‘Affordable Housing’–The Myth Of Public Subsidy And Social Engineering

The DC government, like many others, has passed laws to ‘encourage’ developers to provide a certain number of ‘affordable’ housing units in any new high-rise building they construct.  The arguments for such ‘affordability’ are many.  It is important for firemen, police, and teachers, advocates say, to live near their work.  They are the backbone of middle class society, perhaps its most important members because of the charge they carry, the responsibility of safeguarding our communities, teaching our children, and saving our homes, and they need public assistance.  Theirs is a higher good, say proponents of affordable housing laws, rent control, and rent stabilization.

‘Diversity’ is perhaps the most relevant principle underlying public support of housing.  There is something inherently good about a mix of cultures, ethnicities, race, and incomes.  A city will be a better, more tolerant, and more civil place if such social mixing occurs.  It is only right and proper for government to accelerate the trend and to engineer a more welcoming and accepting society.

Neither policy stands up to scrutiny.  There is no reason why public servants cannot live where they can afford and commute to work like employees in the private sector.  Young workers in Washington routinely live in the suburbs, in small, shared apartments in Rockville and Gaithersburg, and accept the opportunity cost and Metro fare as a worthwhile expense given the attractive salaries paid downtown.  Firemen can also live out of town, come in for their shifts, and be as ready as any colleague who lives near the station to fight fires.  The same goes for police and educators.  A teacher in a Northwest DC school who lives in Falls Church performs no less well than one who lives within city limits.

Proponents of affordable housing say that public laws and subsidies enabling these public servants to live close to work has an ancillary public good – fewer commuters, less pollution, and less congestion.  Yet the number of public workers in one of the nation’s booming high-tech regions is infinitesimal compared to the number of private employees.   Washington’s congestion is due to the economic boom which has brought it out of the one-horse, one-employer, government town, to the place to live. 

If one were for a moment to consider affordable housing proponents’ argument, how might government assure fair and equitable distribution of public resources?  It might be all well and good for the City Council to vote in favor of its firemen, teachers, and police; but no law could be that exclusive.  Anyone falling under an income threshold  would and should be eligible for such housing.  Such a law is a boon to young private sector workers happy to be able to live in high-rent, exclusive neighborhoods of the city paying low rent.  Why should government support them?

As importantly, what would be the threshold?  One cannot fix rent limits without considering income; and how indeed could that be determined? Prevailing firemen’s salaries? And how to fix the rent?  One could match base (fireman’s) income with rents paid, and fix ‘affordable’ rates accordingly. However, this would tend to keep rents lower than they should be given ‘aspirational valuation’.  Families with modest income may be willing to pay a higher proportion of their disposable income for housing in a desirable neighborhood, and any rent below this aspirational level would be uneconomic.

There are two forms of government support for affordable housing.  The first is by law which requires developers of new buildings to reserve a certain percentage of units for lower-income families.  The second is to enforce rent control, a program whereby landlords can only raise rents minimally and gradually for existing tenants. 

The argument for the first option is that taxpayers pay nothing for the program.  Landlords simply will charge more rent for their market-based units in order to cross-subsidize the low-rent ones.  This however will result in two undesirable  consequences.  First, the higher rents will discourage those families of modest means who, as above, assess a high aspirational value to apartments in desirable neighborhoods.  In other words, the market could, left alone, serve the same purpose as government mandates.  Perhaps bottom-rung middle class renters would be excluded, but why should government make that choice or distinction?

Second is that developers under an affordable housing mandate will build units inferior to those at market rates.  They will be smaller, lower, with less light and access while the higher-than-market rents will assure luxury accommodations for those renters on higher floors.  The buildings will be de facto segregated.  Such physical segregation will ensure normal, predictable social segregation.  The young lawyers and lobbyists on the higher floors will be even more unlikely to mix with the police and fire fighters on the lower.

Rent control is an even worse option, for, as in the case of San Francisco and other cities with strict rent control laws, landlords simply hold properties off the market, benefitting from increases in land values while avoiding the losses incurred because of insufficient rents. Not only that, the city benefits from high rent districts.  Former NYC Mayor Bloomberg understood that the development of the High Line, a rails-to-trails pedestrian walkway through lower Midtown Manhattan, would generate economic development nearby.  He was right, and the property taxes from the new desirable high-rent buildings have helped fill the city’s coffers and permitted it to invest in better infrastructure, parks, and public services.  Lower income residents and small business owners were indeed displaced, but such displacement is part of a dynamic economy.

Finally, ‘diversity’.  Despite the clamor and the insistence on its higher good, there is no evidence that it in fact contribute to civil harmony, tolerance, and good governance.  In fact, as this era of identity politics has amply shown, diversity has contributed to divisiveness and disunion. Engineered diversity – like any other public distortion of the economic or social marketplace – is more likely to set back social, racial, and ethnic integration than to encourage it.

Likes have always attracted likes.  Well-paid, well-educated professionals want to interact with people like them – not policemen, firefighters, and utility workers.  They want their children to grow up and be educated in a homogeneous environment and do not want them to be held back by students from less-motivated if not dysfunctional families.  For all the public expressions of support for diversity, ambitious families want none of it.  This conviction has nothing to do with, as many critics claim, racism – the desire to keep schools white.  It has only to do with keeping them upper middle class, high-performing, and socially homogeneous. One of the greatest advantages of Washington’s private schools is that students will be in a uniform community of highly intelligent, motivated, interested, and intellectually curious classmates.

In other words, given fundamental social behavior, the market works quite well.  Despite insistence that social engineering works, human nature will always trump interventionism.  ‘Affordable’ housing is but one example of ill-considered social engineering and perhaps the most visible and obvious.  Yet such engineering occurs throughout the public system.  Schools have become experimental laboratories for social reformation.  Academic excellence is no longer the unique guiding principle of elementary education. Teachers are now responsible for ensuring tolerance of ‘difference’, promoting ‘multiple intelligences’ at the expense of high-performance, socially practical disciplined cognitive learning, and readjusting gender behavioral patterns – e.g. discouraging typical male behavior in favor of a more collaborative, cooperative female environment) .

It is no surprise that parents who can afford it, quickly move their children to private, parochial, or charter schools.  Not only are they in search of a higher quality education; they are fed up with prescriptive administrative policies and government interference.

Affordable housing, like all other public social engineering programs will wither and die, removed without notice by economic dynamism.  It will be revived in down times – the New Deal was never finished and buried – but in good times or even modest ones, it will remain marginal and insignificant.