Yesterday, SJ City Council agreed to endorse a $20bn (!) regional housing bond tax, the lion’s share of which will go towards subsidized, deed-restricted housing. Howard Husock at City Journal explains why this is throwing (lots of) good money after bad, as subsidized housing is just an economically illiterate approach.
Maybe our housing programs haven’t failed because of some minor management problem but because they are flawed at the core. The truth is, devoting government resources to subsidized housing for the poor—whether in the form of public housing or even housing vouchers—is not just unnecessary but also counterproductive. It not only derails what the private market can do on its own, but more significantly, it has profoundly destructive unintended consequences.
Rather than confront these harsh truths, we have over the past century gone through at least five major varieties of subsidized housing, always looking for the philosophers’ stone that will turn a bad idea into one that will work. We began with philanthropic housing built by “limited dividend” corporations, whose investors were to accept a below-market return in order to serve the poor. The disappointing results of such efforts—the projects served few people and tended to decline quickly—led housing advocates to call for public, not just private, spending for housing. Government first responded to their pleas with housing projects owned and operated by public authorities. These speedily declined. “Housers” then sought other solutions, such as using cheap, federally underwritten mortgages and rents paid by Washington to subsidize private landlords.
The expense of this last approach, which had its heyday in the sixties, and the resultant wave of decline and foreclosure led to the twin approaches of our current era. In the first of these, tenants use portable, government-provided vouchers to pay any private landlord who will accept them. In the second, federal tax credits encourage deep-pocketed corporate investors looking for tax shelters to finance new or renovated rental housing owned and managed by nonprofit community groups. Both approaches have had serious problems, but this hasn’t deterred housing advocates from asserting that the way to fix the housing market is through even more federal subsidies and the billions more in subsidies that state and local governments expend.
A realistic housing policy would strive for a non-subsidized world in which many different sorts of housing form a housing ladder. The lower rungs will be modest indeed—as modest as the single-room-occupancy hotels that sprang up in San Diego when that city allowed dwellings with less-than-full bathrooms and limited parking. By relaxing its code requirements, the city catalyzed construction of some 2,700 new SRO units for the working poor—day laborers, cabdrivers, fast-food employees. The SROs have formed a housing ladder all their own: lower-rent buildings may have no TV or phone, while lobby guards in the better buildings enforce more stringent guest policies.
A sensible housing policy would purge housing and building codes of unnecessary barriers to construction. The New York City Housing Partnership, for instance, would like to build new versions of old-fashioned Brooklyn row houses, but handicapped-access laws forbid basement apartments, which allow for a less expensive overall design. Requirements for cast-iron or copper pipes instead of less expensive plastic ones, or for excessive numbers of electric outlets, increase the cost of housing needlessly. Hugely expensive environmental cleanup requirements discourage developers from building low-cost (or any other kind of) housing on the many “brownfield” sites of inner cities. Policy makers should push for safe ways to “minimally rehab” older buildings, so that they’re not priced out of the reach of the unsubsidized poor. City Homes, a Baltimore developer, has tried this on a small scale, with the cooperation of local and state authorities that have held renovation requirements to a minimum. Because of its low costs, City Homes doesn’t need the federal rent subsidies on which most low-income housing complexes depend. City Homes rents only to the employed and has created blocks—inhabited by nurses, city sanitation workers, and the like—that are oases of safety and civility in the midst of bad neighborhoods.
Read the whole thing here.
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