Housing, Economic Growth and Poverty: A Literature Review

Housing, Economic Growth and Poverty: A Literature Review Abstract This paper reviews literature on the relationship between housing finance, economic growth and poverty.   While it is evident that housing construction creates jobs, the review reveals that there is a need for more research to determine the long-term economic benefits of housing and whether housing finance in particular can be an effective tool in eradicating poverty.   The limited evidence is due in part to limits in data and the need to utilize robust econometric techniques to determine the direction of causality in these relationships (i.e. does increased economic growth lead to increased demand for housing and hence housing construction and finance or does housing construction and finance lead to increased economic growth and lower poverty).   Though little direct evidence was found, the financial deepening literature suggests that as housing finance deepens financial markets, it may play a role in poverty alleviation.   This relationship should be investigated further. 1. Introduction While the focus of this review is to summarize empirical evidence regarding the relationship between housing, economic growth and poverty, there is considerable stylized and anecdotal evidence that makes a case for housing as a prescription for poverty.   This literature is extensive although recent books on eradicating poverty in the developing world say very little explicitly about the role of housing.   The End of Poverty by Jeffrey Sachs (2011), states that most would accept that fact that schools, clinics, roads, electricity, ports, soil nutrients, clean drinking water; and the like are the basic necessities for a life of dignity and health, as well as for economic productivity.   Sachs goes on to delineate the strategy for ending extreme poverty by 2025.   While he mentions key investments in people and in infrastructure, he does not explicitly mention housing.   The same can be said of Banerjee and Duflo (2011) and Karlan and Appel (2011).   Perhaps there is an und erlying assumption that housing is necessary.   Perhaps, housing is considered part of the infrastructure that they refer to. Or, perhaps the underlying belief is that economic growth will lead to better housing conditions. At any rate, a specific consideration of the impact of housing on poverty is not given in these recent books on the subject of eradicating poverty in this millennium.   This is representative of what was discovered upon reviewing the empirical literature on this issue. Some authors assert that housing loans and finance are needed but do not provide economic analysis to back this claim.   For example, Bunnarith (2004) in discussing national housing policy in Cambodia asserts that â€Å"housing is needed so that people can have a safe and secure environment.†Ã‚   There is no discussion in his policy paper of the true economic impact of housing construction or finance on economic growth or poverty reduction.   Similarly, Habitat for Humanity specifically acknowledges that housing is necessary to eradicate poverty.   In ‘Consequences of Poverty Housing,’ Habitat for Humanity asserts that the lack of suitable housing creates disadvantages at many levels.   It is seen as interfering with a household’s ability to break out of poverty because so much of the household’s time and money is spent on house maintenance and repairs and not on food, health, education and income generation.   Due to a lack of suitable housing, there is less efficiency arising from illnesses, inability to educate children and an inability to provide a safe and secure environment for economic endeavors.   These are testable implications but little has been done to document these losses empirically, likely due to data limitations.   Some evidence is found and listed in the education section. While there is quite a bit of literature on the interactions between GDP and housing investment, there is surprisingly little evidence documenting the relationship between housing, economic growth and poverty.   One reason for the limited evidence is limitations in quantity of data in developing countries, especially the poorest ones, Hull (2009).   A second reason for the limited evidence is that it is difficult to determine the direction of causality between economic growth and housing.   Ã‚  There is a need to use general equilibrium models which are not easily tested with the available data in the developing countries.   Data limitations are particularly severe when trying to test these relationships in the poorest of the developing countries.   Finally, macroeconomics and housing finance were not studied in depth in economic literature prior to the 1980s, even for the U.S.   Ã‚  When studies were done they typically looked at housing demand as a function of income and growth not the impact of housing on economic growth, see Leung (2004).   Even if where there is analysis of housing finance in developed countries, it may be difficult to make direct inferences about relationships between housing and economic growth in developing countries using those results because so many other factors are at work including financial sector development, government involvement and types of housing. With these limitations in mind, there is some information that may be useful in analyzing the impact of housing finance on economic growth, job creation and poverty.   The impact of housing on economic growth, in developed and some developing markets is highlighted in the next section.   Next, there is a review of the impact of housing on job growth.   The third section reviews what is known about the impact of housing and housing finance on job creation.   Section four reviews the impact of housing finance on poverty.   Some inferences in that section are based on studies of financial market development on poverty.   Section five examines potential social and revenue consequences of housing.   Finally there is a summary of findings in section six. 2. Housing and Economic Impact Housing and Economic Growth: Hongyu, Park and Siqi (2002) recognize the causality dilemma when studying housing investment and economic growth.   They use Granger causality tests to study the case of China from 1981 – 2000.   This study does not address the poverty impact it just studies housing and economic growth.   The authors find that compared to non-housing investment, housing investment has a stronger short-run effect on economic growth.   They also find that housing investment has a long run impact on economic growth but not on non-housing investment.   On the other hand, economic growth has a long run impact on both housing and non-housing investment.   These findings suggest that housing is important in explaining only short-term economic cycles in economic growth. Chen and Zhu (2008) also study the long- and short- run relationship between housing investment and economic growth in China.   The authors look at panel data from 1999 through 2007.   They use robust econometric tests to examine Granger causality of the relationship and find that the relationship is bidirectional in both short – and long- run.   In other words, in China during this period, housing investment impacted economic growth and vice versa.   It will be interesting to see if this result holds over a longer period where more economic cycles are included in the data.   Interestingly, the relationship is different depending on which provinces are analyzed.   The eastern provinces show bidirectional causality like the overall results but results for other provinces indicate that GDP granger causes housing investment but not vice versa. In addition to the empirical analysis of the relationship between housing and economic growth, there are some estimates of multiplier effects associated with construction in developing countries.   For example, Uy (2006) cites that for every 1 peso spent on housing activities in the Philippines, an additional 16.61 pesos is contributed to the GDP.   In Argentina, Freire, et. al (2006) estimate that a 1,000,000 peso investment in construction leads to 1.8 times that amount in demand.   In 1995, a United Nations study indicated that in most developing countries construction of low- income housing is labor intensive and therefore housing construction has a high multiplier effect of between 2 and 3 times the initial investment.   This arises due to the large infrastructure investment (roads, utilities, water, etc.) required in housing development in those countries.   .   In comparison, The National Association of Realtor’s model suggests that the multiplier for home sales in the U.S. is between 1.34 and 1.62. Erbas and Nothaft (2002) study a sample of MENA (Middle Eastern and North African) countries.   Using parameters from the U.S. they simulate the impact that improved home mortgage availability would have on housing markets and economic growth in these countries.   They find that mortgage market reforms would increase housing units built by 10% with a 600 basis point decline in mortgage interest rates.   The impact that the increased mortgage accessibility and housing would have on economic growth is not significant however.   That is because they find, like other studies, that increased investment in housing â€Å"crowds out† investment in other sectors.   The impact on overall growth will be greater if this housing finance helps to improve small business credit. Housing Finance and Affordability Dübel (2007) proposes a model where housing prices are determined by rents, R, growth, g, and the opportunity cost of capital, k, where P = R/(k g).   The role of housing finance in this model is to reduce the cost of capital.   As that cost is lowered, housing prices fall and affordability of housing increases. Housing and Savings Buckley (1996) cites several reasons that mortgage market development can improve household savings.   First, the return to housing will likely provide positive returns especially in light of rapid urbanization in developing countries.   Second, housing provides the most secure collateral against market fluctuations and a positive yield over the long-run.   Third, housing prices are less volatile than other asset prices.   Fourth, the availability of housing improves labor mobility and therefore employment potential.   Finally, the availability of affordable housing finance may lead to increased savings as potential homeowners save to make the required down payment and to maintain their asset.   While many of the work in this area suggests that there should be benefits to overall savings and investment arising from increased access to affordable housing, the literature does not appear to have documented these benefits empirically.   This is an area rich for further exploration. 3. Housing and Job Creation The Case of the United States Wardrip, Williams and Hague (2011) review the literature on the role of affordable housing in particular, in creating jobs and stimulating local economic development in the U.S.   They find that the development of affordable housing increases spending and employment in the surrounding economy.   There are several models used in the housing literature that use â€Å"inputs† such as information on the purchase and production of goods and services for hundreds of U.S. industry sectors, the type and number of businesses in a given community, and a measure of the spending associated with a given program.   Given these inputs, the models â€Å"output† the level of economic activity expected for a given level of housing investment.   For example, the National Association of Home Builders uses a proprietary model to estimate the impact of building 100 new low-income housing tax credit developments for families.   The model predicts that the investment will, on average, lead to the creation of 80 new jobs from the direct and indirect effects of construction and 42 jobs supported by the induced effects of increased spending.   In the long-term, building these units also leads to 30 new jobs that support on-going consumer activity of the new residents.   Market-rate apartment housing will create a similar amount of jobs with just a couple of additional jobs (32) supported by households occupying the new homes.   Of course the models are dependent on the productivity of investment within the community and would likely look very different across countries being considered.   It will depend significantly on the amount of skilled labor available for the construction work since 70% of the jobs created as a direct or indirect result of the new construction, are in fact construction jobs. Rural vs. Urban In support of the findings above, in considering the impact of housing development on a rural community’s economy, the Housing Assistance Council states that housing construction and rehabilitation have a high ratio (62.3%) of value-added to gross outlays.   This means that a large percentage of the outlay for housing construction is available to create wages and salaries, and stimulate job growth in rural economies in the U.S.   The document does not compare the ratio for rural communities with that in urban communities.   This is an important distinction since most of the growth in developing countries centers around urban areas.  Ã‚   Quigley (2008) suggests that results on the relationships between investment and economic growth may be dependent on whether that investment is rural or urban.   The author finds that urbanization promotes productivity due to increases in specialization, centralization of knowledge, complementarities in production and economies of scale and scope.   If this is true, an investment in an urban center may produce greater economic growth than that same investment in a rural area.   This will be an important factor in directing housing policy and finance. Housing and Jobs in Emerging Markets In emerging markets there is some data on job creation as well as the previously cited multiplier effects associated with construction.   For example, in Argentina, Freire, Hassler, et. al (2006) estimate that a 1,000,000 peso investment in construction creates some 40 jobs directly and 20 jobs indirectly from services and related industries.   Tipple (1994) cites numerous studies that find multiplier effects from housing investment.   For example, the National Building Organization in India estimates that a $1,000,000 investment in building construction leads to 600 on-site jobs and 1,000 indirect jobs.   The construction process may stimulate economic growth through backward linkages (e.g. processing building materials) and forward linkages during and after the construction process (e.g. restaurants, repair shops and small scale manufacturing).   However, according to Erbas and Nothaft (2002), housing construction in some developing countries is actually quite capital intensive and reliant on imported materials; as a result only a small percentage of the labor force of these developing countries is employed in construction.   In addition to the construction related jobs, Dübel (2007) finds a positive correlation between financial and real estate related services and the housing to GDP ratio.   Specifically, during the property market upturn in Hong Kong in the 1980s and early 1990s, a doubling of the housing market share of GDP led the share of financial, insurance, real estate and business services to triple from 6.5% to 16.3% of GDP.   Other service sectors, including community, social and personal services also grew, likely as a result of indirect inputs to construction activity as well as increased tax revenues.   4. Housing and Its Impact on Poverty The literature on the relationship between housing and poverty is much smaller than that on housing and economic growth.   Hull (2009) notes there are significant data limitations especially on headcount poverty and labor market outcomes.   These data limitations make testing difficult.   There is a particular need for data in sub-Saharan Africa.   Some findings can be noted and they suggest that all housing investment is not created equal when it comes to addressing poverty.   Some of these studies are highlighted here. Gutierrez et al. (2007) find strong evidence that the sectoral pattern of growth and its employment and productivity-intensities matter for poverty reduction. While employment-intensive growth in the secondary sector (manufacturing, construction, mining and utilities) is correlated with poverty reduction, employment-intensive growth in agriculture is correlated with increases in the poverty headcount.   By extension, if housing creates growth in manufacturing, construction, mining and utilities, it may be effective in reducing poverty.   Similarly, Hull (2009) finds the construction sector is relatively productive but not in all countries.   That is, construction reduces measures of poverty in some but not all countries. Erbas and Nothaft (2002) find that low income housing has a lower import component in production and also higher labor intensity.   This implies that construction of low income housing will lead to greater employment and growth than the construction of middle or high income housing.   Construction of low income housing can effectively improve the living standards of the poorer segments of the population in two ways – by creation of jobs and by creation of suitable housing. Tipple (1994) reviews the literature on the links between employment and housing development and shows that investment in shelter is very effective for promoting employment, especially among lower-income groups; some of the benefits to the economy tend to be inversely proportional to housing cost meaning that low cost housing is more beneficial to the economy.   The informal sector and small-scale enterprises tend to outperform the formal sector and larger enterprises. Housing Policy and Poverty in Developing Countries As housing finance policy is considered, the housing programs and policies of local governments must be accounted for in order to assess the potential effectiveness of housing finance in different countries.   For example, Malpezzi and Sa-Aadu (1996) review contemporary African housing markets and policies.   They find that resource allocation in these countries was quite different than their intended objectives.   These policies have discouraged housing investment and have been both inequitable and distortional.   The authors suggest that privatization of housing investment is more efficient and the African governments need to â€Å"disengage.†Ã‚   Taking the example of the U.S., direct government housing production has been less efficient than private sector tax incentives in developing affordable housing [see Erbas and Nothaft (2002)]. Researchers and policymakers have noted that the housing finance systems in some countries have not been effective in reaching the low income segments of the population.   For example, Moss (2004) states that in South Africa the housing finance system has had little impact on the low-income segment of the population.   Specifically, â€Å"attempts to expand credit into this market through micro-loans have been characterized by initiatives that have yet to demonstrate some form of success.†   The financial sector in South Africa consists of many banks, a number of specialized finance companies and a large number of the so-called alternative lenders.   Future studies should investigate which of these alternatives is likely to have success in reaching the lower income segments of the population.   According to Moss (2004), housing finance has also not been very successful in Nigeria where the gap between income and shelter cost is very wide and has basically eliminated the low income earners from the housing market.   Similarly, Rahman (2009) states that the lack of available and accessible housing finance has been identified by the Government of Bangladesh as one of the important hurdles in improving housing conditions for middle- and lower-income households. Although several potential sources of housing finance for mid- and high-income consumers exist, most of the low-income families’ needs are still unmet. Housing Finance in Developing Markets While there are differences in how housing finance occurs across developing countries, there are some similarities and shared concerns.   The degree to which a country’s banks invest in mortgage lending is relatively low in developing countries when compared to developed countries.   For example, Rahman (2009) cites that in Bangladesh, 4% of banking sector assets are in housing.   In many countries there are state funded and/or sponsored housing finance institutions with government guarantees.   However, there may be allocation problems in that loans are allocated based on politics and not on financials and the granting process can be long and inefficient.   There are not as many types of mortgage instruments and in fact many countries are just beginning to grant fixed-rate mortgages which eliminate interest rate risk for the borrower.   The maturity of mortgage loans tends to be shorter in developing countries – 10 years is the maximum term for some mortgag es in Bangladesh.   In addition to state sponsored financial institutions and banks, home finance is offered by micro finance institutions.   In Bangladesh, one such institution offers these loans for a term of 10 years without collateral.   Although there is no collateral, the borrower must obtain title to the land and must sign a pledge to repay and obtain a group pledge to repay the loan if he or she fails to do so.   These programs tend to rely on a borrowers track record, group pressure and mutual support to control credit risk.   Moss (2004) finds similarities in housing finance in South Africa and to a lesser extent, Nigeria, Ghana and Tanzania.   In most of these countries, anecdotal evidence suggests that the supply of housing finance is much less than the demand and that the institutional structures have not provided sufficient access to housing for the poor. Housing, Financial Deepening and Poverty: One segment of housing finance is the secondary mortgage market and the creation of mortgage instruments or bonds.   While there has not been research on the development of mortgage markets and poverty specifically, the development of those markets can be viewed as part of an overall financial deepening of the capital markets in these developing countries.   Financial deepening has been studied and it may serve as a proxy for the development of secondary mortgage markets to the extent that they occur simultaneously.   At any rate, the development of a secondary mortgage market would be consistent with increasing the breadth and depth of the capital market.   Therefore, a review of the relationship between financial deepening and poverty may tell something about the potential impact of mortgage market development and poverty.   Consistent with this view, Malpezzi (1999) suggests that much of the world is shifting from a housing finance perspective, where special circuits are used to mobilize short-term household deposits for long-term mortgages, to a perspective where housing finance is integrated with broader capital markets. Buckley and Madhusudhan (1984) test a model of the relationship between housing investment and GDP, anticipated inflation, changes in inflation and the extent of capital deepening across several developing and transition countries.   They find that, holding all else constant countries with deeper financial markets invest relatively more in housing.   Singh and Huang (2011) analyze data from sub-Saharan Africa between 1992 and 2006.   They find that financial deepening (as measured in part by credit to the private sector as a percent of GDP) is associated with less poverty and income disparities in SSA countries and that this is most important in early stages of financial development.   Stronger property rights strengthen this relationship.   Finally, Beck, Demirguc-Kunt and Levine (2004) examine a broad cross country sample of 58 developing countries and find that financial development (as measured by the ratio of financial intermediation to the private section to GDP) reduces income inequality by disproportionately raising the incomes of the poor. Impact of Financial Deepening on the Base of the Pyramid and Absolute Poor Singh & Huang (2011) look at different definitions of poverty and examine the impact of financial deepening on them.   The measures of poverty include, the headcount index which measures the percentage of the population living with per capita consumption or income below the poverty line, defined as US$1 a day.   Another measure is the poverty gap which takes into account the distance of the poor from the poverty line.   A third measure is the income of the poorest quintile or average per capita income of the poorest 20 percent of the population.   Using each of these measures of poverty and a sample of SSA countries, the authors find that poverty is inversely related to financial deepening.   The authors also look at the Gini coefficient which is derived from the Lorenz curve.   Larger values of this coefficient indicated greater income inequality.   For this variable the relationship between poverty and financial deepening is insignificant.   In other words, financia l deepening reduces absolute levels of poverty but does not impact income inequality in a significant manner in this sample of SSA countries.   This suggests that various definitions should be examined to gain further insight into the relationship between housing and poverty and to capture the impact on the absolute poor. 5.   Housing Finance and Revenue and Social Consequences Government Revenue Links to Housing Wardrip, Williams and Hauge (2011) itemize revenues from housing development in the U.S.   Some lessons can be learned from this data.   Revenue sources during the construction phase include sales taxes on building materials, corporate taxes on builders’ profits, income taxes on construction workers, and fees for zoning, inspections, and the like.   These estimates presume that the building materials are purchased locally, to the extent the materials are brought in from elsewhere, revenues will of course be lower.   This is something that will impact housing construction in IDA countries.   Revenues in the model depend on local tax structures, construction costs, development fees and whether the local mix of industries is conducive to capturing construction-related activity.   For example, Hangen and Northrup (2010) analyze the effects of developing and rehabilitating 582 affordable homes in Rhode Island in 2007 and 2008 with $25 million in housing bonds.   They estimate that the subsequent income, corporate and sales taxes and fees associated with the total economic activity increased state revenues by roughly $16.7 million during the development period.   In an analysis of a proposed Pennsylvania state housing trust fund, Econsult (2009) finds that for every $1 million in proposed spending, the state stands to gain $82,000 in revenue from the construction of single family homes; these revenues would be higher if the $1 million were spent on affordable multifamily housing. In addition to immediate fiscal benefits, housing construction also provides on-going benefits to the locality.  Ã‚   On-going revenue sources include residential property taxes, property taxes from the businesses supported by the residents, and utility user fees.   A residential development has a net positive fiscal impact only if taxes exceed the cost of providing services to the residents.   The evidence regarding the net effect of affordable housing is inconclusive.   However, there is evidence to suggest that market-rate housing provides net positive fiscal impact (National Association of Home Builders, 2009). Political Stability and Housing There is a presumption that housing improves political stability.   So far, no evidence has been found to indicate that this is true although it is a stylized fact.   Provision of housing is international law.   Sachs (2011) reminds us that it’s a right granted in the U.N. Universal Declaration of Human Rights as follows: Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care †¦ There may be indirect support to the extent that there has been evidence to indicate that housing improves education and education is believed to improve political stability (see evidence in next section).   The relationship between political stability and housing may go in the other direction.   In other words, political instability can affect the housing market.   According to Tu and Bao (2009), instability may weaken investor’s beliefs in property rights, putting the investors in fear that part of the investment may be lost due to poor protection.   Therefore, investors may pay less for the property rights when facing political uncertainty.   Their study uses 10 years of data from Hong Kong and Singapore where there were differences in political scenarios but similar land lease structures and property cycles.   The empirical evidence supports the idea that political instability lowers property rights premiums. Education and Housing To the extent that housing improves homeowner’s borrowing capacity, housing finance could lead to more investment in human capital.   Since investment in human capital may require an individual to borrow money, and borrowing money is costly, to the extent that housing finance lowers the cost of borrowing, it should lead to larger investments in human capital.   Many authors [starting with Becker (1975) and Atkinson (1975)] studied the link between investment in human capital and wealth distribution.   An implication of these models is that income inequality will decrease as access to finance improves. Some studies have documented a link between housing and education.   To the extent that housing finance improves housing affordability for the poor, housing finance may improve education opportunities for the poor.   Jacoby (1994) finds that lack of access to credit perpetuates poverty in Peru because poor households can’t afford to provide their children with appropriate education.   Jacoby and Skoufias (1997) find that without access to finance, shocks to income cause poor families to discontinue schooling for children.   Housing provides an asset that can be used to smooth shocks to income. If housing indeed improves education opportunities for children of the poor then by extension housing will improve political stability.   Sachs (2011) in explaining why governments should provide education, quotes Adam Smith who said, â€Å"An instructed and intelligent people †¦ are more disposed to examine, and more capable of seeing through, the interested complaints of faction and seditiontherefore, the whole society is at risk when any segment of society is poorly educated.†Ã‚   6. Summary A review of the literature pertaining to housing, economic growth and poverty reveals that much more research is needed in order to determine the true economic benefits of housing and whether housing finance in particular can be an effective tool in eradicating poverty.   The paucity of evidence is due in part to limits in data and the need to utilize robust econometric techniques to test for the direction of the causality in these relationships.   In other words, more research needs to explore whether housing construction leads to economic growth or economic growth leads to increased demand for housing and by extension housing finance.   Although there is little direct documentation that housing finance improves economic standing or living standards of the poor, some inferences can be made from the related literature.   The most promising evidence is found in the financial deepening literature where it has been shown that improvements in financial markets are associated with reducing absolute levels of poverty.   To the extent that financial deepening improves with the development of mortgage markets, then housing finance may also be effective in reducing poverty.   In addition, there appears to be solid evidence that housing construction produces jobs – directly and indirectly through the supporting service industries.   Housing is also shown to improve prospects for education and thus may reduce income inequality.   Evidence indicates that there is no one size fits all relationship between housing, economic growth and poverty.   Although evidence shows that housing investment impacts economic growth, that relationship varies within countries and over time.   While not explored in depth in this review, there are some concerns regarding the impact of housing on economic development and poverty.   For example, due to considerable transactions costs, some suggest that housing may reduce job mobility.   In addition, while housing construction may create construction related jobs, there is a question as to whether that just crowds out investment in other sectors of the economy.   Housing finance while improving access to housing, may also increase opportunities for speculation and may lead to large booms and busts and housing cycles that may negatively impact the economy in the longer run. These and other concerns should be explored further to determine their significance. References Atkinson, A. B., 1974, The Economics of Inequality (Oxford: Clarendon Press). Banerjee, Abhijit and E. Duflo, 2011,   Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, (Public Affairs, New York). Becker, G. S., 1975, Human Capital, NBER and Columbia University Press, New York. Buckley, Robert, 1996, Housing Finance in Developing Countries, (McMillan, London). Buckley, R. and R. Madhusudhan, 1984, The Macroeconomics of Housing’s Role in the Economy: An International Analysis, Presented to the American Real Estate and Urban Economics Association. Bunnarith, M., 2004, Between Poverty Reduction Strategy and National Housing Policy, National University of Singapore Working Paper. Chen, J. and A. Zhu, 2008, The Relationship Between Housing Investment and Economic Growth in China: A Panel Analysis Using Quarterly Provincial Data, China National Social Science Foundation Working Paper. Dübel, Hans-Joachim, 2007, Does Housing Finance Promote Economic and Social Development in Emerging Markets?, Housing Finance Impact Study for International Finance Corporation. Econsult Corporation, 2009, Potential Economic and Fiscal Impacts of a Pennsylvania Housing Trust Fund, The Housing Alliance of Pennsylvania. Erbas, S. and F. Nothaft, 2002, The Role of Affordable Mortgages in Improving Living Standards and Stimulating Growth: A Survey of Selected MENA Countries, IMF Working Paper. Freire, Mila, M. Gautier and O. Hassler, 2006, Review of Argentina’s Housing Sector: Options for Affordable Housing Policy, World Bank Working Paper. Guitierrez, C., et. al., 2007, Does Employment Generation Really Matter for Poverty Reduction?, World Bank Policy Research Working Paper No. 4432, World Bank, Washington, DC. Habitat for Humanity, Consequences of Poverty Housing. Hangen, Eric, and J. Northrup, 2010, Building Homes Rhode Island: An Analysis of Economic Impacts, Housing Works RI. Hongyu, Liu, Y. Park and Z. Siqi, 2002, The Interaction between Housing Investment and Economic Growth in China, International Real Estate Review, 5: 1, p. 40 – 60. Housing Assistance Council, 1998, The Effects of Housing Development on a Rural Community’s Economy. Hull, Katy, 2009, Understanding the Relationship Between Economic Growth, Employment and Poverty Reduction, OECD. Jacoby, Hanan, 1994, Borrowing Constraints and Progress through School: Evidence from Peru, Review of Economics and Statistics, Vol. 76, 151-160. Jacoby, Hanan and E. Skoufias, 1997, Risk, Financial Markets, and Human Capital, Review of Economic Studies, Vol 64, 311-335. Karlan, Dean and J. Appel, 2011, More Than Good Intentions: How a New Economics is Helping to Solve Global Poverty, (Dutton, New York). Leung, C., 2004, Macroeconomics and Housing: A Review of the Literature, Journal of Housing Economics, 13: p. 249-267. Malpezzi, Stephen, 1999, Economic Analysis of Housing Markets in Developing and Transition Economies, Urbanization in Transforming Economies, p. 1791-1864. Malpezzi, Stephen and J. Sa-Aadu, 1996, What Have African Housing Policies Wrought?, Real Estate Economics, Vol. 24:2, p. 133-160. Moss, Vuyisani, 2004, Preview of Housing Finance Systems in Four Different African Countries: South Africa, Nigeria, Ghana and Tanzania, Centre for Affordable Housing Finance in Africa. National Association of Home Builders, 2009, The Local Impact of Home Building in a Typical Metro Area: Income, Jobs and Taxes Generated. Washington, DC. Quigley, John, 2008, Urbanization, Agglomeration and Economic Development, Commission on Growth and Development, Working Paper No. 19. Rahman, Khandaker, 2009, Development of Housing Finance and its Impact on Socio-Economic Uplift in the Emerging Economy in Bangladesh, IFC Bulletin No. 31. Sachs, Jeffrey, 2005, The End of Poverty: Economic Possibilities for Our Time, (The Penguin Press, New York). Singh, Raju and Y. Huang, 2011, Financial Deepening and Property Rights: Evidence from Sub-Saharan Africa, IMF Working Paper No. 11/196. Tipple, A. Graham, 1994, Employment from Housing: A Resource for Rapidly Growing Urban Populations, Cities 11, No. 6, p. 373. Tu, Y. and H. Bao, 2009, Property Rights and Housing Value: The Impacts of Political Instability, Real Estate Economics, 37:2, p. 235 257. United Nations, 1995, Shelter Provision. Uy, Willie, 2006, Medium-Rise Housing: The Philippine Experience, Presentation Paper for the 5th Asian Forum. Wardrip, Keith, L. Williams and S. Hague, 2011, The Role of Affordable Housing in Creating Jobs and Stimulating Local Economic Development: A Review of the Literature, Center for Housing Policy. Is Prostitution a Victimless Crime? Essay Is Prostitution a Victimless Crime? Essay Prostitution, as described by the Merriam-Websters Dictionary (1997), is the selling of sexual favors for money or the devoting of oneself or ones talent to an unworthy cause (p. 589). In another frame of reference, prostitution has been called a victimless crime. What exactly is a victimless crime? Wests Encyclopedia of American defines it as: crime where there is no apparent victim and no apparent pain or injury. This class of crime usually involves only consenting adults in activities such as prostitution, sodomy, and gambling where the acts are not public, no one is harmed, and no one complains of the activities (2008). This classic definition of these types of crime implies there is not any victim of the criminal behavior who experiences harm. From a theoretical perspective, conflict theorists may hold that victimless crimes are established as a type of social control over morality by politically powerful people or groups who find them offensive or undesirable while functional theorists may hold that social needs, not societal power, are the underlying condition of labeling victimless behaviors as criminal (Greek, C.E., 2005). Why are some consensual acts considered illegal while others are not? McWilliams (1996) asserts consensual activities prohibitions and restrictions have their basis in religion while ODonnell (2000) in addressing the price of victimless crime laws, proposes those crime laws are a form of morality control and religious persecution that uphold the opinions of the law-controlling majority with regards to race, ethnicity and political stances. The issue in victimless crimes is that society has created laws to prohibit certain types of conduct considered to be against the public interest and when supposed victims freely consent to be the victim in one of these crimes; the question is whether the state should make an exception from the law for the situation. For the purpose of this paper, prostitution and the issues of concern in the legalization of this victimless crime is explored. Upon examining prostitution as a victimless crime, it seems evident there are victims at some level but most of the harm seems to be self-inflicted. Looking at the puzzle of the involved behaviors, having sex and asking for money, each by themselves are perfectly legal. Having sex with someone, even an unknown person is legal, and asking for money is legal but, when the two behaviors are linked into one single instance, a criminal act results. The two separate legal behaviors cannot constitute an illegal behavior for if no person is harmed, or if harm occurs by informed consent of the willing parties, how can it be considered a criminal act? One arguable stance presented is that consensual acts are not without risk and when adults consent to take part in the acts, why should the resulting action be deemed criminal by legal social rules? What kinds of problems can the law solve and what kind of problems does the law create? Among the many proponents of de-criminalizing victimless crimes the concept of unconstitutionality is consistently cited (Hardaway, 2000; McWilliams, 1998; ODonnell, 2000; National Platform of the Libertarian Party, 2002). A prominent vocal critic of criminalizing these termed victimless crimes, such as prostitution, is Robert Hardaway. Hardaway is a professor of Law at the University of Denvers School of Law who has written and co-written numerous texts and articles on legal and community interest matters. Hardaways 2003 book, No Price Too High: Victimless Crimes and the Ninth Amendment, as cited by Cox in a 2004 review, presents a powerful and strongly-argued perspective which argues the criminalization of victimless crimes violate the Ninth Amendment to the United States Constitution (2004). Cox notes the criminalization of these crimes as well as amount of money it takes to enforce the laws are unsound policies according to Hardaway. Although, in the case of drugs, crime against property and person are related to drug use, Hardaway, per Cox (2004), attributes the harm of drug use to the laws rather than the use of drugs themselves. According to Cox, Hardaway uses the example of Prohibition to explain the supply and demand concept of the argument stating: crime and violence do not emanate from some physiological effect of the drug, but the drug laws themselves and with the decriminalization of drugs, neighborhood drug dealers would be put out of business effectively breaking the business-end of organized crime (105). Hardaway further posits, according to Cox, legalizing personal vices is justified by a considered weighing of the costs and consequences of criminalization (30), (2004). ProCon.org has a website which addresses the issue of whether or not prostitution should be legalized and many statements were provided on this website of both the pro and con sides of the issue: No persons human or civil rights should be violated on the basis of their trade, occupation, work, calling, or profession [Prostitution Education Network, 1996]; prostitution violates the right to physical and moral integrityà ¢Ã¢â€š ¬Ã‚ ¦violates the prohibition of torture and of cruel, inhuman or degrading treatment.. [Hoffman, C., 1997]; à ¢Ã¢â€š ¬Ã‚ ¦prostitution laws areà ¢Ã¢â€š ¬Ã‚ ¦a violation of the right of individual privacy because they impose penal sanctions for the private sexual conduct of consenting adultsà ¢Ã¢â€š ¬Ã‚ ¦ [American Civil Liberties Union, 2007]; à ¢Ã¢â€š ¬Ã‚ ¦few activities are as brutal and damaging to people as prostitutionà ¢Ã¢â€š ¬Ã‚ ¦ [U.S. Department of State, 2004] (ProCon, 2009). Of all opposition members, the most prominent is Melissa Farley, a research and clinical psychologist at the San Francisco non-profit organization, Prostitution Research and Education. Farley has written numerous peer-reviewed articles on the subject (Farley, M., 2006). Farleys numerous research articles provide a well-rounded look at the subject matter of prostitution, the sex industry, exploitation of women, as well as the myriad of troubling issues arising from when men purchase women in prostitution. In the 2006 article, Prostitution, Trafficking, and Cultural Amnesia: What We Must Not Know in Order to Keep the Business of Sexual Exploitation Running Smoothly, Farley posits prostitution is sexual violence that results in massive economic profit for some of its perpetrators and is a much like slavery in that it is a lucrative form of oppression (p. 102). Farley goes further to remark on prostitutions legal status (legal, illegal, zoned, or decriminalized) or the location of the ac tivity (strip club, massage parlor, street, and escort/home/hotel) the danger to women is still tremendous (p. 103). Farleys discussion on the peer-reviewed literature which documents the violence so prevalent in prostitution and states: Violence is commonplace in prostitution whether it is legal or illegal (p. 106). Citing a Canadian commission on prostitution and pornography which reported the death rate of women in prostitution as forty times higher than that of the general population and a 2001 Vancouver prostitution research study by Cler-Cunningham and Christensen which reported a thirty-six percent incident of attempted murder, Farley contends prostitution can be lethal (p. 107). Farleys detailed look at legalized and illegal prostitution can impact the perception of the sex industry as a whole. However, within the United States Constitutions first ten amendments, also known as the Bill of Rights, are provisions which may present a strong argument for abolishing criminalizing prostitution and other victimless crimes. The First, Fourth, Fifth, and Ninth Amendments are of particular interest in this dialogue of supporting the decriminalization of prostitution. Although victimless crimes such as prostitution are not specifically addressed in the Constitution there seems to be an arguable position that victimless crime laws violate First Amendment restrictions against laws respecting an establishment of religion especially since religious and moral values seem to provide the foundation for many of the laws. The Fourth Amendments provisions on search and seizure seems to be violated by such devices as warrantless search and seizures which are often utilized to obtain evidence for prosecutorial purposes. The privacy of innocents can be threatened as enforcement of the law requires police and investigators to engage in extensive monitoring, wiretapping, and surveillance of suspects and the public. Some people believe that these warrantless search and seizures and victimless crime laws are a means of political power over selected portions of the population which are unequally enforced against the poor and minorities thereby violating the due process clause of the Fifth Amendment (Kruttscnitt, 1984; McWilliams, 1998; Nussbaum, OConnell, 2000; 1999; Schur, 1971, 1980, 1983). The Ninth Amendment to the United States Constitution has direct bearing on such modern day constitutional issues such as abortion, gay rights, and the right to die. Farber (2007) considers the Ninth Amendment the key to understanding the liberties Americans were to enjoy under the Constitution as envisioned by the Founding Fathers describes the purpose of the Ninth Amendment and the Founders intent: to protect the rights the Founders assumed but failed to enumerate or specify in the Bill of Rights. Like the rest of the original Bill of Rights, per Farber, the Ninth Amendment only limits federal power rather than state government powers. The Fourteenth Amendment came along later and addressed the state government and within that Amendment the Privileges or Immunities Clause is paired with the Ninth Amendment (Lash, 2004; Farber, 2007). America is in first place in the world for the number of incarcerated individuals as highlighted by a Pew Center report that found 1 in every 100 American adults are behind bars with its prison population having tripled in the last 20 years. Spending on prisons has more than quadrupled and the American taxpayers are slowly crushed by this wasteful spending. At an average cost of over $19,000 per prisoner, taxpayers are facing a bill of over $44 billion per year to keep people locked away (Pew, 2004). Coinciding with this rising prison population is the increase in the number of private prisons which increased from five in 1995 to 100 in 2005. Herivel and Wright ( ) in their book Prison Profiteers-Who Makes Money From Mass Incarceration reports private prison industry has seen increased profits and lobbied extensively for more frequent and longer prison sentences and traces the flow of monies designated for the public good and ends up in the pockets of enterprises dedicated to keeping prison cells filled (From their book jacket). History has shown that criminalizing victimless crimes will drive the practice underground where violence, extortion, and coercion are most likely to thrive. This was particularly noticed when the 18th Amendment and later the Volstead Act, 1919, which made it illegal to manufacture or sell beer, wine, or other intoxicating malt or vinous liquors it was not illegal to possess it for personal use. The prohibition, originally intended to reduce beer consumption in particular, actually a failure and ended up increasing hard liquor consumption and created a new business, bootlegging, defined as the unlawful manufacture, sale, and transportation of alcoholic beverages without registration or payment of taxes which became widespread and a staple of organized crime (Prohibition). Almost every individual has the ability and moral capacity to judge what is helpful or harmful to them and it does not make sense for other people to dictate what choices should be made. When individuals commit acts harmful to themselves, the action should be termed as immoral, not illegal. The criminalization for the act of prostitution should not be determined by social effects of an individuals actions or by the moral or religious views of society. Every person needs freedom to make choices and accept the consequences for without these consequences, growth and experiential development will be hindered. If an adult man-or an adult woman, wants to engage in sexual relations with another adult man or woman who charges a fee for his or her services, they should be able to do so without the fear of being guilty of a crime. It does not mean that prostitution should not be subjected to certain legal requirements such as health laws. Removing prostitution from criminal statutes and providing a designation as a business entity subjected to business requirements, prostitution can be taxed, sex workers can obtain health and safety rights other employees have, and problems of abuse and graft associated with police jurisdiction of such a business can be dealt with more effectively with better protection from violence and abuse for those individuals who work within the industry. In a 2001 article written for the New Zealand Herald, Sue Bradford, MA, Member of New Zealands Parliament says it best: prostitution has been a career option for some people since history began. Nothing any law has done has changed or will change thatà ¢Ã¢â€š ¬Ã‚ ¦I believe we would all be better off to accept the job choice that some adults make as valid and worthy of care and compassion for all our sakes (2001). Work Cited Bradford, S. (2001). Dialogue: Sex workers deserve protection of the law. New Zealand Herald. July 30, 2001. 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