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The Poverty War Has Ended The Wealthy Won

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    Why do so many Americans live in poverty? Because so many rich people benefit from it.

    This is the thesis of the lauded sociologist Matthew Desmond’s new book, Poverty, by America. The best seller is at once a careful exploration of poverty statistics; a deeply reported depiction of the lived experiences of the poor; an examination of the ways America’s wealthy exploit the masses; and a case for ending poverty. Desmond shows how the country’s employers, financial institutions, and landlords extract money from low-income families while rich families hoard opportunity for themselves. He also demonstrates how America’s safety-net programs are not just too stingy but poorly designed.

    Desmond is a professor at Princeton. His previous book—Evicted, about the low-income rental market in Milwaukee—won a Pulitzer Prize. We discussed how the rich came to win the War on Poverty and what’s necessary to end poverty.

    This conversation has been condensed and edited for clarity.

    Annie Lowrey: How is poverty different in America than in its peer countries?

    Matthew Desmond: We have more of it. We have double the child-poverty rate of Germany and South Korea. We have a lot less to go around with, in terms of fighting poverty. We collect a much smaller share of our GDP in taxes every year.

    It’s different because it’s so unnecessary. We have so many resources. Our tolerance for poverty is very high, much higher than it is in other parts of the developed world. I don’t know if it’s a belief, a cliché, or a myth. You see a homeless person in Los Angeles; an American says, What did that person do? You see a homeless person in France; a French person says, What did the state do? How did the state fail them?

    Government programs obviously work. I’ve been with people when they receive a housing voucher. They praise Jesus. They fall on their knees. They pray and weep and cry. We have massive amounts of evidence about the benefits of government spending on anti-poverty programs. But poverty is also about exploitation. We have all these anti-poverty programs that accommodate poverty without disrupting it. They’re not eliminating poverty at the root.

    Lowrey: Who benefits from that exploitation? Who benefits from a person being homeless?

    Desmond: A lot of us benefit from it. I don’t just mean the guy that’s a little richer than you or a lot richer than you. I mean a lot of us, those who have found security and comfort in America consuming the cheap goods and services that the working class produces for us.

    Half of us are invested in the stock market. Many times, we see our savings going up and up and up when someone’s pay is going down and down and down. Those two things are related. Or think about the housing crisis: Many times, it’s not just corporate landowners who are benefiting from high rents. It’s homeowners whose housing values are propped up and kept high by a scarcity of housing that they contribute to.

    Lowrey: Let’s drill down on housing. Talk me through how something wealth-generating for some families is wealth-sapping for others.

    Desmond: This is a unique feature of American life. If you go to Germany, a lot of professionals live in social housing. It’s not stigmatized. They’re living shoulder to shoulder with folks that might be in a very different place than they are economically.

    Here, the housing market is bifurcated. For two-thirds of the country—people who own homes—the housing market is almost miraculous. Homeownership is not a winning proposition for everyone—that was a resounding lesson of 2008. But for a lot of folks, it is their biggest source of wealth creation. It’s one of the biggest carve-outs in the tax code, with the mortgage deduction and other housing subsidies. And there are no rent hikes when you’re a homeowner. Then you have this other one-third. The rental market is just utterly brutal, especially for the poorest among them.

    Those two experiences aren’t just different; they’re connected. If you think of zoning laws—that is how we build walls around our communities, how so many affluent communities keep out not just affordable housing, but any multifamily housing. That doesn’t just create these pockets of affluence; it also creates pockets of concentrated poverty.

    Lowrey: How do wealthy neighborhoods fight against poorer families coming in?

    Desmond: I don’t know if you’ve ever been to a zoning-board meeting where folks are debating affordable housing. It shows you just how much work and effort and force goes into defending segregation. The folks who show up for those meetings are really not representative of the broader community. They tend to be whiter, more affluent, more likely to be homeowners. It’s this interesting thing wherein a democratic process has an undemocratic outcome, because representation in this case is a defense of the status quo.

    Lowrey: How do these dynamics affect lower-income families?

    Desmond: It boils down to choice. You have no choice, you get screwed. Are poor renters being overcharged for housing? There’s really strong evidence that the answer is yes, because they have no other choice. They’re shut out of homeownership. They’re shut out of public housing, because the waiting lists are stretching into the years, even into the decades. They’re shut out of other kinds of housing assistance, because only one in four families that qualify for them receive any kind of help. So they have to take the best of bad options. They rent at the bottom of the market and still fork over enormous chunks of their income.

    Lowrey: How much can you reduce this to a white desire to not have Black folks in their neighborhoods, to not have Black kids in their schools?

    Desmond: It is impossible to write a book called Poverty, by America without writing a book about racism. It is crucial. It is huge. One of the big things that makes Black poverty and white poverty different is segregation. In white America, there’s no equivalent of the incredibly segregated and poor neighborhoods so many Black families find themselves in.

    It’s interesting to read the histories of segregation in the 1950s or 1930s. The segregationists used the same exact arguments that we do today. They talk about property values, schools, and crime.

    Lowrey: As you point out, this segregation benefits higher-income homeowners.

    Desmond: I did a study with Nate Wilmers at MIT showing that landlords in poor neighborhoods don’t just make more than landlords in affluent neighborhoods. They make double. That blew me away. When I started my research for Evicted, I was like, Why would you want to buy a trailer park? The landlord of the mobile-home park I lived in let me see his rent rolls, his books. He was bringing home over $400,000 a year after expenses, running the poorest trailer park in the fourth-poorest city in America.

    I checked to see if it was anomalous or a national pattern. And it was a national pattern. The reason I think this isn’t a bigger news story is that it isn’t the case in San Francisco, D.C., or Seattle, places where we all live. It is better to be a landlord in SoHo than the South Bronx. But in Milwaukee, Cleveland, Buffalo, Pittsburgh, the opposite is true.

    Lowrey: What’s the policy solution for housing exploitation?

    Desmond: We need to stem the bleeding. Then we need policies that treat the disease. Evicted concluded with this call for a massive expansion of housing vouchers. Housing organizers are calling for rent control and rent-stabilization measures. I totally think that should be on the table. Even eviction-diversion programs—they have high success rates, and keeping families housed really, really matters.

    Then let’s think about how to end housing exploitation among poor families. What works in New York or San Francisco is probably not the solution for rural Alabama or Cleveland. I’m for extending our investment in permanent affordable housing. That could be through a land bank and building out more co-op and tenant-run buildings. We could be building more of this amazing public housing that we started building over the last 10, 15 years, stuff that blends into the community and is just full of pride and color and life. I am totally for expanding homeownership opportunities to low-income families. There’s a strong case that there are huge returns on investment when you do that.

    Lowrey: What about federal spending on housing?

    Desmond: We’re giving a patient with Stage 4 cancer an Advil and wondering why it doesn’t work. In 2020, we spent $53 billion on direct housing assistance to the needy, through public housing, Section 8 vouchers. We spent $193 billion on homeowner tax subsidies. Most of the benefit goes to families with six-figure incomes. Most white Americans are homeowners. Most Black and Latinx Americans aren’t, because of our systematic dispossession of people of color from the land. It is really hard to think of a social policy that does a better job of amplifying our economic and racial inequalities than our current housing policy does.

    Lowrey: There was this old line on Medicaid: that it wasn’t insurance worth having. Is public housing really housing worth having?

    Desmond: This image of old, Soviet, segregated housing is stuck in the American psyche. But we’ve learned from our sins. And today, we have these low-slung, often integrated, affordable housing units. The kids grow up in this stable environment. I don’t mean to romanticize it. It’s not perfect. But it is stable.

    I don’t know if you’ve ever been to eviction court. But if you go, there are just tons of kids. Until recently, one in the South Bronx had a day care inside it because there were so many kids coming through housing court. What we are comparing is not a family growing up in public housing versus a homeowner in Naperville, Illinois. We’re comparing a family growing up in public housing versus another family paying 50, 60, 70 percent of its income on housing and facing eviction on a routine basis, and maybe homelessness.

    That has a profound effect on kids. They lose their school, their teachers, their neighborhood. There are massive health implications and job implications for the parents. I think it’s worth a tour. Go look at the affordable housing in your community. Change your mindset about it.

    Lowrey: How much of the exploitation is driven by gentrification, by wealthy people displacing poorer people from a neighborhood and shutting them out as it gets richer?

    Desmond: Eviction is not rare. Gentrification is. If you want to study eviction, you typically aren’t studying gentrified neighborhoods. You’re studying poor, segregated neighborhoods where, even there, housing costs have outrun people’s incomes.

    But if we care about community change, if we care about the people investing their lives in neighborhoods getting the benefit of that investment, we should care about those families paying this externality for the neighborhood getting a new subway stop. They don’t get to benefit. That’s hugely important to think about. But if we are asking questions like Why are so many people losing their homes? Why is eviction so commonplace? Why is it affecting so many kids?, to answer those questions, we have to expand the aperture.

    Lowrey: The book points out that our financial institutions, housing markets, and labor market all extract money from low-income families. How does that work for banking, given that wealthy families are the ones with all the money to begin with?

    Desmond: By my calculation, financial institutions pull $61 million a day out of the pockets of the poor in fees—just fees, so they can access their money. Often this is just straight-up exploitative. Banks don’t have to charge overdraft fees. That’s not a thing they have to do to keep the lights on. That’s an incredible source of revenue. And people like you and me benefit from it, because we get free checking accounts subsidized by other people’s overdraft fees. Only 9 percent of bank users pay 84 percent of those fees, $11 billion a year. Payday-loan fees and check-cashing fees are part of that, but the overdraft costs are higher. This isn’t just about check-cashing stores with the bright-red signs in the poor neighborhoods. It’s also about the banks that you and I use.

    Lowrey: Tell me more about your critique of the earned-income tax credit—which is usually considered one of our biggest and most effective means-tested programs, in terms of moving people above the poverty line.

    Desmond: There’s strong evidence that it depresses wages. It’s both super helpful and vital for families, given the hand they’ve been dealt in today’s market. But it isn’t attacking the root cause of the problem. We don’t have the market doing its job.

    Lowrey: I want to go back to this idea that there isn’t just more poverty in America, but that poverty in America is different, more precarious.

    Desmond: In Evicted, I followed this woman I called Arlene. After one eviction, she started applying for housing. She applied to 20 apartments. Then 40 apartments. Then 60. Then 80. I was counting, and she was accepted to none of them. Finally, the 90th person said yes. She got rejected 89 times before she heard yes. Rejection, rejection, rejection, rejection, rejection, then to have someone ask you to think about job training? Or even showing up at your kid’s parent-teacher conference? Poverty just taxes your mind. It captures your mind.

    That’s so crucial to our policy debate, because many times we have the causality backwards. Folks will say, If you want to get out of poverty, get a better job and make better decisions. But the evidence is that once we have a floor under people, that’s when they can start self-actuating. I love the health research about what happens when states raise the minimum wage. People stop smoking. Their babies are healthier at birth. Child-neglect charges go down. All these massive prosocial events.

    The theory behind that: When you’re like Arlene—rejection, rejection, rejection, eviction, rejection, where are my kids going to sleep at night?—the willpower you might have to stop smoking is diminished. This is crucial to understanding the lived experience of poverty.

    Lowrey: We’ve seen large declines in the poverty rate in the past few years, after decades of slower progress. How and why did that happen?

    Desmond: During COVID, we saw this incredible, bold relief, unmatched since the War on Poverty and the Great Society. If you look at the extended child tax credit, it dropped child poverty 46 percent in six months. If you look at emergency rental assistance, eviction rates drop to the lowest on record. If you look at incomes of families in the bottom half of the distribution—after the Great Recession, it took them 10 years to recover. This time, it took a year and a half. Night and day.

    I see this as incredible, incredible evidence of what robust government spending can do. But those things are going away. We’re seeing evictions tick up again. We’re seeing the poverty rate tick up again. That should be troubling.

    Lowrey: Do you think the policy response to the COVID recession changed how we understand poverty in America?

    Desmond: I think it opened up the Overton window. In my world, when COVID hit, we immediately started worrying about the eviction crisis. Advocates started arguing for an eviction moratorium, and they were getting laughed out of the room at first. Even liberal activists thought this would never happen. One state passed it. Another state passed it. Pretty soon North Dakota had an eviction moratorium! And the Centers for Disease Control and Prevention passed it under the Trump administration. It lasted almost a year and decreased the COVID death rate by 11 percent, according to a study out of Duke. It completely changed our imagination about what’s possible.

    Lowrey: Yet there’s been relatively little agitation for the restoration of, say, the child tax credit.

    Desmond: There’s this idea that the CTC didn’t gain popularity because it was pitched, marketed, and reported on as an anti-poverty project. That it didn’t poll well. The lesson was: Let’s pitch it differently. For me, that’s not the lesson. The lesson is How do we change common sense? It is time to push back against these old, tired, boring debates: Can we afford the CTC? I just feel like that question is deeply dishonest and even immoral. We can clearly afford it if we had real tax enforcement that made sure that the richest among us paid the taxes they owed. This isn’t just talk.


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