More than a month into his mayoralty, and Bill de Blasio hasn't done much yet. Whew! So far so good. But how long can it last?
Not too long. News comes today on the ny.curbed website that things are starting to move forward on the "affordable housing" front. Yes, "affordable housing" is precisely what I have nominated for the title of "worst possible public policy." Well, maybe not quite: my nomination was for "affordable housing" in Manhattan, while this proposal seems to cover at least the whole city, and maybe the whole state. So it's not quite "worst possible," just really, really bad.
According to curbed, the new plan comes from Democrats in the state legislature, and proposes to spend some $150 million per year in discounted mortgage interest plus additional unspecified amounts in "a new tax credit" to get the housing built.
The Independent Democratic Conference, which the Journal describes as "a group of breakaway Democrats who share power in the state Senate with Republicans," unveiled a $750 million plan that would require the state to spend $150 million annually to fund more affordable mortgages for developers. The plan also calls for the state to create a new tax credit for the qualifying developments. In New York City, the housing would be aimed at families of four making $75,000 to $100,000, and monthly rents would be about $1,900 to $2,500.
Without even knowing the details, you can immediately see that a big part of the idea is to hide the cost of this program deeply off budget and off balance sheet so that nobody can figure out how much it costs per family benefited. Also, remember that article from The Nation that I cited a few months ago (right after the election) as advocating both for more affordable housing and also for ending tax breaks for developers? Well, forget about that. The only real alternatives for building "affordable housing" are (1) with overt, on-budget subsidies, in which case the enormous cost per benefited family is immediately apparent to all and the thing could never get off the ground, or (2) with tax breaks, in which case the cost is deeply hidden and nobody can figure it out. There never was any question which way they would go.
But there is an alternative way to derive the cost per family benefited, which is to look at the rent they are charged and compare to the market rent for comparable space. For example, assume that the "affordable" apartment to be rented for $2000 per month has a comparable market-rate apartment in the same area that would rent for $3000 per month. Actually, the $1000 per month differential probably understates the difference between "affordable" and market-rate. But at $1000 per month, it would be $12,000 per year.
That is quite a lot of money to hand out to a family that makes between $75,000 and $100,000 per year. This family is not poor by anyone's definition. In fact, it is above the median of the income distribution. Another way of looking at that is, this is the layer of earners that bears the brunt of the tax burden. Unless you believe in perpetual motion machines, you will quickly realize that society cannot come out ahead by trying to get taxes from these people and then handing them back $12,000 housing subsidies per family. There's not enough money to go around. Inevitably, a small number will get the subsidies and everybody's taxes will be unsustainable. Meanwhile, if there are to be per family subsidies of this magnitude, shouldn't they go to the poorest first, rather than to the upper middle class?
But here in New York, there is almost no disagreement that this is a good idea.