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February 14, 2007

$25 MacArthur Grant for Affordable Housing Research

housing
During the past decade, the booming real estate market and waning federal subsidies resulted in the loss of over two million units of affordable housing, according to the John D. and Catherine T. MacArthur Foundation which announced on Tuesday that it was committing $25 million to the study of housing policy in the United States. "A greater national commitment to affordable housing requires a greater understanding of the impact of housing on the well-being of children, families, and communities," MacArthur President Jonathan Fanton, speaking at New York University's Furman Center for Real Estate and Urban Policy, said today. "This new research will produce a deep, empirical evidence base to show how housing affects children's cognitive, emotional, and behavioral development and how housing choices shape the economic, emotional, and physical well-being of adults." According to a reader who attended the event, panel member and HPD Commish Shaun Donovan disclosed that a big focus of HPD over the next year or two is going to be addressing the need for "permanently affordable" housing that doesn't trap families (by disincentivizing them to move) or disappear when initial owners turn around and sell.

Maybe MacArthur wants to devote a few bucks to an idea we've had lately: What if the government created a comprehensive housing voucher program that made subsidies linked to people and not properties? This would remove the incredible inefficiencies and disincentives of the current system, while providing a much more liquid subsidy program to the people who need it. Crazy?
MacArthur to Invest $25 Million in Housing Research [Newswire]
Affordable Housing [Macfound.org]
Photo of Boulevard Homes in East New York by gkjarvis




Posted by Brownstoner at 9:24 AM | Comments (29)

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Isn't that what Section 8 is -- a voucher system for low-income people to use with whatever landlord will accept it?

I have a couple of Section 8 tenants, who are good people. The drawbacks of the program are: relatively low estimates of "fair market value" for apartments and the fact that landlords must pay the tenants' utilities. On the plus side, the checks come every month without fail.

Did you have some other type of voucher system in mind? It would be interesting to hear of other ideas.

Posted by: Kingston at February 14, 2007 9:33 AM

I think the voucher system does exist to certain degree -called section 8 vouchers.
You know any landlords that rent to them?

Posted by: Anonymous at February 14, 2007 9:34 AM

Fair enough. We're talking about vouchers completely replacing rent control and rent stabilization.

Posted by: brownstoner at February 14, 2007 9:37 AM

That's the problem: lots of landlords don't take Sec. 8. They don't want the scrutiny from HUD inspectors or the other bureaucratic hassles. For vouchers to really work in NYC landlords would have to be required to take them (and to renew leases).

Posted by: Anonymous at February 14, 2007 9:41 AM

Definitely a better idea than what we have now with RC/RS/Mitchel Lama/etc etc.

But, throwing more money at existing housing stock in high density area will only raise prices. It would just be inflationary.

I think efforts need to be made to increase supply of housing. That would mean stopping downzoning and opening up more areas to development. If we want more affordability, we should have an "upzoning" movement.

Posted by: JoshK at February 14, 2007 9:43 AM

But Josh, right now we have upzoning in the absence of any requirement to provide low income housing -- none of the new towers in Brooklyn going up right now (everything in Dumbo, everything on 4th Ave) have apartments for low income folks.

You can upzone all you want, but if developers primarily build only for people making over the median income, you will always have 50% of the population who cannot afford these apartments. Apparently there's not as much money to be made in low income housing. Therefore, none gets created without government incentives.

As for inflationary pressures, aren't those coming just as much from those who are being extremely well compensated for their labor in the current economy? What's making housing unaffordable in Prospect Hgts, Gowanus, the South Slope -- all areas where low income people used to be able to find a place to live? Isn't the inflationary pressure coming from top earners? And you're worried about inflation coming from low income people with vouchers?

Part of the housing crunch is due to the fact that the lowest earners in our society don't earn enough to afford decent housing. That's been a problem for many decades -- that's why we have public housing projects. I'm not saying that public housing or rent control are the right ways to intervene in the market, but the fact is that the housing market does not provide for low income people. We have to have government intervention.

Posted by: SPer at February 14, 2007 10:12 AM

now you're mixing different topics Brownstoner.
Low-income people can't even afford rs/rc apts.
And freemarket has never been able to build housing for low-income and never will --- the believers in free-market don't even claim that - they just think enough high-earners will vacate dated/obsolete housing in favor of new units that low income can take over old.

Posted by: Anonymous at February 14, 2007 10:24 AM

I'd like to see the government extend those 2/5 subway lines extended out to flatlands/mill basin...there is a lot of under developed geography out there...let the market supply some more housing accessable to good jobs in Manhattan and Downtown Brooklyn.

Posted by: Anonymous at February 14, 2007 10:29 AM

Exactly right, SPer.

Section 8, as a program, was set up to eliminate the abuses easily found on both the landlord's and tenant's side of low income housing. Landlords have to meet inspection standards that are pretty high, and sometimes even pettily exacting. Tenants are screened, so that only the most "deserving" are in the program. Provisions are set up so that both landlords and tenants who do not abide by the rules are kicked out of the program. I know several people who have section 8 tenants, and find them to be better tenants than some of their market rate tenants.

Of course, there are occasionally horror stories on both sides, but there are certainly plenty of tenants and landlords from hell in the free market as well. Section 8, like the words "the projects" and "welfare" always seems to bring to mind, and to any discussion by people who have never known them, or anyone on them, the image of the worst offenders of all of those programs. There are many, many people who have been helped by these programs, and lead productive, quiet lives. Let's not throw out the baby with the bathwater. Unlike the vast majority of Brownstoner readers, not everyone can afford market rate housing, and there just isn't enough to go around. As a supposedly enlightened society, we should be prepared to help anyone to get a decent roof over their head. I hope the McArthur money produces real and tangible solutions and ideas that can be implemented asap.

Posted by: Crown Heights Proud at February 14, 2007 10:40 AM

SPer,

There's a great paper done a while back, I think the last name was "Glazer" , maybe "Glaser". He did work analyzing how zoning and use limits affect cost and it was a very strong link. I think the results are pretty compelling.

There is a lot of building here now, but for a city this size we are at the bottom end of units constructed by population. Whenever you see the price of resell being so much higher than the cost of construction you have to ask "why"?

You are right in that there will always be some people who are so poor that they cannot afford anything or very much. But when you have a tightly fixed supply like this you create many more disenfranchised people as housing gets bid up. Especially when we have so many high earners here. If you have three apartments and four people...

And when you look at other cities, you can rent something for $300 a month and make $15k/ year. Yes, that's poor, and that's a shitty life, but those options don't exist here as restrictive supply has forced them out.

And, if you're not convinced yet. Just try to play through what would happen if every poor person in the city just got a $2k/mo rent voucher. We still have the same fixed stock of housing. You would need to create more housing for it to make any difference.

Posted by: JoshK at February 14, 2007 10:51 AM

Josh,

Are you saying that other cities don't have affordability problems? I find that hard to believe, actually (unless you're talking about depopulated cities like Detroit that have a large, if deteriorating, housing stock). And in NYC, you certainly can live somewhere for $300 per month -- doubled up or more in a room, or even sleeping in shifts (yes, people do that).

Of course there needs to be more housing created. That isn't the question. The question is whether the housing that is created will be affordable to people below median income.

Are you really proposing eliminating zoning? It's hard for me to imagine you would like the results. In any event, Brooklyn has long been zoned for much denser development than it has gotten. But higher density development has only gotten underway as part of LUXURY development, not affordable/low income development. Developers want to build densely when they stand to reap enormous returns -- ie, by putting high rise condos in desirable nabes like Fort Green, Park Slope, etc. Most of the affordable housing created in the past couple of decades has been very low density -- viz, Nehemiah Housing in East New York.

Personally, I'm against rent control/rent stabilization, because these programs easily end up benefiting the wrong people, and do discourage construction (ie, a reluctance to invest in residential development because of concerns about limits on return). Boosting low income people's ability to enter the market through vouchers will further stimulate development. I don't see why one needs to assume a FIXED stock of housing, as you do, in the context of significant expansion of the Section 8 program.

Again, I think the housing crunch for low income people is directly related to extreme income inequality. I believe that wherever you have extreme inequality, you will have ample housing options for the wealthy and zip for the rest.

Posted by: Anonymous at February 14, 2007 1:01 PM

Sorry, the post at 1:01 was mine -- didn't mean to make it anonymously.

Posted by: SPer at February 14, 2007 1:03 PM

SPer- very very right. the only thing I would say though is that while it is easy for the control/stabilization program to be abused, the majority of people on it are the ones who desperately need it. I don't see how it discourages construction because rent control and stabilization don't apply to new construction.

Posted by: Bx2Bklyn at February 14, 2007 1:48 PM

JoshK,

You are probably thinking of Edward Glaeser. Ironically, the Mises blog brought up this point today here: http://www.mises.org/story/2471

"Harvard economist Edward Glaeser, commenting on the controversy surrounding 980 Madison, sensibly noted that blocking the construction of new Manhattan residential space will result in housing costs being higher than they would be if the apartments were built. Wolfe's response demonstrates his ignorance of the fact that his pet cause entails very real costs: "[The proposed 980 Madison Avenue project] certainly isn't going to help the housing situation. Just more people who have the money will be able to move in" (Gillette, 2007, p. 21).

Wolfe apparently has never considered the fact that, when very rich people move into those new apartments, that will ease the demand for the residences they would have occupied otherwise, allowing the slightly less wealthy to acquire those spots. That, in turn, will free up the housing those people would otherwise have chosen, making them available to yet others, and so on. An increase in the housing stock at any price level will tend to lower housing costs in general, although, of course, that effect might always be offset or even swamped by some other factor working in the opposite direction.

Wolfe, not content with this first display of economic naïveté, continues, "To take [Glaeser's] theory to its logical conclusion would be to develop Central Park." Here, he confuses the recognition that action X would act towards lowering the cost of good Y to imply that, therefore, X must be done! Without a doubt, filling Central Park with apartment buildings would lower New York City rents. Similarly, butchering all of the dogs and cats in the United States for food would lower meat prices. But that in no way implies that either course of action is indisputably recommended. People quite sensibly prefer not to eat their pets, even though doing so would reduce their meal expenditures, just as New York City residents might prefer a bucolic respite in the midst of their urban environment, even given the higher housing costs that entails.

Glaeser is doing nothing more than noting that the elementary principles of supply and demand apply even to virtuous causes, while Wolfe, by refusing to concede such a basic truth, raises the suspicion that his campaign may have more to do with his public image than with concern for the greater good."

Posted by: iceberg at February 14, 2007 2:08 PM

Ok, it's "Glaeser".

I think his analysis is intuitively right. It's very hard to get past the problem. If we have a limited supply of housing, throwing more money at it will just make it more expensive.

But, Sper, you don't have to go to Detroit for more affordable housing. Most of the country is pretty affordable where supply is not constrained.

You are right that the new construction targets the luxury crowd more, but when supply (zoning rights) are scarce, you have to max it out and pick off the lowest hanging fruit. The people with more money will win in this situation. But even then, more quantity at the high end helps even the low end, but not very much unless there's some serious new supply, which there's not.

And yes, I think we shouldn't have zoning at all. It's just a bunch of commies sitting together in a room somewhere "fighting the man". All of the cool, beautiful construction was built before zoning. Compare downtown Manhattan and midtown.

Posted by: JoshK at February 14, 2007 3:45 PM

Bx2Bklyn,

I don't think anyone desperately needs to live in Manhattan. All of the RS/RC people I know are no more "deserving" than you and I.

And, if you think about it, the RS/RC apt has a very tangible economic value. Wouldn't it be better to auction of RS/RC "certificates" and send the money to kids with cancer or something like that?

Posted by: JoshK at February 14, 2007 3:47 PM

There is no affordable housing because the rich continue to impose draconian zoning laws on us.

Eliminate zoning laws in NYC, or at least eliminate height restrictions, and there will be lots of affordable housing. As soon as we can knock down the hundreds of square kilometers filled with low-density housing and erect 100 story highrises, housing will be affordable.

Lastly, rent ceilings have to be eliminated. The 500,000 elderly single females who live in Manhattan MUST move someplace else. They have no reason to live in the city, and the young already support them through endless public subsidies like social security and medicare. We should at lease be able to live in the one city where you can make some real money.

Posted by: Eryximachus at February 14, 2007 4:55 PM

"Unlike the vast majority of Brownstoner readers, not everyone can afford market rate housing, and there just isn't enough to go around. As a supposedly enlightened society, we should be prepared to help anyone to get a decent roof over their head."

Well said, Crown Heights Proud. How about accepting a section 8 voucher for your rental? Put your money where your mouth is.

Posted by: Anonymous at February 14, 2007 5:00 PM

JoshK,
Downtown Manhattan only looks the way it does because people decided it was worth saving old buildings! Don't you think developers would be delighted to build high rises in Greenwich Village? Is that what you really want?

You seem to be of the opinion that any effort to determine a common good must be the work of "commies". I see you worship at the altar of the free market. I know this is a religion with some people, and it seems to make considered debate impossible.

And once again, you fail to address the fact that until recently, Brooklyn has had little in the way of restrictions on residential development, and yet we didn't see stuff going up. Why not? Because there's more money to be made building for the wealthy. Eliminating zoning doesn't solve that problem.

Most of the rest of the country does not have the kind of extremities of wealth as exists in major cities. So the comparison doesn't hold.

Posted by: Anonymous at February 14, 2007 5:51 PM

Anon 5:51
>>Downtown Manhattan only looks the way it does because people decided it was worth saving old buildings!

I meant downtown downtown, the Woolworth building is my favorite. Imagine what it would have looked like if they had RC back then and such burdonsome zoning. Say hello to a Mitchell Lama ugly butt.

>>And once again, you fail to address the fact that until recently, Brooklyn has had little in the way of restrictions on residential development, and yet we didn't see stuff going up.>Because there's more money to be made building for the wealthy>Most of the rest of the country does not have the kind of extremities of wealth as exists in major cities. So the comparison doesn't hold.
Believe it or not, rich people are everywhere. It's just that in New York, because of all of the commies and their community boards that a middle class person here feels po'.

Posted by: JoshK at February 14, 2007 6:15 PM


I like JoshK's extremism. He's definitely got a point.

Housing would be much much cheaper if zoning was changed to allowed every building in NYC to be twice as high.

With all that new housing, I bet prices would drop in half. I'm a landlord, so I'd personally suffer from reduced rent and the decrease in the value of my property, if I didn't build higher, but there's no question that it would be a win-win situation for developers and middle class renters/buyers alike.

Down with zoning that protects the few. Let's start a new New York City --one where everyone, rich and poor alike, can own there own home!

Well put, Joshk.

Posted by: Jake the Snake at February 14, 2007 6:29 PM

Anon 5PM - how do you know that I don't have a section 8 tenant? In fact, how do you know that I don't let one of my tenants live rent free, because she is still in school? You don't know anything about what I do, or don't do, what I have or don't have, or who I help, or how I choose to help them. Let me know when you get off of your self righteous throne and out into the trenches yourself. Next.

Josh, we've had this argument before, and I still don't understand how anyone can believe in trickle down housing, especially in this city. By your argument, building new lux housing entices person A to move from the Dakotah to this new building. Person B would then move in, freeing up their aptment for person C and so on down the line, so that at the bottom, some low income person will now get a home? Surely you can't believe that that works. You allow for no variables, such as someone coming into town from somewhere else and taking the Dakotah apt, thereby stopping the entire process, and housing remains static. That's just a simplistic monkey wrench in the works, and I've blown your whole theory. No commies needed, unless the out of towner is part of the communist conspiracy.

Eryximachus, you are just nuts. I hope the AARP comes after you with a net.

Posted by: Crown Heights Proud at February 14, 2007 6:32 PM

Why is it taken as a given that any city should try to create opportunities for people below median income to live there? Doesn't creating an artificial low end on the housing market only increase and enforce the divide between those who earn significant wages and those who do not? Doesn't this just help create a whole community of services, both legal and illegal, that cater to, exploit, and try to maintain that low end? Isn't the solution to fix the wage divide, not the monthly rent check?

Posted by: Anonymous at February 15, 2007 12:16 AM

I don't know if this thread is dead yet or not, but...

1. Iceberg, do you ever download the podcasts from George Mason U / EconLib? I think you'll like them, they get some really good people.

2. Crown Heights - I think if you follow your example through, you will be convinced. Imagine with your example if we tore down a few buildings. There would now be fewer places to live. Would prices go up then? If your logic works, then somehow prices would have to now go down as lower supply leads to lower costs. Right? Therefore you are stuck into admitting that supply and demand determine price.

Then, imagine 5 people and four apartments. No matter how much money you give these five people, they will still be out one apartment, unless you build more. Now imagine that you are the LL of one of the apts, and you now hear that someone is building a few new units. You've been enjoying nice high rents b/c there's not enough to go around. Do you anticipate that prices now with the new construction will go up or down?

Posted by: JoshK at February 15, 2007 10:07 AM

JoshK,

Suprisingly, I like reading the GMU professors over at CafeHayek (Boudreaux and Roberts), but even they aren't anarchist enough for my tastes. In any case they fit my Austrian-economic tastes.

Posted by: iceberg at February 15, 2007 11:28 AM

CHP has stated on this board that she rents at market rate because she can't afford to do otherwise. That's what the above statement was based on.

Posted by: Anonymous at February 15, 2007 11:32 AM

iceberg ,

I don't always agree with them. eg, they had Thaler on a while back. But they do get interesting people.

Posted by: JoshK at February 15, 2007 11:36 AM

JoshK-

I never said "deserve"- I said "need" and that's a very differnt thing. I totally agree that no one needs to live in Manhattan (I tried it and hated it- ergo, here I am in Brooklyn).

But I think there is a further issue that too many people forget about city living. Business desperately needs employees to function. NYC has moved further and further way from any kind of manufacturing (indeed too expensive for them), and while kissing corporate butt is stifling the small mom and pop businesses which are an enormous part of the economic engine which employs hundreds of thousands of New Yorkers. NYC has had huge increases in so-called service industries, which are heavily dependent on people rather than technology. Think what the economy of this city would be without restaurants, theaters etc.

The enormous salaries paid to those in the financial services extends to only a small sector of the labor market so the majority of people do fall in the lower to middle income area in terms of salary. The majority of workers, in terms of people, falls into the lower income levels. But however you slice it- business needs labor to function. And if labor can't afford to live without reasonable access to their jobs (that doesn't involve a 2 hour trip in both directions), they can't get to work, or they can't afford to get to work because of the travel expense. They can't afford to work for the salaries offered because everything is too expensive.

So businesses not only lose workers through high turnover, but replacing and training new people costs them. Big business is better able to absorb the cost but smaller businesses take a hit. Without the big business breaks corporations get, they are being forced out of business. That effects the economy because again, without small business the economic engine breaks.

It's the domino theory. One thing can't fall without setting off a chain reaction. Parts of Manhattan and the rest of the city have to remain affordable and liveable (please everyone- no comments about getting 6 roommates for a 1 bedroom in a rapidly gentrifying Harlem) for even lower income people.

So fix RC/RS- set income caps or whatever, but breaking it will do more than force out lower i come people. It hurts business.

Posted by: Bx2Bklyn at February 15, 2007 12:50 PM

So what, 11:32? I hardly think that puts me in a class my myself. I would venture that 90% of the homeowners on this site have market rate apts because they can't afford a mortgage without them. That still has absolutely NOTHING to do with my work with the community regarding low income housing, homelessness, etc. Would it make you feel better for me to be homeless myself for you to give me credit for anything? Sorry - not happening.

Sorry, Josh, supply and demand does not lower prices enough in this city to affect middle to lower income renters/buyers. Almost all of the new construction going on in this city is aimed at upper incomes. There may well be a shuffling around and a deal or two within that strata of buyers, but it doesn't trickle down to where it counts. It only means that Joe Gotbux has several apartments to choose from, and maybe can leverage a deal out of one seller. That has no effect beyond that specific economic group. His moving from the Apthorpe building to the Time Warner Center does not mean a firefighter is moving to the Upper West Side.

Posted by: Crown Heights Proud at February 15, 2007 1:44 PM

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