How Corrupt Is The New York "Affordable Housing" Game?

In New York City we have a dizzying array of taxpayer-subsidized “affordable housing” schemes: low income public housing; mixed income public housing; “limited equity” co-ops; the so-called “Mitchell-Lama” program; 80/20 and 70/30 “inclusionary zoning” requirements; and plenty more. Something around 1 million people live in one type or another of these subsidized projects. That would be about 1 person out of eight in the City.

The whole idea with these schemes is that each resident pays substantially less than what would be the market rent for the same unit. After all, by hypothesis, we have a “crisis” of housing cost, where market rate apartments are priced too high for many people to afford. Therefore, we need politicians to provide taxpayer-financed subsidies to create a large tier of the “affordable” apartments. The actual rents for each “affordable" apartment are then determined by a political rather than a market process. In the case of the low-income projects, the rent is set as 30% of the tenant’s income, meaning that a tenant with no income could pay as little as nothing in rent, even when the apartment is in a desirable location. Other apartments in different programs first have a rent set, and then are allocated to people whose income has been determined to be appropriate for that rent. Sometimes these politically-determined rents might be relatively close to a market rent for a comparable apartment in the same area; but other times the “affordable” apartments are located in desirable areas, and the local market rent for a comparable apartment could exceed the “affordable” rent by a factor of five, ten, or even more. Such disparities occur, for example, in desirable Manhattan neighborhoods, as well as in waterfront areas in Manhattan and also Brooklyn.

So we have large numbers of apartments that would have market rents of perhaps $3000 up to even $10,000 per month, going for perhaps $500 to $1500. Of course, long waiting lists develop for these subsidized apartments. Some designated political gatekeeper gets to decide who gets the next apartment when it becomes available. Now, what is the chance that such a process can proceed for years and decades without pervasive corruption? Zero.

I have long been amazed that there hasn’t been a series of scandals about the allocation of these apartments. Could it really be possible that none of the thousands of modestly paid government employees who allocate these apartments ever succumb to temptation?

This past week, one such scandal finally blew. The New York Post had the story on Tuesday, headline “Coney Island affordable housing bosses got $870K in bribes: authorities.” On that day, Brooklyn DA Eric Gonzalez announced the indictment of three women who were the effective gatekeepers for an “affordable” project called Luna Park near the ocean in Coney Island. Here is a picture of the project:

Luna Park Housing Development.jpg

This being only about a block from the ocean, you can be sure that plenty of the apartments have ocean views. Apartments in the project supposedly were allocated off a waiting list, which had about 14,000 people on it. However, insiders knew that the apartments did not go to those on the waiting list, but rather to those who paid off the gatekeepers:

Three Brooklyn women at the helm of a Coney Island affordable-housing development pocketed more than $870,000 in bribes by fraudulently fast-tracking wealthy home-buyers into high-demand units meant for low-income families that needed them, officials said Tuesday. . . . “Corrupt insiders got cash bribes, applicants got the apartment they wanted without having to wait, and honest families were left out in the cold,” Brooklyn District Attorney Eric Gonzalez said.

How pervasive was the corruption? The indictment announced on Tuesday involved bribes paid for some 18 apartments (in a complex of some 6000 units). But DA Gonzalez had this to say:

“We would have to be naive to think that these were the only apartments in Luna Park that were awarded through bribery,” Gonzalez said. “In fact, we actually believe that this was the norm, not the exception.”

In a follow-up editorial on Wednesday, the Post quoted a resident as follows:

“Well over half of the apartments here were gotten through bribes,” one resident of the taxpayer-subsidized Luna Park complex tells The Post. “It’s impossible to get an apartment here without bribing your way in.”

And this is just one of dozens of such projects all around the City, with apartments that go not to the highest bidder, but rather through some political allocation that is supposedly “fair” and “just.” From the Post’s May 22 piece:

[I]t’s hardly cynical to suspect that insiders are pulling scams all across the city’s vast and varied affordable-housing landscape.

Pervasive corruption in such allocation is completely inevitable. If we somehow get one set of totally honest gatekeepers at some project for some period of time, the next set of gatekeepers will surely succumb to temptation. After all, these are human beings. There is no such thing as honest socialism for anything resembling the long term.

Meanwhile, New York is on a big push to expand the “affordable housing.” Of course.