to get into that question, then it comes to another thing that we probably will discuss is who actually get to live there. And then on the other hand is thinking about this redevelopment, I think the HOPE VI itself is primarily funded through federal dollars. And then now the new generation, which is the Choice Neighborhoods initiative, which is what Jordan Downs utilize, it actually is a mixture of federal dollars and local and the nonprofits. It's a mixture of those. Is that potentially a better way in terms of improving efficiency? So it gets to a lot of different layers of questions that we can discuss.

- Well, so I just looked up to make sure I was right. It turns out people who finish college, the present value of their lifetime earnings is about $1.2 million higher than those that don't. So if raising a kid in this environment takes them from not finishing college to finishing college, then it's, I mean, from an overall economic standpoint, paid for itself. Now you might say, "In the end, what that kid should be doing is paying taxes later in life to repay the benefit of that improvement in their standard of living." And that's just educational attainment. Other things, I mean, absence of crime matters. I mean, we know, again, I'm going to refer to twice Johanna today. While she was here at the Lusk Center, she did a study that showed that when kids were exposed to violence at school, their attendance dropped precipitously. And we know attendance all by itself is a very strong predictor of school performance. And so for families with children, it sounds like it's worth it. I think it doesn't mean we couldn't do better because again, even in LA, it really costs $400,000 to $500,000 to build a decent house. So why it's costing a million? And people give me reasons and I don't find them probably convincing. So it'd be better if we could do this for $400,000 or $500,000 instead of a million, but nevertheless, maybe a million actually pays for itself given if we get these better child outcomes. Maybe the example I gave is extreme. Maybe you're going... But even imagine going from not finishing high school to getting a degree from a community college, that's a lot of benefit right there. But to your point, like, who gets access to this? How do we make those decisions? That matters a lot too, right?

- Yes, so exactly. That's the point that I want to add to their comments about the kids going to college worth $1.2 million. I think the calculation we need to do here is to consider what's the alternative for the kids that actually live there. So if they are actually from a neighborhood that couldn't support them go to college either way, then potentially on the aggregate level, we are actually not benefiting. We are not actually getting a lot from that. So they could have gone to college either way. So what is the alternative for those people? I think there's a huge question mark. One of the thing that I wish I could do in my project, which I could not because of the data availability, is exactly trying to understand, where do people go? Because in the holistic style of redevelopment, they have to demolish the old housing first-

- Yeah.

- Which means people, family who originally live there have to move out to somewhere else. And I think consistently studies have find that there are very small share of those family actually get to move back into the community that they are originally living.

- I just want to make sure I heard that right. A very small share gets to move back.

- Yes. Yes, very small share. I think it's safe to say less than 30% of them actually get to move back. And so because it varies a lot from project to project, but overall I would say 30%, maybe even less than 30%. And then there's this studies by a group of Harvard scholars where they actually have a micro individual level data, they can track where people move to. So they also look at the HOPE VI redevelopment and they look at people who used to live in the same census tract as the public housing, so basically live in the public housing project. After redevelopment, where did they move to? What neighborhoods? What is the neighborhood condition that they moved to? And they also look at who moved in. So compared to their original neighborhood, how is it different? And if I remember correctly, so a lot of people, first of all, they also find that most of the people don't really move back after they move out. And then in terms of the neighborhood they finally located in, the good news is that those neighborhood is better than the public housing before redevelopment, but it's a big question mark whether it's actually better or equivalent as the redeveloped community after HOPE VI. And in terms of people who actually move in, it seems like it didn't change too much for them. So their original neighborhood is already somewhat decent, and then they get to move into this new public housing neighborhood. It didn't seem to be a huge lift for their conditions compared to where they are originally from.

- So this brings you back to the voucher question is: don't the people who are forced to leave, don't they get some sort of rental assistance to find a place somewhere else? Or am I misremembering that?

- So I think not always. There are several really prominent projects in Chicago where they collaborate with economists that actually do some kind of those studies to assign people with vouchers so that you can try to find housing. But my impression is that not every HOPE VI Project has that option for the original residents. They do have some kind of relocation plan for them, not always a voucher. And then we all know the vouchers issue is that even you have a voucher doesn't guarantee

- Right-

- You to go to a good housing.

- The landlord will take it. Yeah. Yeah.

- Yeah, exactly. So that's my impression. Yeah.

- So it sounds like at this point, a flaw in the program design is exactly what you're talking about, is you don't know that these hundreds of thousands of dollars, if not more, per unit, are going to have the impact on people that you're hoping for because of the mix of people who leave and who come.

- Yes. I do want to emphasize another improvement actually. So, so far we've been talking about HOPE VI, which is a discontinued programs that redevelop public housing. Actually, there's a huge improvement, to my understanding, in the new generation of HOPE VI, which is the Choice Neighborhoods Initiative. It operates very similarly as HOPE VI, although its coverage has expanded not just public housing, it also look at Section 8, project-based housing. And so anything that's like previously...

- So tell the audience what that is.

- Yeah, so Section 8 housing is somewhat similar to public housing, but then my understanding is that people living there are not as distressed as public housing. And then I think it has to have a similar component as like the voucher. I could be totally off base here, so please fill in if I got anything wrong.

- So Project-based Section 8 is basically housing that was developed for Section 8 vouchers as opposed to a portable voucher that you take from place to place. And the voucher is equal to the difference between market rent. So the developer who does project-based Section 8 collects what the government deems would be more market rent for that project. And then the voucher is the difference between 30% of the tenant's income, which the tenant pays. And then the increment between those two goes to the landlord, that's the voucher, to the developer. And there are a number of project-based Section 8 developments in Los Angeles, both on the... They were project-based to begin with, or they're converted to that where a developer will raise money to rehab a not particularly nice private building into something pretty decent and then get a designated project-based Section 8 and get the vouchers as a result of that.

- Yeah. Thank you so much for filling in this important detail. So basically, I think the Choice Neighborhood has two big improvement compared to HOPE VI. First is the location of the location issue for the original residents. So, for right now, if public housing or any government-sponsored housing project want to apply for Choice Neighborhood to redevelop, they have to come up with a plan for relocation or location of the residents. You can either provide temporary on-site location for the original residents or you can provide off-site or you can do what Jordan Downs did, which is like, first you build a new housing, relocate them into the new housing, and then demolish the old housing. So there are three basic types of ways of how people handle it that I've been observed so far, but that has to be this relocation plan, which is missing from the HOPE VI redevelopment. And the second part is instead of just focusing on the physical structure of housing, there has to be a plan for community improvement. So that's not previously required for HOPE VI, although a lot of HOPE VI projects already did that. But for Choice Neighborhood, that's required. So you have to improve the neighboring environment. Yeah. So I'll say, with this, I get the sense that the government is definitely picking up the issue with HOPE VI, which is like, the original residents potentially did not benefit from the redevelopment. But right now with Choice Neighborhood, since most of the project will offer the residents a chance to move back and also they would provide this temporary housing for them, so it becomes more likely that we can say that the original residents did get to enjoy the improved neighborhoods after redevelopment.

- So I want to ask you a question that sort of goes outside of the research that you've yourself done that comes to this whole question of place-based versus people-based anti-poverty strategies. And I want to make a comment myself on that, but before I do, I wanted your take is: do you think that one is generally better than the other? Do you think we need to do both? What do you think are the limitations of each? Because this has been an important policy debate going on for, my guess is 40, 50 years now. So Lizhong, what's your take on the people versus place-based strategy for poverty alleviation?

- That's very good question, and I will always enjoy another opportunity to answer this question again, because, to me, short answer, I think government have to do both. It's not even negotiable. I think just have to do both. And then I think this question actually tied to another parallel discussion, which is, right now, is the housing problem facing the United States, is it like a supply issue or a demand issue? And I think at the end of the day, we have most consensus on that it's both. So, first of all, people have different demands. There's huge variation across space. We have hot demands in places like LA, Bay Area, New York, where people would love to live here if it's more affordable. And at the same time, there would be definitely less debate in more rural area. At the same time, it just happened to be the case that these places like California in general is so hard to build, especially hard to build high-density housing. So to the point that supply is very restricted, and so it's not very responsive to increase in demand. And so we end up with this affordable crisis. And so basically what I'm trying to say is that it's clear that it's both a supply issue and a demand issue. And I think to tackle the ultimate question, which is the affordability crisis, we need both supply measure and demand measure. So in terms of supply measure, right now, the line of work that I'm doing actually looks beyond a government-sponsored housing project like LIHTC or Section 8 project-based or public housing. It's more even looking at from a local perspective, looking at the land use regulations, what actually determines for private developers to come in, how do we make it easier for them to build, to increase the supply? So that is one big chunk of things in terms of supply that we have to do something about just to make the market more responsive, for developers more responsive to the demand changes. And at the same time, we will always have this subpopulation, even though no matter how much supply we put, it could still be too expensive for them to access really good neighborhood with low crime and good school districts and then make a life there. So this subgroup population are people who we need demand measures for. So I'll consider these two things more complementary than competing in terms of the supply and demand measures.

- Well, I guess there are people who argue that no matter what you do, there are going to be, let's just call them low-opportunity neighborhoods in a city. And so you take one neighborhood and you make it better. What happens is the low-opportunity neighborhood just pops up somewhere else. It's like a whack-a-mole kind of thing. And, you know, people are people and there are always going to be clusters of people who have a difficult time participating, particularly in a market economy. And so that you're better off trying to give more people the skills that they need in order to compete in a market economy than you are trying to fix a neighborhood. So what's your reaction to that kind of argument?

- I think that question, it's kind of like asking, can we solve inequality? And I think the answer is no. Inequality will always forever and ever exist. We can't... Or in other words, it's potentially not ideal to have everybody look the same or every places look exactly the same. So in my opinion, I think it will always be a dynamic issue that the government just have to keep acting on it. But I would say it kind of goes back to my enthusiasm about inequality of opportunity. I don't think inequality itself is an issue, but inequality of opportunity is an issue. So potentially what the government's goal should actually be providing people with opportunity to go to neighborhood of their desire of, like, you know, do something about their current situation. Will we have eventually some places are always worse off? Like, I think that's, like, inevitable. But, yeah, but where that places are, it could change. Things are evolving, our dynamics. And the same thing with people. There will be people just happy with where they are and they don't want to move or they are just happy with where they are, but there would also be people who really want to move to somewhere else. And I think the question is, can we actually provide with those people that want to do it with the opportunity to do it?

- So something I struggle with from a equality of opportunity standpoint-

- Yeah.

- Is... my guess is one of the highest-opportunity places to live in Southern California, San Marino. And I say that because I think its public high school ranks sixth in the state of California or something like that. And I think four of the other five are the Bay Area and one is in Sacramento or San Diego. No, it's La Jolla or something like that. Okay. So San Marino is very expensive. Now, part of the reason it's very expensive is because they have zoning that prevents multifamily housing from being built, and I think that's terrible. And I can be very critical of San Marino, but I'm pretty sure if you change San Marino's zoning so you had multifamily housing, it would still be one of the most expensive places. And so but you get a real benefit out of being born there. And a paper Jung Choi and I did some years ago shows that actually the benefit to a lower-income kid is greater in a place like San Marino than the high-income kid, because the high-income kid's going to do fine anyway. They have lots of resources out there. Well, they're not going to do fine necessarily, but from a resource standpoint, they're all set to go. So do we owe it to everybody to have the opportunity to live in San Marino? And that is the policy question I really struggle with is I think maybe it's not actually is country. There are people who argue, "Oh, if you live in a neighborhood that doesn't have opportunity, it's your own fault." And I certainly don't subscribe to that view, is in my view, everybody should live in a safe neighborhood with a good school system with reasonable proximity to jobs, those three things, right? But maybe there's no point in having this conversation because we haven't remotely done that yet. But this question of equality of opportunity so depends, as Raj Chetty, and others have shown, on the ZIP code in which you're born. Is there any way we're going to overcome that?

- Yeah, that is a million-dollar question, I feel like. So I'm saying this from a very anecdotal standpoint. I haven't done too much research, but I do have a few thoughts on that. The first thing, when we are having this conversation, there's place keep popping into my head, which is Seoul. So I'm thinking about South Korea. It's a country, but it happens to that the one single biggest metropolitan area is Seoul and everybody wants to live in Seoul. And so the question for Korean policymaker is more like, "Can we make another Seoul?" "Can we make Busan more like Seoul so that some people at least would be equally happy living in Busan?" So it sort of gets to the San Marino thing that you discussed. It's impossible to make every place as good as San Marino, like the school quality, but everything. But San Marino, the school district is good for some reasons, some actionable reasons. Maybe it's because of the teacher's quality, maybe it's some kind of a investment or long-term tradition. I'm not exactly sure. But are there any of these elements as replicable in other places? Can we potentially make other school districts also competitive, also good enough that can make some people equally happy regardless they're in San Marino or in other places? So to me, it's more like we will have inequality no matter what, but there's a extent of inequality that people can withstand and there's a level that is just too stark that you just cannot bear the alternative. So you have to be in San Marino or in Seoul. So I think it's really important for a policymaker to start thinking about, how do we strike that balance? You do want places, there are some places that are better than the others, so you always have... Because I remember the literature of income inequality, why there's a group of scholars believe that it's not a bad thing to have income inequality is because if this inequality is arising from different level of effort, then it could potentially be a way to stimulate people work harder. But if this inequality is coming from a place that people feel so powerless about, it's like, "Nothing I can do," then potentially generate something negative.

- So Lizhong Liu, thank you for joining us on this installment of "Lusk Perspectives." It was great to spend an hour talking with you about your research and I hope you'd be willing to come back at some time to talk about the research you've been doing since you left USC. And everybody else, this has been "Lusk Perspectives." Tell your friends and neighbors to give us a listen. Thanks for being here.