New York, The Home Of Crazy Housing Policy

In the private sector, when you fail you go out of business; but in the public sector failure is the springboard to argue that the taxpayers aren't giving you enough money and to try to get more.  New York housing policy provides some extreme examples of this phenomenon.  We're now about four generations into trying to cure a housing "crisis" through government actions that include rent regulations, extensive public housing, subsidies through a dizzying variety of different programs, onerous housing codes and inspection systems, and on and on.  And somehow the remaining "market" housing turns out to be the most expensive in the country.  Nobody seems able to look outward at places like Houston or Phoenix or Las Vegas with little to none of such programs, lots of construction, and much lower free market prices, as well as far better housing options for the low-income population.

Our new City Comptroller Scott Stringer looks to be trying to make a name for himself in this double-down-on-failure game.  Back in April he came out with a big report titled The Growing Gap: New York City's Housing Affordability Challenge.  It seems that that one didn't get the play he was hoping for, so he has just come out with another one, largely rehashing the first, titled  How New York Lives: An Analysis Of The City's Housing Maintenance Conditions.   Cutting to the heart of these reports, the big news is that the public and rent-regulated housing in New York City are in far worse condition than the free-market rentals and the owner-occupied housing.  Now there's a shocker!  And not only that, it's getting worse.  Consider these finding as to the low income public housing units under the jurisdiction of the New York City Housing Authority (home to about 500,000 people, or about one-seventeenth of the population):

• In 2002, 60 percent of public housing apartments had at least one deficiency.  By 2011, 79
percent of public housing apartments had at least one deficiency.

• Water leaks, a key element of a recent tenant-filed federal lawsuit, also rose substantially.  In 2002, water leaks were observed in approximately one-fifth of NYCHA apartments. By 2011 that percentage was nearly one-third.

• The number of units with broken or missing windows increased 945 percent from 2005 to 2011.

• From 2005 to 2011, rodent observations increased 12 percentage points, with over 36 percent of NYCHA apartments experiencing this condition in 2011.

• From 2008 to 2011, heating equipment breakdowns increased by 72.8 percent and units with broken plaster and peeling paint increased by 111 percent.

Well, there's nothing like socialized housing to improve the lives of the people!  The September report lacks an explicit plea for the big bucks, but consider this from the April report:

In recent City Council testimony delivered by Chairwoman Shola Olatoye it was noted that
NYCHA needs approximately $18 billion dollars to bring all of their developments to a state of good repair.

Eighteen billion?  No problem, we can get that by, say, shutting down the school system for an entire year.  Since I don't foresee that happening, what I do foresee is continued decline for the properties of the NYCHA.  The chance that government functionaries will ever adequately maintain the properties is about zero, and it really doesn't matter how much money they have to do the job.  If you can do the job adequately on your current budget, what's the argument for getting a bigger budget?  And without a bigger budget, how are you going to be able to hire yourself five assistants and a chauffeur?  The whole idea is to fail, and without a doubt they will fail and continue to fail.

Of course there is a way to get the current public housing stock maintained at no cost to the taxpayers.  That is to give  the projects to the current residents.  As owners, I predict that the residents will magically maintain their properties without cost to the taxpayers, just like the other housing owners do, in order to enhance their property values and make money on sale.  Oh, and by the way, we will have created several hundred billion dollars of housing value out of thin air -- value that today is suppressed by the lack of private ownership of the properties.  And we will also have removed hundreds of thousands of people from poverty.  More on that in future posts.

But anyway, in the category of housing policy craziness, we have an even crazier one out this week.   Something called the Fiscal Policy Institute has proposed a new property tax to apply only to residential properties of market value higher than $5 million and only when the property is not the "primary residence" of the owner.  FPI estimates that there are 1556 such units in the City.  Its proposed tax would be on a sliding scale, where property value between $5 and 6 million would get 0.5% of full fair market value per year additional tax, up to 4% additional tax on value above $25 million for the unit.  FPI, which assumes that all of these people are too dumb to take evasive action, calculates that the tax will raise $665 million per year, of which 83%, or $551 million will be paid by just 445 people at the rate of $1.2 million average per year each.

This idea arises out of the noticeable building boom going on in Manhattan of super high end condos, many selling for $5 million and up, of which, according to FPI, approximately half are purchased by non-City residents as part-time pieds-a-terre.   OK, but do we really believe that this handful of people is going to fork over an average of $1 million or so each per year for the privilege of owning this part-time pad?  The reason that New York has been attracting this market in the first place is precisely that its property taxes are moderate compared to the international competition.  At this level of gouging, why won't those Russian oligarchs go to Rio or Hong Kong?  And nobody seems to counting for anything the salaries of the construction workers and salespeople and the like that will go away when the building boom gets killed off.  It's not clear to me at all that this tax will even be a net positive in revenue when all is taken into account.

But needless to say, the City Council and State Legislature are panting with excitement with this opportunity to "get" these non-voting rich people.  Already, a resolution has been presented in the City Council, and a bill in the Legislature.  And who, you may ask, are the legislators presenting these items?  Why, none other than my own representatives, City Councilman Corey Johnson and State Senator Brad Hoylman.   Of course, these are the guys from the wealthiest districts in town, Greenwich Village and Chelsea.  Proving once again my proposition that the people who are most consumed with jealousy for the top one percent are in fact percents 97 and 98.