« Give. Me. A. Break. | Home | Friday Linkfest: 10 Reasons to Remember »
The Affordable Housing Bunny Hops Into Pasadena
By Centinel | May 8, 2008
Joe Piasecki tugs at the heartstrings at the beginning of his piece about Prop. 98 and I had to count to ten to avoid banging my head against the wall:
Not far from the 61 new luxury condominiums built recently behind the historic Friend Paper Co. building in Old Pasadena, a tiny homeless woman sleeps inside a tattered, empty suitcase.
All that sticks out is an arm, a shoulder and her head, which she covers with a blue floral cloth — whether out of shame or fear of being identified she wouldn’t say, ignoring questions.
Next to her is a dirt mound where Ambassador College’s former east campus was demolished to make way for even more high-end housing. The Westgate Pasadena Project will give rise to an impressive mix of 820 condos, townhomes and apartments, but not all of these will be out of reach to people who might otherwise end up like the woman living in a suitcase.
In order to comply with Pasadena’s inclusionary zoning ordinance, developer Sares-Regis is setting aside 85 apartments as affordable housing for low-income residents and paying additional city fees toward generating even more subsidized homes. The Friend Paper Co. project chose to pay more than $1.2 million into the city’s affordable housing creation trust fund in lieu of selling nine condos below market rate, according to Kermit Mahan, who works in the city’s housing division.
But whether any of that housing reaches local people who need it, say affordable housing activists, depends on the results of the June 3 state primary election.
Proposition 98 aims to restrict government’s ability to use eminent domain to seize property, but would also make all forms of rent control — including the city’s inclusionary zoning ordinance — illegal in California and threaten other renter protections, they warn.
The contrast of a luxury development being built beside a homeless woman’s camp is a striking one. In fact, I saw that selfsame woman when I was driving past the area yesterday and remarked to my wife on the lady’s lamentable condition. However, I did not respond to her plight by thinking, “Without rent control, she would be homeless.” Why? Because we have rent control, and she’s still homeless.
More importantly, Piasecki is dodging the real issue in this article: does rent control work? I don’t mean that as some evil capitalist; I mean that as advocate of the poor, as someone who has spent a lot of hours in soup kitchens, and as someone who, in my younger days, definitely worried about the cost of an apartment in Pasadena (though things weren’t as expensive as they are now). I mean: is rent control the best way to help poorer people have a place to live?
It’s not a theoretical question. We should be able to quantify how much money the city charges in fees to subsidize “affordable housing,” how many “affordable housing units” are made available, and what the average income is of the folks living in those units. Then, we should compare that to the effects that rent control has on the rest of the market: how much more do non-rent controlled apartments cost as a result of rent control? We should be able to compare those numbers side by side and say either, “Wow, rent control is amazing and really helps poor people” or “Hmm, rent control actually helps a really small number of people, and raises prices for everyone else.”
An economist would tell you, in a heartbeat, that the latter is true. Price controls have long been debunked by theorists of all persuasions. As Wikipedia, source of all knowledge of everything tells us:
Most economists believe that a ceiling on rents reduces the quality and quantity of housing available.[5] This view is based on analysis of empirical evidence as well as the understanding generated by theoretical models.[6] Even such liberal economists as Paul Krugman have cited rent regulation as a case of “economic stupidity” which despite its good intentions leads to the creation of less housing, raises prices, and increases urban blight.[7]
To reiterate: I have no reason to dislike rent control other than the fact that I like the idea of people being able to get housing at the most affordable price they can. If rent control is hurting folks on the margin, as I suspect it is, then we need to come up with other solutions to the problems that it purports to solve (i.e. rapacious slumlords, etc.). The fact is, we need to grapple with the facts of rent control, not the good intentions that are behind it. Good intentions do no equal a good idea. And Piasecki is failing as a journalist by limiting the story to rhetorical extremism that ideologues use rather than a discussion of the merits of a piece of public policy.
Last 5 posts in Main Page
- Feed Portantino's Election Reelection Campaign - July 23rd, 2008
- Alvarez Waterboarded! - July 23rd, 2008
- Morning Linkfest: 7 Reasons to Hate Corporations - July 23rd, 2008
- Even the Cost of Underwear Is Increasing - July 23rd, 2008
- Pasadena Has a New City Clerk - July 23rd, 2008
Topics: Main Page, Media, Pasadena |
May 8th, 2008 at 9:43 pm
Piasecki is failing as a journalist not because he limits the “story” to rherorical extremism, but because he is allowing a particular group to use the paper as nothing more than a media outlet for press releases. No investigation, no facts, no interviewing of the folks affected by rent control…you know, no journalistic integrity.
And the papers wonder why they are failing in the marketplace…I am convinced the best way I can support our local “newspapers” would be to buy a parakeet.
May 8th, 2008 at 11:03 pm
Without question, rent control is a failure wherever it is found in the US.
There are no government subsidies in rent control situations. The financial burden is placed squarely on the shoulders of private property owners.
The government has many reasonable, fair and legitimate ways to help the poor, elderly, disabled and others with their rent. Government can provide rental assistance, or buy and/or build residential housing and provide it to those in need at low cost or even no cost. But the government should not force a private property alone to bear the entire cost of renting his or her property at less than the fair rental value.
May 8th, 2008 at 11:38 pm
C & P you should have a print version of Foothill Cities.
May 8th, 2008 at 11:43 pm
Hmmm, if you’re willing to cover the costs, sure thing. Ah, if only we could…
May 8th, 2008 at 11:55 pm
Its not impossible.
May 9th, 2008 at 6:43 am
To the best of my knowledge, Pasadena does not have rent control.
That said, their idea of “affordable” housing is laughable. It’s still pricey. And Pasadena’s programs to help first time home buyers are rather restrictive when you read the fine print (you often have to sell to another first-time home buyer in the program, which means that you don’t sell at market value, for example).
Rent control is a bad idea for the reasons mentioned above. It hurts new renters coming into the market by limiting the availability of units because old renters hang on to their rentals for longer than they should due to the stupid low rents that they pay. It hurts landlords who can’t get free market rents and maintain buildings as well. It hurts long term renters because it doesn’t give them an incentive to buy property and build wealth.
May 9th, 2008 at 6:48 am
I previously supported rent control and it’s a dumb idea.
Doesn’t work, is not fair to a free-market society, etc.
May 9th, 2008 at 6:49 am
P.S. A great and well-written post that I agree with.
May 9th, 2008 at 12:28 pm
As has already been noted, Pasadena doesn’t have rent control. Pasadena has an affordable housing fund that the developer paid in to.
I realize the reason for this post was to rant against rent control. But rather than go off on a irrelevant free market tangent, could you clarify if you are against the affordable housing fund actually described in the article you’re attacking? And if so, why?
May 9th, 2008 at 12:47 pm
JB, fair enough.
My policy towards affordable housing programs is just the same as my feelings about rent control. If it works, let’s use it. If it doesn’t, then let’s not.
Affordable housing programs may not be rent control proper, but they tend to be plagued by similar problems; they favor a small number of folks with cheaper housing, while having a negative impact on people in the rest of the market. For example, the money that goes into the affordable housing fund doesn’t come out of thin air nor is it donated by the developers that pay into it. They will be making the same profit margins by one way or another. So, they view the fee they pay into the fund as a tax and account for it by raising prices on other units.
Consider it this way: I have five homes to sell. Each cost me eight dollars to build. I’d like to make a twenty percent profit, to invest my company and compensate myself, so I charge ten dollars per home.
Now, if the city comes in and says “one of these homes must cost two dollars, instead of ten dollars,” my response would be to raise the prices of the other homes to make up the difference. So, one person gets a house for two dollars, and everyone else pays twelve.
The same goes for a case like the affordable housing fund. If all my costs for those five houses previously added up to forty dollars, but the government says “oh, and you need to pay ten dollars to an affordable housing fund,” I’m up a creek. I gotta add two dollars to the cost of each of my houses. And since I still want to make a profit, each home, instead of ten dollars, costs twelve. So, now the homes are more expensive for everyone.
Of course, if the program works, and everyone can see that it works, and with that money, the city is able to create a wonderful affordable housing program that really makes sense, we could just call it a tax and be done with it. It’s a tax, affordable housing is a government program, and that’s that. The problem that I have is no one ever actually provides evidence that we’re better off with an affordable housing program than we would be without it. I don’t care if we have one or not: I’m interested in having housing be as affordable as possible. I just want someone to make a real, numbers-based argument, not wave the ten elderly people who are in affordable housing in my face and say, “Do you hate old people?” No, I love ‘em. I’m just concerned about ALL the people on the margin, not just the lucky few who get into artificially cheap housing.
May 9th, 2008 at 12:51 pm
What exactly does the affordable housing fund do? I don’t know. Where does the money go? How does it increase the inventory of housing on the low end of the cost spectrum (particularly in the case where the developers just pony up the money, rather than include so-called “below market” units in their developments)? It seems to me that the whole spectrum of housing prices needs to shift. I can’t imagine that Pasadena could significantly increase inventory of housing on the low end, and at the same time not have a shift in the upper end.
Incidentally, there is a spectrum-wide shift taking place right now. And selfishly, I think it’s great to see housing prices tumble. But then again, I look at my house primarily as a place to live in, not a place to store my money in.
May 9th, 2008 at 5:19 pm
Centinel,
I read your explanation in 10 above and would question one of your assumptions. First off, a developer is not going to raise his price on a housing unit to cover his cost for affordable housing fees or units. A developer is going to price his product as high as the market will allow, affordable housing fees or not. So, the developer is not setting the price, the market is. If the market price will cover the affordable housing fee (or the cost of the affordable units) and the developer still has a large enough margin or profit, he will develop his property accordingly. If the market price does not cover the developer’s costs and profit, he will not (or should not) develop the property. If he does, the cost does not change but his profit does. The developer can not just increase his prices to cover the costs and profit, since the market determines his sales price.
Now the question then arises, does the affordable housing policy affect the market dynamics enough to limit the overall supply of new housing units, which causes the market price of new units to increase and also cause existing housing stock to become less affordable? I would argue that zoning and slow growth policies have a far greater effect on market supply dynamics than the affordable housing policies and these policies counter the efforts the City is trying to make on affordable housing.
I agree with you that we need more empirical evidence that affordable housing programs work. I would also like documentation and data on the number of government controlled/administered affordable housing units within Pasadena and also the number of market rate housing units that would be classified as affordable, to get a better picture of the true inventory of affordable housing units and the extent of the problem.
May 9th, 2008 at 5:46 pm
JM:
Great points. Of course, if the city is introducing a cost that equally impacts all developers, than presumably the cost will be passed on in some relatively uniform manner. But you’re right to point out that it’s not like the developer can wave a wand and set the price as in my very simple explanation. Your explanation certainly is a better description:
Agreed. And I can’t say with any certainty that affordable housing programs have a greater effect than zoning or slow growth policies; you’re probably right in saying that those have a much higher impact. Of course, that’s where I’d like to see the discussion go; toward an empirical debate that really tries to analyze the merits of public policy, rather than merely relying on empty claims about the rectitude of offering “affordable” housing. I like focusing on affordable housing programs, because you should be able to separate them from the broader debate and see pretty quickly whether or not they are worth it, i.e. how much goes into that fund, how many units come out and how many people benefit and to what degree?
May 10th, 2008 at 8:05 am
Please forgive the following self-promotional plug.
On Pasadena’s Inclusionary Housing Program see the following articles by Wayne Lusvardi, Pasadsena resident, real estate appraiser, and former low income housing developer for L.A. County:
Inclusionary Housing is a Pea Shell Game
http://www.californiarepublic.org/archives/Columns/Lusvardi/20050706LusvardiPea.html
Inclusionary Housing is Sociological Suicide
http://www.californiarepublic.org/archives/Columns/Lusvardi/20070815LusvardiSuicide.html
The Mayor and the Small Landowner
A Parable about Inclusionary Housing
http://www.theonerepublic.com/archives/Columns/Lusvardi/20060320LusvardiMayor.html
May 10th, 2008 at 8:24 am
Also see:
The Mayor and the Small Landowner: A Parable of Inclusionary Housing
http://www.theonerepublic.com/archives/Columns/Lusvardi/20060320LusvardiMayor.html
Inclusionary Housing is a Pea Shell Game
http://www.theonerepublic.com/archives/Columns/Lusvardi/20050706LusvardiPea.html
Inclusionary Housing is Sociological Suicide
http://www.theonerepublic.com/archives/Columns/Lusvardi/20070815LusvardiSuicide.html
May 13th, 2008 at 9:59 am
[…] college was established back in 1947 as a venue to train ministers for the church. Centinel and Publius have pointed out that a place constructed out of charitable donations for a “transcendent” purpose […]
May 14th, 2008 at 2:18 pm
Related to this issue - Pasadena has lost units of Section 8 housing over the past decade (don’t have the numbers, but I’m pretty sure this is true). Section 8 landlords must keep units in full working order, complete with stove and fridge, etc. The demand for housing in Pasadena is so great that landlords can rent units without stove, fridge, etc. for just as much or more as they would get for the units through the Section 8 program.
I once tried to help a family living in a rarer-than-hens-teeth three bedroom Section 8 unit. The landlord raised the rent from $1200 (the agreed-upon Section 8 rate) to $1300. I was willing to pay the extra $100 just so the family could stay an extra month or two while finding someplace else to live. My do-gooderism was no doubt in violation of some Section 8 rule, and the landlord didn’t want the $100 anyway. Raising the rent was the landlord’s way of de-Section 8-ing the property. Sad.
May 15th, 2008 at 5:39 am
BTW - Why isn’t JP picking on the health care system? Certainly that homeless woman has health issues…