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.