Princeton's Matthew Desmond Gets Everything Wrong About Poverty's Root Causes

Desmond's analysis never goes deeper than his facile assertion that "poverty persists because some wish and will it to."

By Aaron Brown of Reason. Excerpts:

"What causes poverty in America, according to Desmond? He answers with bland, awkwardly worded slogans, such as: "Poverty persists because some wish and will it to." He says we need "policies that refuse to partner with poverty, policies that threaten its very survival."

Desmond gets more specific about what doesn't cause poverty. He dismisses cultural explanations, such as single-parent households and declining marriage rates. He quickly dismisses the idea that the welfare state traps people in cycles of dependency, claiming that these arguments rely on anecdotal evidence, even though there's a vast systematic literature on the subject. Desmond doesn't take up political scientist Charles Murray's basic challenge to explain why it is that between 1949 and 1964 the American poverty rate dropped by 22 percentage points before the government did practically anything to help. After President Lyndon Johnson launched his war on poverty, the decline leveled considerably.

Desmond approaches his firsthand investigations with the preconception that poverty is a byproduct of capitalist exploitation. Prices aren't set in a competitive marketplace, in his view; they're just a projection of greed. It's "tempting," he writes, "to blame rising housing costs on anything other than the fact that more than a few of us have a god-awful amount of money and are driving prices higher and higher through bidding wars."

A chapter on the real estate market titled "How We Force the Poor to Pay More" argues that it's twice as profitable to be a landlord in the inner city. Desmond doesn't bother explaining why even more unscrupulous people don't tap into this lucrative business opportunity.

His evidence for this claim is a 2019 paper he co-authored in the American Journal of Sociology that uses data so crude that it really tells us nothing. It omits important costs—like return on equity capital—and benefits—like real estate appreciation—that strongly bias the results in the direction Desmond wants. It ignores how landlords in poor areas are shamed, sued, occasionally jailed, forced to go to court to evict families, and must routinely travel to dangerous areas. 

Those headaches scare away most investors, which means that those who stick it out can charge more.

The way to reduce costs in poor areas is to do the opposite of what Desmond advocates and make it easier for landlords to do business, such as streamlining the process of evicting tenants who don't pay rent.

Another chapter attacks government welfare for the rich and middle class, and though he makes some valid points, again Desmond is sloppy with numbers. In 2020, he writes, "the federal government spent more than $193 billion on homeowner subsidies," mostly benefiting "white" people "with six figure incomes" as compared to "$53 billion" for "direct housing assistance for low-income families."

By limiting his tally of what low-income families get to "direct housing assistance," he leaves out the entire $260 billion budget of the Department of Housing and Urban Development. And by limiting it to "federal," he excludes roughly $70 billion in state and local housing subsidies. He also excludes tax breaks, tax credits, and other indirect federal low-income housing subsidies.

The largest share of the $193 billion figure that Desmond counts as "homeowner subsidies" is an income tax that doesn't exist—an estimate of what people who own their homes would pay if they were taxed on the imputed rental value of their real estate. The logic is that if you buy a house and rent it out, the rent you receive is taxable income, so if you live in the house yourself instead of renting it, you should pay tax on the rental value.

This policy change would do nothing to reduce poverty. If the government started taxing homeowners on imputed rental value, homeowning would be less attractive, and home prices would fall. This would reduce construction jobs and housing supply. Existing homeowners who switched to renting under the new tax regime would not stop occupying homes, so the reduced supply would mean more homeless poor.

Desmond has a tendency to juxtapose the hardship of the poor and the resources of the rich. But he also concedes that there's "no evidence that the United States has become stingier over time" and, in fact, "federal relief [for the poor] has surged" even under Republican administrations. He seems to want homeowners to pay more taxes simply because he thinks homeowners are rich and punishing them with higher taxes is a good in itself.

Desmond's initial celebrity came from his best-selling 2016 book, Evicted: Poverty and Profit in the American City, which was excerpted in The New Yorker. The book argues that eviction is a major cause and exacerbator of misery for poor people. 

The evidence Desmond assembled actually shows that eviction is one thread in a skein of causes—and one of the less tractable ones to address.

Evicted concludes with an epilogue that pushes strident policy views completely at odds with the detailed stories about poor families forced out of their homes which fill the rest of the book. Desmond is an engaging storyteller who manages to convey the experience of his extensive personal interviews and observations—he just doesn't know how to interpret his own evidence.

"Eviction is a cause, not just a condition, of poverty," is one of Desmond's most often quoted insights. None of the stories in the book support this contention. All the families he profiles had deep problems prior to their first evictions. Some are drug users or criminals; others are victims of crime; most are unemployed or have insecure low-wage employment without benefits; many have washed out of social programs like public housing and job training. 

There are two heartwarming success stories driven by quitting heroin in one case and getting a good job in another. Neither was triggered by finding secure housing.

Desmond never grapples with the fact that housing is different from other forms of social welfare because it involves neighbors. Many of the tenants in his story are people no one is willing to live next to, so they get kicked out of shelters and public housing and turned down by landlords concerned with their effect on neighborhoods.

If Desmond were a serious housing policy analyst, he would understand the tradeoffs at play. High physical standards for occupancy eliminate much of the low-cost housing stock, but lack of standards can mean people live in unhealthful, unpleasant slums. Allowing bad tenants to stay in good places degrades neighborhoods. Concentrating low-income people in public housing projects can lead to conditions as bad as in any urban slums. Making it difficult for landlords to evict nonpayers, squatters, and vandals reduces the available housing stock as landlords abandon properties or refuse to rent to poor people, and it doesn't free up units for better tenants.

Desmond's book actually tells an inspiring story of people working hard to solve these problems, usually with their own time and money. The solutions are never perfect, but lots of people are trying, with patience and skill, to keep everyone housed as best they can.

The book repeats the claim at several points that "the majority of poor renting families in America spend over half of their income on housing, and at least one in four dedicates over 70 percent," which is another misreading of the evidence. Those numbers come from the American Housing Survey, which yields very low-quality information about family income.

Desmond should have consulted the Bureau of Labor Statistics Consumer Expenditure Survey, which uses much higher-quality economic data about households and actually covers the population Desmond is writing about.

From those surveys, as of 2021, we find that the poorest 10 percent of the population spends an average of $12,416 per year on housing—including not just rent or mortgage payments but utilities, insurance, taxes, late fees, and other charges. That is 180 percent of their average pre-tax income—$6,916—but only 41 percent of their average annual total expenditures—$30,433—mildly higher than the overall population average of 34 percent.

How do families spend more than four times their pre-tax income? It's not by taking on debt or dipping into savings. On average, these same families added $5,570 to net assets. Low-income households get more money back from the government than they pay in taxes, and they receive subsidies and in-kind assistance that are not measured in most income numbers, including the American Housing Survey numbers. They also earn cash income in the underground economy.

There are certainly people forced to devote the majority of their financial resources to housing, and that's a problem worth caring about. But they account for a fraction of a percent of the U.S. population, or much less than what Desmond claims.

Halting all evictions, which some policy makers have called for since the publication of Evicted, would have catastrophic, unintended consequences. It would chase away honest landlords and embolden abusive ones, who will simply change the locks, cut off utilities, refuse essential repairs, or threaten their tenants with violence.

Desmond misinterprets his own evidence and favors moral grandstanding over serious policy analysis. His stories actually point to the conclusion that the biggest cause of poverty is crime. If poor neighborhoods were safe, if middle-class people didn't fear crime associated with housing projects, if poor people weren't routinely cheated and abused, poverty would be reduced to a simple problem of lack of money and could be eliminated for far less cost than current social spending.

Desmond's analysis never goes deeper than his facile assertion that "poverty persists because some wish and will it to." 

"Abolishing poverty," as he sees it, means looking inside ourselves and finding the will to act. His books have had such a wide reach, I fear that this simplistic nonsense will cause policy makers to forget the hard-won lessons of the '60s in favor of policies that leave the American poor worse off than they already are."

Related posts:

Mistaken About Poverty (Matthew Desmond's book Poverty, by America) 

‘Poverty, by America’ Review: Poverty Is Your Fault