Thursday, December 23, 2004

"Affordable Housing" We Can Ill-Afford

A news story in the Washington Post today caught my attention. It reported that Arlington County (Virginia) -- my former home -- plans to appeal a court ruling that “said the county overstepped its legal authority in guidelines it established to encourage developers to create more affordable housing” (“Arlington Might Appeal Ruling on Affordable Housing,” Thursday, December 23, 2004, p. VA03).

The report explained that the “guidelines asked developers of residential buildings to voluntarily set aside 10 percent of floor space for the county's affordable housing program. Such programs generally aim to help lower-income residents keep their housing payments to 30 percent or less of their income. On Dec. 10, Arlington Circuit Court Judge Joanne F. Alper ruled that the request was mandatory and that, as a result, the county had exceeded its legal authority under Virginia law.”

The debate over “affordable housing” has raged in Arlington County for so long, it seems nobody remembers when it began. That fight has probably lasted longer than the one in Charlottesville and Albemarle County regarding the building of the Meadowcreek Parkway. (That road is still not started after more than 35 years of discussion, debate, delays, and indecision.)

I decided to dust off an old article of mine, written while I still lived in Arlington, which was published in both the Arlington Journal and The Metro Herald in May 1997. One notable update: then-County Board Member Al Eisenberg is now a member of the Virginia House of Delegates.

Other communities, in Virginia and other states, are facing similar questions. I hope this old article contributes to their debates, as it when I was active in Arlington County politics in the 1990s.

Here it is, from more than 7 years ago, relevant today as much as yesterday:

"Affordable Housing" We Can Ill-Afford

A recent report in the Arlington Journal (May 12, 1997) relates the revival of a longstanding debate in Arlington County about subsidized housing and other efforts to create a stock of "affordable housing" in the county. The report characterized the issue as "divisive," with County Board Member Albert C. Eisenberg facing off against civic leaders and fiscal watchdog groups.

The issue is as divisive as it is perpetual. Arlingtonians will recall that "affordable" housing was a key issue in the County Board race of 1991, and again in the 1993 special election in which Ben Winslow defeated Jay Fisette (who are both hoping for a rematch this fall). Underlying the debate is a simple question: Why does housing in Arlington seem expensive compared to other places?

The number one reason: Arlington is an attractive place to live. Many people want to live here because of its proximity to Washington, because of its fine schools, because of good parks and restaurants, because of various ethnic enclaves -- and this is just the beginning.

When a lot of people want to live in a place that's only 26 square miles, demand outstrips supply. By the most basic laws of economics, the laws of supply and demand, this means prices are driven upward.

The second reason housing costs are high in Arlington is that taxes are high -- despite the protestations of current officeholders, objective studies show that Arlington levies some of the highest property taxes in the country, with another tax increase approved by the County Board this year -- and high taxes raise the overhead for owners of rental units. The cost must be passed down to renters and other consumers.

Moreover, Arlington suffers many of the same problems that communities across the United States do. Housing policy expert William Tucker explained in Reason magazine that "researchers estimate that zoning delays and building- code requirements add some $15,000 to $30,000 to the price a new home in many parts of the country. ‘Starter homes' -- simple, no-frills structures that first-time home buyers can afford -- are almost impossible to build in exclusive suburbs. Apartments are fought everywhere. . . . Then people wonder why we have an 'affordable housing problem.'"

We need to reframe the debate by removing the term "affordable housing" from our lexicon. "Affordable housing" is a weasel word that confuses more than it assists us in discussing housing policy. All housing is affordable to somebody. We should rather talk about low-income or moderate-income housing. That's the real issue.

Most low-income housing in Arlington was once owned or rented by middle- and upper-middle income residents. Colonial Village and Buckingham, for instance, were built almost 60 years ago to house well-paid New Deal bureaucrats who came to Washington from around the country and needed a place to live.

Over the past six decades, that housing has deteriorated and lost its value for upper-income people. It has therefore become available to lower-income groups. This scenario has been played out across the country. In cities like Philadelphia, Cleveland, Milwaukee, and Richmond, houses that were once mansions owned by rich people have been subdivided into apartments for low- income tenants.

County Board Member Eisenberg and others would like to see a greater emphasis placed on low-rent units today, so that 10 percent of the county's housing stock falls into that category. Can you imagine what low-rent units built for 1997 will look like in 50 years? They will decay so rapidly that by 2047, they will be -- as one homeowners' advocate so aptly put it -- "mere shells," inviting disintegration, grime, and crime. Such decay may happen even sooner.

The flexible and adaptable housing market provides better long-term prospects. Whenever a developer builds a rental unit for a middle- or upper- income tenant, he frees up a unit that tenant formerly occupied for a lower- income resident to move into. That resident's former apartment then becomes available for someone from an even lower income group.

When government intervention -- whether in the form of subsidies or rent control -- takes place, the housing cycle becomes disrupted. The supply of housing does not circulate fully or smoothly, driving prices up. This makes rents and mortgage payments higher for everyone. Even Washington, D.C.'s limited rent control illuminates this process. That law discourages landlords from improving their property or investing in more than just a few units. Forcing developers to build low-rent units when they really don't want to do so is similarly disruptive.

The best way to solve any shortage of low- or moderate-priced housing is to let the market work without hindrance. Get the government out of the housing business. Landlords, tenants, and homeowners can perform quite well without the interference of the Planning Commission, the Arlington Housing Corporation, or the County Board itself. A truly free market will provide an adequate supply of housing at reasonable prices.

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