Guest Post: Old Man Potter Lived a Wonderful Life

by Tom Mullen

December is upon us and that means plentiful opportunities to watch the enduring classic, It’s a Wonderful Life. Unfortunately, the overwhelming majority of viewers completely misinterpret Frank Capra’s dystopian nightmare as a heartwarming Christmas tale.

The emotional appeal of angels getting their wings is undeniable. Crying out for correction, however, are the vicious slanders regarding the film’s real hero, Henry Potter.

We first hear of Potter from George Bailey’s father, Peter Bailey, who badmouths Potter with the usual falsehoods about businessmen. But during Bailey’s envious rant, we learn something important: Henry Potter is a board member of the building and loan. We later learn Potter is, in fact, a stockholder.

That puts a somewhat different light on his subsequent motion to liquidate the business upon Peter Bailey’s death. Yes, we hear George Bailey repeating the familiar socialist tropes his father did: that Potter only wants to close the building and loan because he “can’t get his hands on it” and considers the little people cattle, etc. 

But Potter responds with some rather inconvenient facts: the building and loan has been making bad business decisions, providing what we’d now call subprime loans to people who can’t pay them back.


Potter the Stockholder
The Baileys squander their investors’ money on a do-gooder, subprime loan scheme to make everyone a homeowner.

We don’t know how Potter became a stockholder, but the Bailey Building and Loan does not appear to be a publicly traded company. The most likely explanation is Peter Bailey asked Potter for capital, just as George Bailey does later in the film, in between rounds of disparaging Potter as a greedy capitalist. That would be perfectly consistent with today’s “progressives,” who rail against capitalists out of one side of their mouths while sucking up to them for money out of the other.

But regardless of how Potter became a stockholder, Peter Bailey has a fiduciary duty to him to run the business for maximum profit, providing Potter and the other stockholders a return on their investments, something George Bailey confirms they never intended to do. Instead, the Baileys squander their investors’ money on a do-gooder, subprime loan scheme to make everyone a homeowner. It worked out in fictional Bedford Falls about as well as it did in early 2000s America.

Meanwhile, the Baileys constantly slander Potter’s rental houses as “overpriced slums.” These are the same Baileys whose housing opportunities are more expensive than Potter’s.


But People Like Potter’s Houses
Their accusations constantly beg the question: If Potter’s houses are so bad, why do so many people choose to live in them? It’s constantly implied Potter’s customers have no other choice, but what exactly does that mean? Why has no one else, including any of the businessmen on the board of the Bailey Building and Loan, developed rental properties that are higher in quality, lower in price, or both?

The inescapable truth is Potter is wealthy because he provides a product that most satisfies his customers’ preferences for quality and price. If there were an opportunity to provide a higher quality product at a lower price than Potter was charging, a competitor would do so and take market share away from Potter, until Potter either raised his quality, lowered his price, or both.

The Baileys burn with resentment that so many residents of Bedford Falls prudently choose to live in Potter’s less expensive housing than buy a house they can’t afford, financed by the Baileys’ Ponzi scheme. Thus, even after shirking their fiduciary duty to run the business properly, the Baileys spend decades assaulting Potter’s character in a transparent attempt to lure away his customers.


Potter the Rescuer
When the Depression hits and the Bailey Building and Loan is exposed for the fractional reserve fraud it is, Potter offers to come to the rescue with a generous offer to buy out its customers. It is noteworthy there is a run on the Bailey Building and Loan and the local bank, but Potter is financially secure enough to save them both, proving once again he is the only honorable businessman in the film.

But we must give the devil his due. George Bailey, the ultimate huckster, saves the building and loan without Potter’s help, convincing the yokel mob making a run on his business to keep their money tied up in his fundamentally insolvent confidence game.

That brings us to the one regrettable act Potter is guilty of, which is concealing the $8,000.00 the incompetent Billy Bailey inadvertently handed him while attempting to make a deposit. It’s true this was an underhanded act, although not unprovoked.

We don’t know how much Potter had invested in the Building and Loan to become a stockholder, but suspect it was a lot more than $8,000. One could make the case he was merely getting back some of the money the Baileys had previously defrauded him of, but there are courts for such matters and Potter should have sought their help if he had a case.


Smearing Potter
Nevertheless, two generations of Baileys had led a decades-long assault on Potter’s good name, resulting in most townspeople disliking him, even though he has quite literally saved their lives on numerous occasions. Without him, a large portion of Bedford Falls would be unemployed, have nowhere to live, or both. It is not an exaggeration to say that without Henry Potter, Bedford Falls would cease to exist. Yet, thanks to the Baileys, he is the most hated man in town.

Compare Potter’s vindictive reaction when George Bailey crawls to him for help after the $8,000.00 is lost to Potter’s reaction at the board meeting at the beginning of the movie. At the board meeting, Potter dismisses George’s unhinged attack upon him and redirects the discussion to the subject of the meeting: what is best for Bedford Falls. By the latter confrontation, Potter tries to have George arrested for embezzling.

Potter’s dastardly act is totally out of character with the Potter of the earlier scene or any other event we know of in Potter’s life. As far as we know, he has always been a hard-nosed, unsentimental businessman, but has never committed a crime or held a grudge, as he does now. Everything we know about Potter up to this point tells us his vindictive attempt to have George Bailey prosecuted is precisely the kind of emotional decision-making Potter has avoided for most of his life. That is why he is so wealthy at the beginning of the film.


Potter’s Breaking Point
Everyone has a breaking point. Potter had evidently reached his. Had he been prosecuted for keeping the $8,000.00, which may have been tricky from a legal standpoint, given that Billy Bailey had handed the money to him, he could easily have plead temporary insanity caused by years of psychological warfare waged against him by the Baileys.

We’ll never know, because before Potter has any opportunity to allow his passion to cool and clear up the misunderstanding, George Bailey sets off on his suicide melodrama, followed by a long, self-aggrandizing hallucination about angels and how Bedford Falls would be worse without him. By the time he concludes his childish escape from reality, the same yokels he previously conned during the Depression are now bailing him out once again, foreshadowing so many future bailouts of dishonest financiers whose assets should have been turned over to better management in bankruptcy court.


The Triumph of Evil
In one of the darkest moments of the film, George Bailey’s Christmas tree is jostled and one of the bells adorning it rings. George Bailey, now confident he and his fraudulent real estate scheme are safe, suggests the bell signifies an angel has earned his wings, as if his dishonest business dealings and ruthless defamation of legitimate competitors had divine sanction.

Nothing more is heard of Henry Potter, the man without whom Bedford Falls would not exist. He is left friendless and without the one thing he could cling to before George Bailey, the Devil incarnate, wrested it from his grasp: his honor. As the credits roll, evil has triumphed. The economic fallacies inherent in Baileyism become accepted truth, resulting in disaster after disaster, including the most recent in 2008.



Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? and A Return to Common  Sense: Reawakening Liberty in the Inhabitants of America. For more information and more of Tom's writing, visit www.tommullen.net.

This article was originally published on FEE.org. Read the original article.

From the Archives: Concerns about the affordability of 'affordable housing' in Charlottesville

Publisher's note: This article was originally published on Examiner.com on April 6, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

This was my first article published on Examiner.com. Eventually I wrote about 500 articles that appeared on the now defunct news site over the six years between April 2010 and June 2016.

Concerns about the affordability of 'affordable housing' in Charlottesville
April 6, 2010 3:15 PM MST


According to a recent report in the Daily Progress, Charlottesville “has adopted a goal of making 15 percent of the city’s housing stock affordable for those making less than 80 percent of the area median income.”

An earlier Daily Progress article noted that raising Charlottesville’s affordable housing percentage from 10 percent 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.”

Charlottesville suffers many of the same problems that communities across the United States do.

Housing policy expert William Tucker once explained 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.

Circulation of Housing

Over time, housing built for affluent people deteriorates and loses its value for the original owners. It then becomes available to lower-income groups. This scenario has been played out across the country. In cities like Philadelphia, Milwaukee, and Richmond, houses that were once mansions owned by rich people have been subdivided into apartments for low-income tenants.

Mayor Dave Norris 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 2010 will look like in 50 years? They will decay so rapidly that by 2060, they will be 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.

Hazards of Government Intervention

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.

"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 subsidy 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.

Mayor Norris and his fellow council members are well-intentioned. It is good to make home ownership available to as many people as possible (provided that they can legitimately qualify for mortgage financing) 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. Other areas beyond those boundaries are affected, too.

Adventures in the Land of the Mathematically Challenged

A letter to the editor in today's Daily Progress tries to draw attention to the problem of expensive housing in the Charlottesville area.

The letter writers, however, display a sad sort of incompetence when it comes to their grasp of everyday mathematics.


They explain that

according to the U.S. Census, the median value of owner-occupied housing in Charlottesville from 2008-2012 was $286,400. With the median household income in Charlottesville at $44,535, a mortgage on the median home value is likely more than half of your monthly net income.

That may all be accurate but the howler follows in the next paragraph:

Homes under the median value are rare, and are often no more than 800 square feet and/or in complete disrepair.

The second part of that sentence may or may not be true, but the first part is demonstrably false.

It is not possible that homes "under the median value are rare," since, by definition, 50 percent of all homes are under the median value. (The other 50 percent are, by definition, above the median value.)

Perhaps the writers were trying to say that homes available for purchase that are also below the median value are rare, but that is not what they said.

Would this kind of innumeracy (mathematical illiteracy) be solved by adopting the Common Core, or made worse by it? Or would this demonstration of innumeracy be solved more simply by having a good copy editor?

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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And Slavery Is Freedom, Too ...

An article in this week's C-VILLE about a recent meeting of left-wingers (their term, not mine -- they call themselves "Left of Center") to discuss "affordable housing" (an issue I have previously addressed in Economics 101 terms that seem beyond the ken of the discussants) has this paragraph about local neighborhood activist Joy Johnson:

“Housing is a right,” said Joy Johnson, a panelist and herself a beneficiary of public housing. As she explains it, she relies on her publicly funded residence to keep her from having “to depend on a man or the system to take care of my family. It allows me to be independent.”

Johnson gives a new meaning to "independent" that would make George Orwell blanch. As a "beneficiary of public housing," Johnson is, in fact, dependent on the taxpayers, who pay a good portion of the market value of her rent. Only in the lexicon of the loony left can "dependency" be synonymous with "independence."

The fact that people like Johnson suck on the public teat as a means to subsidize their lifestyle choices does not make them "independent" -- it makes them infantile.

In other "affordable housing" news, the executive director of the Free Enterprise Forum was on WVTF-FM's "Evening Edition" tonight, to discuss that group's new report on housing in Albemarle County. Neil Williamson said that the report, called "Locked Out: The Impact of Local Regulation on Affordable Housing," argues that land-use and other regulations have driven up the cost of housing in suburban Charlottesville.

According to a news release summarizing the report's findings:

Albemarle County ranks lowest in housing affordability in the Metropolitan Statistical Area (MSA) according to a new report issued today by The Free Enterprise Forum. The “Locked Out” report finds that just 16% of Albemarle homes are available to families earning median income. The report also finds Albemarle County has the largest planning department staff, the largest comprehensive plan and the longest approval time for subdivisions. Fluvanna County had the highest percentage of homes available to families earning median income.

Underwritten by The Charlottesville Regional Chamber of Commerce and Hi-Tech Signs, the “Locked Out” report seeks to identify existing regulatory barriers and encourage an open cost/benefit analysis between regulation and affordability. The report includes an analysis of new urbanist design regulations, growth boundaries and their impact on land use patterns.

“Hopefully this report is the start of a new dialog with all the municipalities regarding their regulatory environments and its impact on housing affordability”, said Free Enterprise Forum Executive Director, Neil Williamson, “Median income workers in Detroit, Atlanta, Dallas and Houston have a better opportunity for homeownership than here in our region”.

That news release includes an interesting and informative graphic. (You'll have to open it in a new window to be able to read it properly.) It compares housing costs in the Charlottesville area to major metropolitan areas:

The Free Enterprise Forum study merely reiterates what we have known for a long time -- restrictions, whether of land use or of other sorts, drive up costs and therefore the prices available to the consumer.

For instance, a 2002 report in the Journal of Real Estate Research found (according to a summary by the Reason Public Policy Institute):

According to the authors, the results suggest that local growth restrictions impede housing growth and lead to a larger appreciation in housing prices. This research also supports decades of scholarly research showing that growth controls can reduce housing affordability if they increase housing costs and limit the supply of land available for new housing units.

One of the favorite suggestions by "smart growth" advocates -- in Albemarle County and elsewhere -- is that local governments should encourage infill development.

Chris Fiscelli, a research fellow in the Urban Futures Program at the Reason Public Policy Institute, wrote about this topic in a 2003 article:

Smart growth and the buzzwords that accompany it are swarming our neighborhoods - sustainable development, viable communities, healthy neighborhoods, and infill development are just some of the terms of choice for planners and politicians these days.

Infill housing, promoted by a new California law, is a process where vacant sites located closer to established, developed areas receive preferential treatment for development than sites not located as close to historical city centers. Infill housing is supposed to increase density, promote affordable housing closer to jobs, preserve open space, reduce traffic congestion, and improve the environment. It doesn't. An examination reveals this policy actually exacerbates many of the aforementioned problems and does very little to alleviate the others. . . .

Simultaneously, relatively cheap land on the urban fringe remains vacant-land that could be developed to allow subsidy-free homeownership opportunities for families with low to moderate incomes. It is clear that promoting infill rental housing over "for-sale" housing located on the urban perimeter is a more expensive alternative to society and hurts overall long-term housing affordability.

The traffic congestion and air quality benefits of infill housing, touted by smart growth advocates, are also based on misconceptions. The underlying assumption is that as densities increase, residents will reduce their driving and walk and use transit for their trips. This belief has little grounding in reality. With the exception of places with very high densities such as the downtowns of New York City, Boston, Chicago, and San Francisco, increased density does not force people out of their cars. Since most markets will not bear densities high enough to induce the switch to mass transit, it is unlikely people will be leaving their cars at home. Witness Los Angeles; it is the one of the densest metropolitan areas in the country, but has very low transit use.

Since infill housing won't increase transit use, the increased density will actually increase traffic congestion as more drivers use the same amount of roadway. And that also means increased air pollution since vehicles emit more gases when traveling at slow speeds in stop-and-go traffic.

Dr. Samuel Staley, a member of the Board of Scholars for the Virginia Institute for Public Policy and director of RPPI's Urban Futures Program, summed up the problems with "smart growth" as a response to the lack of affordable housing in an article he wrote for the Virginia Institute in 2002:

Virginians need to think outside the box. As incomes rise and consumer housing preferences become more and more diverse, real-estate markets need flexibility and room to adapt. Conventional planning is incapable of achieving this. The seemingly endless stream of public hearings, micromanagement of site plans, and special-interest opposition to new development creates a cumbersome, costly, and highly uncertain approval process. This process does more to stifle housing innovation than promote it.

The most fundamental problem with "smart growth" and urban planning, in general, is that it assumes too much knowledge on the part of planners. The late Jane Jacobs and Friedrich Hayek, among other freedom-oriented thinkers, taught us decades ago that the market, with its diffusion of knowledge and communication through the price mechanism, is the best and most reliable "planner" we have available.

"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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