Following up on yesterday's post, I thought it might be interesting to take an in depth look into the question of whether typical residents of New York City public housing are or are not "poor." It turns out to be not such an easy question to answer. Here is the nub of the problem: These are people who are provided by government with resources of value far in excess of the amount deemed to constitute the federal poverty "threshold." In the official measures, these additional resources are not counted, and the recipients are therefore, for the most part, deemed "poor." But should the additional resources be counted? If these resources don't count toward alleviating poverty, why again do we provide them?
First, consider a profile for a typical New York City Housing Authority (NYCHA) family. NYCHA in 2017 reported the "average" income of its resident families as $24,336, and the average monthly rent as $509. The $24,336 is slightly below the 2018 federal poverty threshold for a family of 4, which is $25,100. Thus it is likely that about half, or somewhat more, of NYCHA families are said to be "in poverty." But of course, the $24,336 does not include any increment for the implicit subsidy of the NYCHA apartment. How much is that? Because it is not paid in cash, there are different ways to value it. One way would be to take the annual HUD operating subsidy to NYCHA, which is about $2 billion, and the forgiven NYC property taxes, which would be at least $500 million, and divide that up among the 170,000 +/- NYCHA apartments. That is basically the methodology used by Mr. Early in his study discussed in yesterday's post. That methodology would give you an implicit subsidy of about $15,000 per year per NYCHA apartment. But that is a very low-end way of looking at it. At the high end, you could value the NYCHA apartments by looking to what comparable apartments in their neighborhoods are currently renting for. By this alternative methodology, many NYCHA apartments -- particularly those now located in fancy Manhattan neighborhoods, and those lining the Lower East Side waterfront -- come with annual subsidies in the range of $50,000 and even $100,000 per apartment.
So, just to make a case that draws out the contrasts, consider a 4 person family with the average NYCHA family "income" of $24,336 living in a water view apartment that comes with a $100,000 annual subsidy by the second methodology. Add in that it is highly likely that such a family would also receive other government benefits: Medicaid (that costs about $10,000 per beneficiary in New York, so $40,000 for this family), food stamps, heating assistance, clothing assistance, school lunches, Pell grants, cell phones, EITC, etc. The full package likely costs the taxpayers well in excess of $150,000 per year.
So, is this family "poor"?
In favor of counting this family as poor:
- The government in its official measure of poverty definitely one hundred percent counts this family as "poor." Take that for what you will.
- Despite the shower of government benefits, essentially all of them are are in kind or highly restricted in how they can be spent. (The exception is the EITC, which can be up to about $6000.) That leaves the family with very little discretionary income. There is little or no money, for example, to go to a movie, or to eat at a restaurant, or to take a trip, or for recreation. If you underspend your heating allowance, you can't use that on food or clothing, and vice versa.
- The family's life style choices are extremely restricted. That huge housing subsidy is only for this one apartment. Moving is almost impossible, whether for more space for additional children, or to be in a neighborhood you like better, or to get a better job, or any other reason.
- The family faces a huge burden on its ability to advance in life. NYCHA charges as rent 30% of your "income" (as defined) until a limit is reached. Assuming that this family has a 2 bedroom apartment, the limit will be reached when their income hits $55,640. If they try to strive to get to that $55,640 income, they will effectively be paying a special 30% marginal income tax, and also will gradually be losing the Medicaid and EITC and food stamps, etc., as they hit various thresholds on the way up. Almost everyone finds these hurdles impossible to overcome. It's so much easier to stay at the just-under-poverty-threshold income and take the shower of benefits.
- Without doubt, this family feels itself to be poor. They are forced to take whatever the government decides to give them, with very little say themselves about how they want to live their lives.
In favor of counting this family as "not poor":
- There is no sense in which they are suffering any kind of physical deprivation. They have not just food, clothing and shelter, but also whatever they seek in terms of education and healthcare and cell phones and much more. They have no legitimate human need that goes unprovided.
- They live in a highly-desirable Manhattan water view apartment for which others would gladly pay ten or twenty times what they are paying.
- The taxpayers spend some $150,000 or more per year to support them. If that's not enough to lift them out of poverty, what is?
As you can see, there are reasonable arguments for both sides of the proposition. But here's the thing: How could our government have gotten itself into a position where it can shower as much as $150,000 per year of benefits on a family and yet that family and the government itself and most others still regard the family as "poor"?
Perhaps you might think that the government bureaucrats who run NYCHA and comparable programs would take the position that they have succeeded in lifting the beneficiaries of their programs out of poverty. Otherwise, wouldn't they be facing angry taxpayers and voters? But the funny thing is that the taxpayers and voters aren't that angry. They have little understanding of how much money is already being spent, and naively think that some small amount of additional spending will solve the problem this time around. And thus the position of the bureaucrats is that the taxpayers have been stingy and yet more money is needed.
I'm waiting to see if HUD (under Ben Carson) will follow through on threats of major cuts to funding for NYCHA. Such cuts would be the best thing that could happen to the residents.