New York City Doubles Down On "The Worst Possible Public Policy"

I promise to move on from this "affordable housing" thing after today, but meanwhile the Official Manhattan Contrarian Worst Possible Public Policy is just such an easy target.  Even as I've been heaping ridicule all over the recently-opened Sugar Hill Development, approved during the Bloomberg tenure, new Mayor de Blasio and his team have been pressing forward aggressively with new and expanded "affordable housing" initiatives.

Out on the waterfront of Astoria, Queens, directly across the East River from the Upper East Side of Manhattan, a developer named Alma Realty has proposed a large new project called Astoria Cove.   Needless to say, the local pols -- both mayoral administration and City Council -- have used the proposal as a perfect opportunity to hit up the developer for their favorite form of graft, namely affordable housing.  The developer started off proposing that 20% of his units would be "affordable," but that was just an opening offer.  After some back and forth, there now appears to be an agreement that this will go up to 27%.

Joe Anuta of Crain's New York Business wrote up the story on November 13.  He quotes the developer, John Mavroudis of Alma, as being pleased as punch about the deal: "This has been a very engaging process, and we look forward to the next stage and then moving ahead with construction."  (One of the most disgusting things about government coercion is how they buy the expressed public support of people like Mavroudis, who in reality is very likely seething with anger over getting extorted in this way.)  And then we have this from Alicia Glen, Deputy Mayor for Housing and Economic Development:

"The big story is we got 25% of the units for free," said [Glen], who called the deal a paradigm shift.  "They are permanently affordable at a range of incomes."

Yes, this is the level of mental midgetry that we are dealing with.  They should change her title to Deputy Mayor for Economic Destruction.

The New York Post this morning is on to the story.  In an editorial titled "Free-Housing Hokum,"  they point out that so much has been extorted out of the developer that it might well render the development uneconomic such that it won't get built at all.

Mayor de Blasio touted the agreement as a “game-changer.” Deputy Mayor Alicia Glen bragged to Crain’s that the city was getting a quarter of the units “for free.”  We hope it all works out. But we’d feel better if the mayor recognized that, as with lunches, even in Progressive Land there’s no such thing as a free apartment.

Well, this project may well still get built, especially given today's very hot housing market in New York.  But the broader question is, to what degree does New York's suite of housing policies --from affordable housing requirements to restrictive zoning to rent regulation to a crazy building code -- suppress housing construction and render housing less rather than more affordable?  The best way to answer that is to collect comparative statistics on New York versus other housing markets where none of these policies exist.

A website called New York YIMBY ("yes in my back yard") has helpfully gone out and collected data on construction jobs as a percent of total jobs in various markets both in the U.S. and outside.  Here is the chart:

Even with the current construction boom, New York only has construction jobs as about 2.8% of all jobs.  That puts it in company with other slow growth big blue cities like Los Angeles, Boston and Chicago.  Meanwhile, high-growth cities like Dallas and Houston -- where they never heard of "affordable housing" mandates or rent regulation, and the zoning is wide open -- have construction jobs in the range of 5.5 - 7% of all jobs.  YIMBY calculates that that translates into 200,000 missing construction jobs in New York.  They don't go on to calculate how many missing housing units, but over the course of decades, it is many, many hundreds of thousands.

As always with de Blasio, the nagging question is, is he just too dumb to understand that his policies harm those he is supposedly trying to help, or is he actually smart and his agenda is to grow a permanently dependent class of people trapped in his affordable housing?  I'm still going with option one (too dumb) but I'll take any contrary evidence that is offered.

Once Again, The Preposterous Sugar Hill Project

I know I keep coming back to this monstrosity (for example here and here), but I can't help myself.  Last Thursday the New York Times had yet another glowing article about it, admittedly in the interior of the paper rather than on the front page.  But the article is just so illustrative of the lack of critical thinking in New York orthodoxy that I can't let it pass.

For those unfamiliar with it, the Sugar Hill Development is the latest Manhattan exemplar of the "affordable housing" mantra.  Although it is plenty hideous enough to be a low-income project, in fact it is intended for "mixed incomes," meaning that there was a hugely complicated list of income criteria to meet in order to qualify for a lottery to get one of the apartments.  Some 30% of the apartments were reserved for those of "extremely low incomes," while at the other end 20% of the apartments could go to those with incomes up to 60% of "Area Median Income," which, in case you don't know, is itself well above U.S. median income.  The rest of the apartments go to people somewhere in between.  Where these geniuses get the idea that a person is stuck for life at his or her spot in the income distribution, I have no idea, although one of the functions of these projects is to make sure that once accepted no one will ever again move up.

Anyway, the news is that the building is finished, the lots have been drawn, and the lucky winners are moving in.  The Times is there to catch the excitement:

Anette Christopher took a few steps into her new apartment and dropped to her knees, arms stretched toward the ceiling. “It’s everything I dreamed of,” she said through her tears. “It took me a long time to be happy like this. I worked very hard for this.” . . . The night that Ms. Christopher signed her lease, her south-facing windows let in the glow of Midtown Manhattan’s multicolored spires amid a low-lying fog. But the New York City skyline could not light up as brightly as her smile. “I feel blessed,” she said.

Ms. Christopher is a "$10 an hour . . . home health aide."  She is moving in with her 23-year old son, Kevin Saunders.  So, is this one of those "extremely low income" families, or does young Kevin accept some responsibility to contribute to the family fisc?  Believe it or not, the Times does not mention whether or not Kevin works, leaving you with the (probably false) impression that Anette's home health aide job is the only source of income.

So when we're all done gushing over how great this is, permit me to ask the very most obvious question: What else could the City of New York have done with this same money?

I have previously calculated that the cost to the City of providing each apartment in this development to a lucky family is approximately $2 million in present value 2014 dollars.  That number is necessarily approximate and based on the opportunity cost derived from what the City could have had by renting the apartment to someone else at market rent.   It does not include foregone property taxes, which would be additional.  You may dispute my calculation, but it does not really matter what the exact number is, because the principles that follow apply equally whether the actual number is $1 million or $3 million or anything in between.

I propose comparing this affordable housing program to an alternative program, which is simply to hold a lottery that people of the same income criteria can enter, and the winners get a tax free check for $2 million.  Here's the comparison:

Cost to the City per winning family:

  • Cash giveaway: $2 million
  • Affordable housing giveaway: $2 million

Benefit to winning family:

  • Cash giveaway:  All families receiving $2 million in cash are immediately removed from "poverty" status.  For example, they can invest the money in corporate bonds yielding 3-4%, and have annual income of $60,000 to $80,000, far above poverty level for even the largest families.  They can take part of the money and buy a house or apartment debt free and still have an annual income of a multiple of poverty level.  They can get themselves a great education and start moving up the income distribution.  They can spend for consumption on any of the huge number of products that our economy offers, from clothes, to food, to computers to medical care and more, all without need to touch principal of their $2 million gift.  They are completely liberated from government dependency for life.
  • Affordable housing giveaway:  They may have a nice apartment, but it doesn't give them a dime of cash income.  All families that started in poverty are still in poverty despite the giveaway.  They can't buy a home or indeed move anywhere but here.  They can't buy any food with the gift, or any clothes, or a car, or a computer.  For that matter, they don't have any cash to maintain the apartment, which means that it is highly likely that ten or so years from now this building will have serious maintenance issues, as do most New York "affordable housing" projects.  If their family situation changes (like, additional kids) and they need to move, too bad -- they lose whatever remaining value of the $2 million is out there.

Well, I guess Anette was too polite to say to the Times, "Why don't they just sell the building to the highest bidder and give us the cash instead of the apartment?"

For myself, it seems to me completely obvious that the main idea of "affordable housing" programs is to create a class of people permanently dependent on the government.  Why these programs have so much support among New York's voters, I cannot explain.  

A Few Thoughts On Obama's Immigration Executive Action

Several readers have urged me to share my thoughts on President Obama's Executive Action on immigration of a few days ago.  So here goes, in no particular order:

First, as loudly trumpeted as this is, I'm not sure that a whole lot is going to change.  The basic proposition here is a declaration by the executive that we are going to stop seeking to deport people in certain categories, e.g., those who have been here five years and have kids who were born here and thus are citizens.  (Here's a link to a government web site with descriptions of the Executive Orders.)  Well, were they actually deporting a lot of those people up to now, at least among those who avoided contact with the law and did not get caught committing crimes?  Not that I've noticed.

Supposedly these new Actions are being taken as a matter of "prosecutorial discretion."  Of many orders and memos released in this blizzard of paper, here's one talking about how they are going to be "exercising" that "discretion."  They seem to be saying that you have to ask for it, and they will only grant it on a case-by-case basis:

As an act of prosecutorial discretion, deferred action is legally available so long as it is granted on a case-by-case basis, and it may be terminated at any time at the agency's discretion.  Deferred action does not confer any form of legal status in this country, much less citizenship; it simply means that, for a specified period of time, an individual is permitted to be lawfully present in the United States.

And then you have to register and give them all kinds of information about yourself:

Applicants must file the requisite applications for deferred action pursuant to the new criteria described above.  Applicants must also submit biometrics for USCIS to conduct background checks similar to the background check that is required for DACA applicants.

Well, if you're working at some Silicon Valley shop, giving up that information may make some sense.  What if you're a casual day laborer?  And remember, the next President can completely change his mind and undo this thing, now that your name, address, and biometrics are all conveniently sitting in his data base. 

Of course they do have a method of luring you onto their radar screen, which is a few hundreds of billions of dollars of prospective welfare, food stamp and Medicaid benefits for the "regularized."  One of the great unrecognized advantages of our current very messy immigration system is its strong discouragement of the millions of illegals from signing on for the vast regime of handouts.  You might get discovered and deported!  Now that disincentive is at least partially gone. 

Indeed, without the prospect of handouts no one in their right mind would volunteer to register with the government like a subject of the Soviet Union.  So it would appear that the whole idea of the project is to get a few million new dependents signed up for the handouts.  If you haven't previously read it, I recommend my article from May 2013 titled "Any Immigration Reform Passed By Congress Will Make Things Worse."  (OK, I didn't think at the time that there might be a big immigration reform without it being passed by Congress.  I should have just said that any immigration reform will make things worse.)  Among other things, the article contrasted the U.S. versus European immigration regimes, with the Europeans having large number of immigrants qualifying for lots of handouts while most of our largely illegal immigrants did not.  How does that European system work out?

The result of that in places that have tried it, namely much of Europe, is a huge alienated underclass seething with resentment and ready to explode in riots and/or terror attacks.  For example, consider Sweden, currently engulfed in about a week of riots with no end in sight.  The rioters are predominantly muslim immigrants, who make up about 6% of the population, while receiving some 70 - 80% of welfare payments.  Or consider the extensive rioting in the poor suburbs around Paris in 2005, again largely by unemployed immigrants subsisting on various forms of state handouts.  France just had another round of such riots in Amiens in 2012.  Relevant to this issue is the now eighteen-part series by Mickey Kaus of the Daily Caller titled "Does Welfare Cause Terrorism?"  Recent subjects of the series have included the Tsarnaev brothers of Boston marathon fame - yes, they had been on welfare.

A theme of many commenters has been the damage done to the rule of law by these executive orders covering things that most had thought required Congressional action to achieve -- the "most" including President Obama himself, caught on tape numerous times denying that he had the authority to do what he has just now done.  Yes, there has been damage to the rule of law.  But the real damage was done long ago, when Congress got the idea that it's OK to pass hundreds and hundreds of laws, some of them thousands of pages long, that nobody can possibly read and understand, and that the executive can't enforce more than a small part of.  Examples: Obamacare -- well over 1000 pages; Dodd-Frank -- closer to 2000 pages. 

How many federal crimes are there?  Here is a Wall Street Journal article from 2011 describing an effort to get a count, where the counters ultimately gave up after coming up with around 3000 or so.  Manufacturing a 100 watt incandescent light bulb?  Installing a toilet of over 2 gallons flush?  At some point nobody pays attention to this stuff any more.

Over at Powerline, John Hinderaker suggests that the next time there is a Republican President, he can have a lot of fun with the new Obama non-enforcement doctrine.  How about announcing that the corporate income tax will no longer be enforced?

Under the Obama Non-Enforcement Doctrine, a president can’t enact new laws by decree, but he can exercise his discretion by not enforcing existing laws. This means that the doctrine is a one-way ratchet with an inherently libertarian bent. Given a little thought, conservatives could come up with a long list of laws that we would be better off without. Each one would be a candidate for the Obama Non-Enforcement Doctrine. 

Hinderaker predicts that the Democrats will soon cry "uncle" if a Republican President should try such a tactic.  Perhaps they would propose a Constitutional amendment, such as a requirement that the President "take care that the laws be faithfully executed."  Oh, wait a minute, he's pulling your leg -- that's what the Constitution already says (Article 2, Section 3).  Problem is, there aren't enough people in the universe to accomplish the job.  

Can't They Understand That Their Policies Are Counterproductive?

The Wall Street Journal recently has added a "Greater New York" section that you outlanders don't seem to get.  In this morning's version we find a report that yesterday our illustrious Mayor Bill de Blasio spoke at a breakfast forum in Washington sponsored by Politico.  (The on-line Journal article is behind a paywall, but Politico has video here.)  Of course, de Blasio took the occasion to advocate that if the Democrats want to recover and win in 2016, they need to get behind his "progressive" agenda, most particularly the fight against income inequality.  And also, of course, that the person to lead this effort is Hillary Clinton.

The Democrat should be willing to challenge the status quo. . . .  The Democrat should be willing to challenge wealthy and powerful interests and should marry that with a grass-roots organizing strategy that epitomizes the message. . . . 

Now, do you think that Mr. de Blasio's interviewer from Politico, Mike Allen, would have thought to ask how he could possibly have any credibility on the income inequality issue when the highest measured income inequality in the country is right here under his nose in Manhattan?  Needless to say, the issue did not come up, at least not in the portions quoted in the Journal article and not in the video that Politico has posted.  That's what it means to have subservient house journalists -- you can be interviewed by them, secure in the knowledge that they will not ask any difficult or embarrassing question, no matter how glaringly obvious.  Meanwhile, as I have pointed out here multiple times, a study of all Congressional districts shows that NY-10 has the highest "Gini coefficient" of all Congressional districts; and NY-12 is number 3.  Mayor de Blasio's office, at City Hall, is in the NY-10 district.

So really, isn't it obvious to everyone with a pulse that New York's collection of policies makes income inequality worse rather than better, at least as measured by the most widely used metrics?

Over the past weekend, the New York Times published an article in its Real Estate section that unintentionally illustrated how this comes about.  The article is titled "Divided by a Windfall," and describes the tensions that have arisen in a large Manhattan "affordable housing" complex from a proposal to remove the complex from the affordable housing program and allow the apartments to be sold on the free market.

Of course, "affordable housing" is de Blasio's favorite program above all others to address income inequality.  Yet from all anyone can observe about the man, he seems to be completely unaware that affordable housing programs clearly and obviously increase measured poverty and income inequality.  That's because the value of the rent saved by a low-income family through having a discounted rent is not counted as income.  Here in Manhattan, many families get rent discounts of $50,000 per year, and some get discounts of over $100,000 per year, none of which counts in their measured income.  Meanwhile, very sensibly, these people minimize their measured incomes by various means in order to qualify for these huge rent subsidies.

The project under examination by the Times is called Southbridge Towers.  It's not one of the low-income NYCHA projects that I proposed giving away in my article last week, but rather falls under one of the many other wacky New York housing subsidy schemes, this one called the Mitchell-Lama co-op.  According to the Times article, there are about 70,000 units of this type in New York (most outside of Manhattan).  The basic deal was this:  The state finances construction with tax exempt bonds.  You apply in a lottery for an apartment, and if you win, you get your apartment for a steeply discounted price.  (The Times gives the average price paid at Southbridge as $17,500.)  Theoretically, you "own" the apartment; but when you sell, you must sell back to the co-op corporation itself, and the price must be exactly what you had paid, here an average of $17,500.

Of course, with a desirable downtown Manhattan location (in fact quite near de Blasio's office at City Hall), these apartments are now worth an average of over $500,000; some may even be worth $1 million.  Can the residents cash in?  Actually, it's specifically permitted after a fixed period of years, as long as they re-pay the state-subsidized mortgage and refinance it privately.  So a proposal to do just that was presented to the shareholders at Southbridge, and passed in September.

A win-win you say?  You don't understand official New York thinking. 

“It’s a sad day for affordable housing in New York,” said John Fratta, 61, the only member of the 15-member Southbridge Towers co-op board to oppose the decision. “It’s really a tragedy.” . . . Mayor Bill de Blasio’s housing plan even suggests reaching out to former Mitchell-Lama developments to see if residents would consider returning to the fold.

Nobody in the article is actually able to articulate why exactly it is a "tragedy."  This complex has 1,651 units, which means that at over $500,000 per unit, it's worth close to $1 billion.  That's a billion dollars of value that has been locked away and prevented from entering the economy or anyone's income by brain-dead restrictions on resale.  Now suddenly a billion dollars of income will be created out of thin air.  Or, as the co-op board president who spearheaded the privitization put it:

“People of modest means now have an asset worth hundreds of thousands of dollars,” said Wallace Dimson, 68, the president of the Southbridge Towers co-op board.

And it's not just that they can sell the apartment.  There are lots of other ways to monetize some or all of the value once market sale is allowed.  For example, you can borrow against the value.

Well, it's not hard to see why de Blasio hates this privitization thing.  The process makes it glaringly obvious how ridiculous the affordable housing program was in the first place.

Letter To A Manhattan Resident

Last week the Manhattan Institute's City Journal published one of my articles, titled "Letter to a Manhattan Resident."  I'm putting the first part of it here, with a link over to the City Journal if you want to read the whole thing.

I am a resident of Greenwich Village in Manhattan. Recently, I received a letter from an oddly named group calling itself “The Rest of the Country.” Since the letter is not addressed specifically to me, I thought the senders wouldn’t mind if I shared it more widely.

Dear Manhattan Resident:

We could not help but notice that we voted very differently out here than you and your Manhattan neighbors did in the recent midterm elections. We sent large Republican majorities to the U.S. House and Senate, and also elected large majorities of Republicans to state governorships and legislatures. But in Manhattan, Democrats prevailed by huge margins in every one of 25 races for U.S. House, statewide offices, and the state legislature. In the races for New York governor, comptroller, and attorney general, the Republican candidates each got only about 13 percent of the vote in Manhattan. In 22 races for federal and state legislative offices, the Republican candidates got less than 10 percent of Manhattan’s votes in six of them, and less than 20 percent of the votes in another seven. And in five of the 22 races, including two of the four for U.S. House, no Republican candidate ran at all. The most successful Republican contender in Manhattan got 32 percent of the vote in an Upper East Side assembly district. His Democratic opponent won with twice as many votes.

Out here we regularly read newspapers and watch television news reports emanating from Manhattan. We understand that you think we are stupid, if not immoral, in our failure to support the “progressive” public policy agenda of your Democratic politicians. But given the huge disparity between our patterns of voting and yours, we thought we should explain how we see things.

By per capita income, Manhattan is the richest county in the country. In New York, and in Manhattan specifically, you have put in place more government programs to address poverty and income inequality than has any other state or locality. You have higher taxes than any other jurisdiction. You have a vast array of housing programs, from extensive low-income public housing, to rent regulation, to multiple “affordable housing” initiatives. Your welfare programs are the nation’s most generous. You have the most generous Medicaid program, too. And you spend almost double the national average per student on K-12 education.

Yet, even with all those programs and all that spending, according to Census Bureau statistics, Manhattan’s poverty rate is above the national average. And in a recent study of income inequality broken down by congressional district, a Manhattan district, NY-10, was shown to have the highest income inequality of all 435 districts in the whole country; and another Manhattan district, NY-12, came in third.

Continue reading . . .