Wednesday, February 03, 2010

Charlottesville's 'Affordable Housing' Trap

The announcement that Charlottesville's City Council wants to increase the stock of so-called "affordable housing" by a significant fraction sent me back to look at one of my earliest blog posts.  Before revisiting that piece (which was the republication of an article I wrote in 1997, for what it's worth), let's look at this week's news.

Rachana Dixit wrote in the Daily Progress on February 1:

The City Council has agreed that Charlottesville’s affordable housing stock should increase to 15 percent of all city housing in the next 15 years.

“Housing is just as important as the other infrastructure we invest in in our community,” Councilor Holly Edwards said during the council’s meeting Monday.

Upping Charlottesville’s affordable housing percentage from 10 percent — the current amount, according to an affordable housing report completed by the city’s Housing Advisory Committee — to 15 percent would require the city to commit an average of $1.7 million each year until 2025, or a total of roughly $25.7 million. This would be needed to add and preserve 2,350 affordable housing units, the report states.
Now, take a look at what I wrote on December 23, 2004, but replace references to "Arlington" and "County Board" with "Charlottesville" and "City Council," and fast-forward dates from 1997 and 2047 to 2010 and 2060. (Just thinking of those upper-digit years sends shivers up one's spine.)
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.
Little has changed in the past five (or even 13) years that would make me amend what I wrote back then, except to state it more baldly:  "Affordable housing" by design has to be cheap or low-quality housing.  If it isn't, the builder has to lose money on it (in the absence of a transfer payment from taxpayers).  Government intrusion in the marketplace interrupts the circulation of housing that makes older units "affordable" (relatively less expensive) and brings new, higher-quality units onto the market.  It may seem paradoxical, but if we want "affordable" housing in the future, we should be building "unaffordable" housing today.

Even though Charlottesville is a small city and Arlington is about five times as large (and is an urban entity overlaid with -- or masquerading as -- a county-government structure), the problems and solutions remain the same.  The economic realities of the housing market apply across the board, whether we are talking about large cities or rural areas, suburbs or exurbs, Manhattan (Kansas) or Manhattan (Big Apple).

Mayor Dave Norris and his fellow council members are well-intentioned.  It is good to make home ownership available to as many people as possible, and also to prevent homelessness.  Intervening in the housing market through subsidies and regulation of housing providers, however, will do little more than shift the problem either from one taxpayer to another or from one jurisdiction to another.  After all, the housing market of the City of Charlottesville is not self-contained; it is integrated with the markets of Albemarle, Fluvanna, and Nelson counties, and other areas beyond the our metropolitan area are affected, as well.

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1 comment:

Anonymous said...

Why is it "good" to "make home ownership available to as many people as possible"? I thought one of the lessons of the 2007 housing bubble is that low-income people (a.k.a. bad credit risks) are actually better off NOT owning their houses, and banks are better off not financing such purchases.