Lottery Lunacy? Allocating Middle-Income Subsidies

Why shold ANYONE be entitled to buy a $460,000 Slope townhouse that I assume would go for triple that in the open market? For $460,000, the dear professor could have bought on the free market a smashing coop apartment in Jackson Heights, Forest Hills, Sheepshead Bay or a dozen other neighborhoods.

Nobody sould have the "right" to live in Park Slope because they "only" make between 80% and 200%(!) of the area's median family income.

What a scam!

Posted by: guest at March 3, 2008 10:08 AM

The more the government intrudes on private markets, the worse the problems become!

Less regulation, intervention, and involvment is required, not more.

Let the market work itself out free of incumbrances, Government interference only exacerbates the problems.

Posted by: guest at March 3, 2008 10:12 AM

Dick Cheney for President.

Posted by: guest at March 3, 2008 10:19 AM

I guess getting rid of exclusionary zoning and landmark laws is out of the question.

Posted by: guest at March 3, 2008 10:31 AM

Here's one thing the city can do: enforce Mitchell-Lama agreements.

Landlords and developers held up their side of the bargain with low rent for great places for years and years and years and then when the agreement runs out, the residents protest like mad. 15-20 years of a subsidized loft in Brooklyn Heights was NOT ENOUGH for these people (many of whom were highly paid professionals).

We need to support the law in these cases. Otherwise, NO ONE will ever enter into a similar arrangement with the city again.

Posted by: guest at March 3, 2008 10:33 AM

I agree with 10:33. I would propose that any gain on a below market re-sales should be prorated to the actual pirce paid with the balance of proceeds going to support other middle-income housing subsidys.

For example, take a home that is bought for $500K and the market value is $1.5 Million.

The buyer then sells 5 yeras later for $2.0 Million. This is a 33% gain over market value at the time of purchase. The original buyer should be entitled to a 33% gain on the original $500K purchase price or $166K and the remaining proceeds should be retained by the housing authority to support similar programs.

This will take alot of speculators and schemers out of the market and perpertuate the availability of these subsidys to many others.

Posted by: guest at March 3, 2008 10:45 AM

'Let the market work itself out free of incumbrances, Government interference only exacerbates the problems.'

The market was 'working' it self out and free of government interference and that's why it's in the mess it's in now.

Posted by: guest at March 3, 2008 10:49 AM

10:33 raises an interesting point. i have seen some lottery applications that are very explicit about the requirement that the applicant be purchasing their first ever home. if you already own and can profit from that ownership upon selling, that seems to me you should be disqualified or at least have additional rules to apply to you.

Posted by: guest at March 3, 2008 10:56 AM

The formula that is used for these programs is out of date and that is where the problem is. The price of the house is based on what somebody within 195% (I believe) of the median income of that neighborhood plus any rental income could afford. This puts a very low cap on the sale price. House prices also have increased at a much greater rate than the median income has. The disparity between the two using this formula in the 90's was much less - say a house that would be around mid to low 300's would sell for high 200's low 300's.

Posted by: guest at March 3, 2008 11:07 AM

There are measures in place to prevent people from flipping the apartments at 150 Myrtle for instant profit.

If the units are sold within 20 years it must be to somebody who fits the criteria of the program designated in the original sale.

Posted by: guest at March 3, 2008 11:11 AM

This also ignores the fact that many of these people have "income" that is not being counted. They are favoring many city workers who may not have a high salary, but do have a high pension that their private sector counter parts do not have. While someone working for a private firm is saving for retirement and health insurance etc. out of their higher salary, these people don't need to because it is part of their total compensation. Everyone is always weeping for the underpaid cops, firefighters, and teachers who can retire after only 20 years with a high pension. Now you want to subsidize their housing too?

Posted by: guest at March 3, 2008 12:16 PM

I'm completely biased since I did buy my home through one of these lotteries, but there are a few things to consider:

-The amount of subsidy varies significantly and higher-income lotteries typically have a much smaller subsidy; for example, my unit was said to be 20-30% below market. A property that was priced at a third of market value as described above would have significant income restrictions.

-Many although not all of the units in these programs have income restrictions, flip taxes or other provisions intended to keep buyers from cashing out quickly - and enforcement mortgages designed to ensure buyers occupy, rather than rent out, properties are also pretty standard.

-The programs also often include preferences for teachers, firefighters and law enforcement, since making it easier for these essential but lower-paid personnel to live in the city is considered to be an important city goal.

That being said, the programs are very decidedly not perfect. I already owned an apartment in the city that was adequate for my needs and by most standards did not "deserve" a subsidized apartment; I try to make up for that by serving on the board of my building, shopping at local businesses whenever possible and generally trying to make a positive contribution to the neighborhood.

The same can't be said of several other residents who promptly rented out their apartments at market rates - including one police officer who benefited from the law enforcement provision! The NYC real estate market is quirky and often unfair, and I know I certainly don't have the right answer for fixing it.

Posted by: guest at March 3, 2008 12:22 PM

Say Polemicist,

As early as the 1860's/70's, New York knew that the free market couldn't provide decent housing. "Pre-law" tenements were an abomination. (Read Jacob Riis's "How the Other Half Lives.") That's why housing regulations began in the 19th Century, not after World War II. And all that Bronx housing you like? It was heavily regulated (successive multiple-family housing laws from 1876 to 1928) and zoned (since 1916), and built for the middle-class, not the poor.

And want to see unregulated contemporary housing? Visit Istanbul, where brand new concrete and brick apartment houses are very much like pre-law New York tenements: crowded, nasty, and structurally unsafe. (Only now is that town looking to institute regulations -- like New York's!)

U. Designer

Posted by: guest at March 3, 2008 12:51 PM

Let's throw Erika Badhu out of her rent-controlled apartment and give it to someone who needs to in order to afford to live in Brooklyn.

Posted by: guest at March 3, 2008 12:59 PM

I decided to leave a job in the private sector which paid double what my city job paid. The private job pension was basically the same as the city pension but I left for job security which is now not even the reality with city jobs. The city uniform and teachers pensions are much better than the city non-uniform pensions but they also put up with alot more BS. In addition, people in the private sector can live whereever they choose including NJ. Most civilian city workers have to reside in the five boroughs, the uniformed services - Fire, Correction, Police and Sanitation have to live in the five boroughs or one of the outlining boroughs where housing is extremely expensive. Amidlevel employee in the private sector can move to Jersey where the housing is cheaper and schools are better.

Posted by: guest at March 3, 2008 1:43 PM