Saturday, May 21, 2011

Affordable Housing

Liberals like to blather on about " affordable housing"   as if there was such a thing as " unaffordable housing" .


The housing market has pretty much reached a nadir right now, with prices a historic lows, at least compared to the last decade.  And in some places, like Florida, there are a staggering number of empty homes - perhaps as much as 10% of the housing stock sits empty.

And one of the causes of this meltdown was government intervention in the marketplace, in terms of making the Home Mortgage Interest Deduction the only piece of deductible interest for the middle-class, which in turn encouraged people to use their homes as banks.

And the emergence of Fannie Mae as the de facto mortgage holder for most Americans (as much as 90% of mortgage debt is either guaranteed or issued by, the government) served to further skew the Real Estate market.

This is not to say "it is the government's fault" - only that when government gets in the subsidy business, well, prices go up accordingly.  And when the government subsidizes certain activities, people do things they ordinarily wouldn't dream of doing.

In the housing business, many folks, mostly Liberals, complained for many years about the lack of "affordable housing".  This always struck me as an odd argument, as the idea that homes were "unaffordable" seemed patently specious.

After all, if a house was "unaffordable" no one would buy it.  And no one would build it, either.  And, until recently, there was no inventory of unsold homes out there that no one could "afford".

And even today, this is true.  There are a lot of unsold, unoccupied homes on the market that people can afford, but are just choosing not to buy.  We have a surplus of housing inventory - and prices are falling accordingly.

And as a result, the arguments about "affordable homes" are not carrying as much weight anymore.  But what are these arguments saying, in essence?

Well, for you and me - Mr. and Mrs. Middle-Class America, we have to spend a lot of our income on housing, and we take that as a given.  Houses are expensive, mortgages are not cheap, and increasingly, property taxes are very high.  So we pony up the dough - often up to 1/3 of our income - to have a place to live.

The "affordable housing" proponents are often well-educated Liberals who are also middle-class or upper-middle-class folks who feel sorry for the poor and think that the Government should provide subsidized housing for the poor.

And of course, if you say you think this might not be a swell idea, well then you are some cold-hearted bastard who wants to throw widows and orphans out on the street.

But there are a lot of good reasons why throwing money at the poor is not necessarily a good policy decision.  When you subsidize a market - be it housing or corn, you distort market values.  And the end result is often than prices just go up.  Or, worse yet, you give people incentives to do things they ordinarily wouldn't do - often bad things.

I had a discussion once with a fellow in Key West who was all bleedy-heart Liberal, and thought his "good fortune" was unearned, and thus he should spend his life helping those "less fortunate" than him.  "We need more affordable housing in Key West!" he said.  And as someone looking to buy a house there at the time, I agreed.

The joke was, then and now, that if you are a millionaire, you can live in Key West, as you can afford a house there (just barely).  And if you are dirt poor, on welfare or assistance, you can live there as well - as you would qualify for "public housing assistance".  But if you are middle-class, well, it is "go screw yourself" as the housing for sale is too expensive, and you don't qualify for free housing.

My point to him was this:  Why is it good public policy to provide free housing to the poor in a resort community with some of the highest property values in the State?  If people are going to live on welfare, shouldn't they do it in a place where it is cheaper to live?  Do the indigent have a "right" to live on a resort island?

In my mind, the answer is NO.  If you want to live off the Government - which means living off the income of you and me, then you shouldn't have a choice of the nicest spots in the world to live.  And moreover, it makes sense, from an economic view, to house people who want to "live off the dole" in places that are more affordable, and perhaps places where they might better be able to get jobs.

But the fellow I was talking to felt just the opposite.  No, no, he said, we need MORE public housing and MORE money spent to bring homeless people to a resort island.

I just didn't get it.  I couldn't afford to live there, unless I was destitute or a lottery winner.  It made no sense to me and still doesn't.

Housing is expensive, period.  And yea, it is a pain-in-the-ass to pay for housing.  And yea, most of us have to pay a huge chunk of our incomes in rent or mortgage payments.  But for some reason, we feel we need to offer some folks a handout when it comes to homes.  And when you tell someone they don't have to pay for a home - or the full price of it, well, they don't value it.

Section-8 housing is a case in point, and I wrote about this before.  It started with the best of intentions, but quickly went awry.  Slumlords would buy run-down properties and rent them out to Section-8 tenants for exorbitant rents.  The Government would pay a percentage of this rent (up to 75% in Fairfax County) and the tenant was supposed to pay the rest.  The tenants rarely did and the landlords did not expect them to.

Living in a "free" or steeply discounted house or apartment, the tenant would not value the property and abuse it and let it run down.  And the landlord would do no repairs, in a quid quo pro with the tenant - you pay no rent, I do no repairs, the government pays me, the government pays you - everyone is happy.

But the intention of the law - to put poor people into better housing - was thwarted, and instead, some wealthy slumlords got wealthier and entire neighborhoods went down the drain.

Housing is expensive - that is a given.  And as P.T. Barnum once said, the suckers don't value things if you don't charge them for them.  When people pay a lot of an apartment and it is hard to get, they value it and treat it well - knowing that finding a substitute would be hard to do. But when you are given a free place to live and have no responsibility - well, there is no incentive whatsoever to do the least to respect the property you are in.

Yes, it is a compassionate gesture to be concerned about the poor and to want to provide "affordable housing" to the poor.  But 50 years of public housing, subsidized housing, and section-8 housing hasn't worked, for the most part.  Public housing projects quickly turn to crime-ridden ghettos and dangerous places for the poor to live.

And of course, all of this costs us money - money to build these places and tear them down later on, as well as money to pay people to not work and to live in such places.

Maybe this is a radical idea, but if we are going to pay people, why not pay them to work?  Tell the Service Employees Union to go sit on a tack an put these welfare recipients to work at something and give them a paycheck instead of a handout.  And with that paycheck tell them to find a place to live on their own.  Yes, they will spend a lot of that paycheck on housing - like the rest of us do - but will appreciate the housing more.

Like I said, radical idea.

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