I have previously nominated so-called "affordable housing" in Manhattan as the "worst possible public policy." But the question arises, what to do about it? The answer is remarkably simple, because everything about this policy makes everyone involved with it worse off. Thus any and all ways of getting rid of public housing will make everyone involved better off. My preferred solution is to give away the public housing buildings to the residents. What I can't understand is why nobody else out there is pushing this idea.
Consider the disaster that is public housing in Manhattan today. (I'm only focusing on Manhattan because that is the focus of this blog; similar facts can be compiled for all of New York City.) We have in Manhattan 53,570 units of low income housing run by the New York City Housing Authority, lived in by around 120,000 people, presumably nearly all of them low-income. While some of them are likely not in "poverty," the ones who are constitute a sizable chunk of the 285,000 or so people who the Census Bureau asserts are living in "poverty" in Manhattan. Yet all of these people receive deeply discounted apartments, the value of which is not counted in their "poverty" status. When the Manhattan NYCHA projects were built, most of them were located in slums or otherwise in out-of-the-way areas with low housing values. Not so today -- there is no such thing as a bad neighborhood in Manhattan any more. In the Chelsea neighborhood, the projects have come to be surrounded by new condos, trendy art galleries, and the High Line park. Other projects are located right next to some of the most expensive parts of the Upper East and Upper West Sides. On the Lower East Side, some projects line the East River, with coveted waterfront views. The discount on lifetime rent received by the residents easily has a present value of $1 million per family, and over $2 million in many cases. But the families have no access to cash to spend and are deemed in most cases to be in "poverty." The buildings pay no property taxes, have a huge backlog of billions of dollars in needed repairs, and are a serious drain on all other taxpayers of the City.
In public ownership, these projects have zero value. Nobody owns them, and nobody can sell them. What would their value be if privately owned? The median value of privately-owned apartments in Manhattan is right around $1 million. OK, presumably public housing units would be worth less than that, but don't forget that location is a much more important determinant of value than physical condition. If the average value of these apartments is $500,000 (which I think is low), then we have about $25 billion of value trapped in these projects. If the average value is $1 million, then it's well over $50 billion. There is a huge amount of value trapped here and waiting to be unlocked.
Giving the apartments to the residents opens infinite possibilities:
- They can now rent out rooms for cash income previously unavailable to them.
- Or they can rent out the whole apartment, rent a cheaper place somewhere else, and pocket the difference to live on.
- Or, for many apartments, they can divide them in half, sell or rent one half, and use the income to live in the remainder.
- Or they can sell the whole apartment, become a millionaire, and go live somewhere cheaper.
- Or they can borrow against the apartment, and use the proceeds for all kinds of personal betterment, from going back to school to starting a small business.
- Owners of these buildings as condos could build additional buildings on unused adjacent land and pocket the proceeds. When the City recently proposed to build additional buildings on NYCHA vacant land, many tenants protested vigorously. Watch them do a 180 and start new developments themselves when suddenly they get to pocket the money and get rich from selling the new apartments.
The residents go immediately from poverty to relative wealth, with real net worth (in many cases millionaires) and lots of possibilities for generating serious income and spendable cash for the first time in their lives. Meanwhile, the buildings will promptly have the ability to charge maintenance fees sufficient to keep the property in good repair. The buildings stop being a drain on the taxpayers, and indeed, could even start to generate some property taxes (I would recommend that this be phased in slowly).
Needless to say, this proposal is anathema to the Manhattan progressive. Yet I have never heard any coherent reason to oppose my plan. The usual response goes something like: "We should live in a community that is open to people of all income levels." Sounds good at first blush, until you realize that what they're really saying is that we should keep the poor poor so that my lefty college classmates won't ridicule me for living in the wealthy enclave of Manhattan. Well, what happened to the idea of making it possible for the poor to get out of poverty? The residents of Manhattan public housing are living, breathing human beings who deserve the opportunity to escape from poverty and achieve success in the world; they are not animals to be kept imprisoned in a zoo for the viewing pleasure of their superiors.
Here we have an unused $25 to $50 billion or so, sitting on the table and completely available for promptly removing tens of thousands of people from poverty with the wherewithal to live on their own free from government dependency. And the reason not to do that is -- what?