Subsidized and/or Affordable Housing

[mplsjaromir]

This article explains why new luxurious development alone will not fix the affordable housing problem.

Trickle down gentrification

[bubzki2]

Sorry, but this article smacks of bias and hyperbole, and in my opinion is quite short on cogent reasoning. I could follow the author's train of thought and logic leading to the conclusion that new, luxury construction does not in fact lower rents through increasing the total housing stock. Sorry, but this article is far from repealing the economic truths that are supply and demand.

With that said, I do agree that public housing often is poorly maintained, giving it an aura worse than I probably deserves.

[woofner]

The article seems to come from a coastal perspective, so pooh-poohs the effect of filtering on the middle of the market, which applies far more to the Midwest and the South, where the rent spectrum is more compressed than on the coasts.

But it is absolutely correct about how no amount of filtering will help the working poor, because the housing market has entirely failed them. Do the (message board) math. If you're lucky enough to get a 40-hour per week job at minimum wage, you take home around $1100 per month (before taxes). If somehow you score an $800 two-bedroom and a roommate, you're paying 36% of your income for rent, leaving $600 for food, transportation, and bills. If you're extremely lucky (and you'd have to be to get into this rare situation), you can scrape by in this no-frills situation until your first medical emergency or car breakdown. But don't think about kids, or luxuries like vacations (not that your minimum wage job will allow you to take them, even unpaid).

This is why we are seeing homelessness increase despite probably the largest effort ever to address it. The housing market has failed on the low end. Prices have increased, wages have stagnated, and benefits have decreased. What do you think is going to happen?

[David Greene]

Sorry, but this article is far from repealing the economic truths that are supply and demand.

Sorry, but this is not a "truth." It is a model used to predict behavior and is not applicable in all situations. Monopolies come to mind. Generally, he price isn't set by supply, it's set by what people are willing to pay. Markets don't work for health care and they don't work for housing for the poor. With housing, we have extraordinarily wealthy people willing to pay almost anything for housing. We have a very wealthy 20% who will accept the luxury rents. The rest scramble to get what they can afford. Building a few luxury appartments isn't going to solve that problem. The problem is much deeper and is related to the wealthy inequality and inequality of political power which the article rightly highlights.

[RailBaronYarr]

This is why we are seeing homelessness increase despite probably the largest effort ever to address it. The housing market has failed on the low end. Prices have increased, wages have stagnated, and benefits have decreased. What do you think is going to happen?

I would bet that most here agree that the problems affecting the bottom 1-2 quintiles are not simply a housing/development issue. There are huge structural issues preventing many from keeping up on affording, well, life. But from a housing lens, it's hard to argue that more (good, dense) development that trickles down isn't a good thing, overall. It allows more jobs, amenities, etc to be located in such a way that they can be available to people without owning a car (or perhaps even paying for transit service).

But obviously this isn't enough - when that's all you have, you end up with a very small minority of companies holding the supply side. Honestly, I'd bet 90% of the apartment units going in right now are held by less than 10 developers/owners. Yes, there's a demand-side price people are willing to pay, but that's at least partially influenced by what's available. We need a better market-driven bottom of the market to round it out and provide choice for the people you describe. Micro apartments/studios, shared kitchen/bath buildings, laneway homes, basement apartments, etc all factor in, and without the required cost of parking spaces and setbacks they may just be affordable. Beyond that there will always be a market failure that non-profits can/should provide, with further subsidization as necessary.

But yeah, a top-down approach isn't the end-all be-all, just a cog in a better housing market.

[mattaudio]

I don't think anyone is suggesting that luxury infill is a comprehensive solution to affordable housing. That's ridiculous. But allowing the market to expand to meet demand (even on the high end) will help in the long run. And getting in the way will hurt affordability in the long run. In the meantime, we ought to get out of the way and focus instead on the root issues (raising real incomes, tackling inflation that erodes purchasing power, etc) and short term solutions (bonding for affordable housing, supporting housing organizations, etc).

[Chef]

Rents aren't too high, it is wages that are too low. The long term solution is to raise wages, rather than build subsidized housing. Ultimately, this is the root of the problem:



The solution requires a broad, politically based approach to rebalancing the power in our society between those who own our economy and the rest of us who work for them.

[mattaudio]

The problem is even deeper.... the dollar. Raising wages is fine, but it will just dilute purchasing power and lower real wages for much of the middle class. It will accelerate inflation, which will hurt the middle class much more than hurting elites who are well insulated from loss of purchasing power.

[VAStationDude]

Nonsense. More equal distribution won't result in increased money supply. The amount of money in the economy has to grow along with output. Failure to increase the supply of money results in a disastrous deflationary spiral. Economically illiterate Paul bots have been predicting rampant inflation for decades and we're still mired in low growth andlow inflation. If the mythical inflation threat ever comes to fruition it certainly won't affect Middle class individuals as much as would the wealthy. Non rich people have low assets and high debt relative to their income. With the wealthy the exact opposite is true. People with debt benefit from inflation as their obligation is diluted.

Next time Charles Mohran starts talking fractional reserve banking leave or at least tune him out.

[mplsjaromir]

Libertarians are so certain their ideas will be successful. The fact is their ideas have never been tested, except the gold standard which was universally rejected. There absolutely no shortage of resources to ensure everyone has a modicum of human dignity i.e. food, clean water, healthcare , housing, education, etc.

Markets are good things, but they have some problems, externalities, prisoners' dilemmas, the principal-agent problem, public goods, monopolies, oligopolies, monopsonies, market power, tragedy of the commons, rent-seeking, game theory, moral hazard, incomplete information, information asymmetry, bounded rationality, adverse selection, nepotism, cronyism, racism, sexism, homophobia, regulatory capture, human irrationality, third-party payer, deceptive marketing, non-rival goods, free-riding, limited liability, non-excludable goods, transaction costs, missing markets, strategic price complexity, guilds, occupational licensure, patents, trademarks, de-merit goods, predatory lending, subsidies, regulatory arbitrage, tax arbitrage, labor arbitrage, capital controls, trade wars, currency manipulation, zero-bounded interest rates, tariffs, and last but certainly not least, a complete blindness to the needs or rights of future generation.

When a clear problem arises, people are homeless for example, society should step in and try to assist. Pretending that a freer marketplace would end the problem is unusually cruel.

[RailBaronYarr]

Those are all true things about markets, but with regards to housing, specifically, I'm not sure a case could be made that more regulations to the market (or more subsidies to certain housing and transport options) are a good thing. If you told me we could use the roughly $93.4b federal funds (link) spent on subsidizing housing for families making over $75k, and spread it out across things like improving transit, further rental subsidies for low income folks, and general reductions to regressive taxes (like local sales taxes, etc), I'd be ecstatic. If that money could be more efficiently used by removing cost-increasing regulations, project-lengthening/cost-increasing red tape and neighborhood "input," etc I would be even happier.

[mattaudio]

Indeed. And again, I don't think anyone here is arguing that allowing new high-end units makes housing more affordable. Nor is it anything but a small component of the overall solution to make sure people have housing.

The point is that, all things equal (such as not replacing downmarket dwelling units) adding dwelling units (no matter the price point) necessarily lowers equilibrium price or keeps it stable in the long run. And preventing natural expansion of supply necessarily increases equilibrium prices in the long run. This isn't "libertarian" at all -- it's an accepted and mainstream economic principle no matter which school of theory you follow.

[FISHMANPET]

Indeed. And again, I don't think anyone here is arguing that allowing new high-end units makes housing more affordable. Nor is it anything but a small component of the overall solution to make sure people have housing.

Fine, I'll say it then. New luxury housing will make other housing more affordable. The key is the luxury market has to be saturated. A place like the Churchill has been charging luxury rents and not really providing luxury amenities on par with what's being built now. That building is old enough I'm sure it's been paid off many times already, so they don't need to maintain a certain price point to pay back their loans. So they can either upgrade to keep pace with new luxury rentals (because there's still a demand) or, if there's no demand, just say screw it and lower rents and not put in granite counter tops or whatever.

New luxury housing is needed to keep people from renovating older cheaper housing stock to luxury standards.

I think it's going to be hard to build anything around the median rent cost in the central cities, because of things like parking minimums. So all we can hope for is that the luxury buildings of today are the middle class housing of 10 years from now. Below a certain price point it's just not economical (or safe) to provide market rate housing, at which point subsidies should come in to play.

[mplsjaromir]

There are over eight times as many vacant homes as there are homeless people in the US. Clearly just building more housing does not get everyone into homes. Less regulation is not going to alleviate the underlying problem. A more dirigiste approach needs to be taken.

[mattaudio]

Where are those units? Probably not where people want to be. There are 27 listings in Mpls under $50k, most of which would not pass a HUD inspection or appraisal for occupancy. There are nearly zero units under $150k in the neighborhoods where multifamily building is strong.

In my experience, the houses that are vacant and that are "affordable" are in very small towns. There are frequently habitable houses for $40k or less that look very habitable. They are far from most jobs.

Also, the market has done a good job of making housing more affordable for a large segment of the population. How many people, probably a majority of us, were able to buy foreclosures for maybe half of their previous sale price? This is probably not helping the lowest income earners, but it helped quite a few folks in the middle.

Furthermore, how exactly do you propose to match up people with houses? By queue? And if such dirigisme is applied, it will prevent a majority of Americans from participating in the housing market.

[mplsjaromir]

I think something similar to what Utah does called Homefirst would be good. They give apartments to homeless people. Pretty simple stuff. I would go further and have the government build more housing.

The problem is, too many people still don’t think that practicality and compassion should outweigh their conviction that the poor are poor simply because they have somehow failed morally.

[mattaudio]

You are creating a false choice and one that is very offensive. Believing that housing is a human right and understanding that the majority of the housing market is best distributed by price rather than queue are not mutually exclusive.

I can't imagine anyone actually thinking "that the poor are poor simply because they have somehow failed morally" so why imply that others who disagree with you think that. It only distances yourself from others who share your same concern, housing for all, but who may view the housing market as something a little more complicated than matching up empty houses and people who need them.

[MNdible]

Since we've strayed from affordable housing into dealing with the truly homeless, it's worth noting that the majority of the chronic homeless are dealing with issues much more significant than just not being able to make rent.

[mplsjaromir]

The housing market does do a good job for most as it stands. There needs to be more action for those who the market has failed.

When ever see someone who believes that government assistance should come with a drug test, that is someone who believes that poor people are poor because of failed morality. Falsely pathologizing Black Poverty as proof Black Culture is bad would be another instance of people confusing morality and wealth. It is a fairly common concept.

[mattaudio]

You're coming across as extremely ridiculous at this point. Where are these people you describe in our city? They probably exist somewhere, but thankfully are not a part of the discussion. So you're setting up a straw man.

I miss Woofner in these threads. The socialist who could make a point.

Thanks MNdible for dropping in. We have now established that it makes much more sense to address 1. low wages as the primary problem with housing affordability and 2. mental illness etc as the primary cause of homelessness.