Subsidized and/or Affordable Housing

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Nick
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Subsidized and/or Affordable Housing

Postby Nick » December 11th, 2012, 5:34 pm

After seeing some comments about it in other places, I thought it wouldn't be a bad idea to have a dedicated thread for this topic. I'm interested in seeing the opinions of some of our users who are smarter and more articulate than I.

Lately I've been reflecting about the whole premise of building subsidized, "affordable" housing and increasingly I'm thinking it's not really a great idea. For specific purposes (the disabled, the elderly, etc) it makes sense. But if your only qualification is that the tenants are low-income, I can't help but think that this distorts the market just as much as increasing road capacity in Delano or the home mortgage interest tax deduction. Plus, as is established, it concentrates low-income people into certain areas. I realize this would probably happen regardless.

I'm certainly not trying to make the argument that "affordable" housing is being built with bad intentions, but what do people think about this?

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Re: Affordable Housing

Postby Tcmetro » December 11th, 2012, 6:10 pm

If you want to see truly market rate conditions in housing look at any third-world city. Mumbai, Bangkok, Lagos. Everyone gets what they can afford. So if you are poor you live in a dirty slum without AC, water, electricity. If you are rich you live in a fancy highrise with all the modern amenities. While the extremes in income inequality are not as pronounced in the US, you will basically have the same situation. Poor people will live in the run down housing (and thanks to the high drug use amongst Americans, high crime neighborhoods), and wealthier people will live in neighborhoods without all of these problems. Basically, if you are for market rate conditions, don't be hypocritical and advocate the cleaning up of neighborhoods where the poor people have to live. If the houses in the high-crime poor neighborhoods start being demolished, where are the poor supposed to live?

In any case the US probably subsidizes housing the least in the first world, and transportation the most. Basically the government here promotes mobility for those who can afford it, but you are near SOL if you are poor and want a decent place to live. The government hands out peanuts to the poor in comparison to all the subsidies on those who can actually afford to pay their way.

As more related to the discussion on development in the Twin Cities, I don't think that a lot of these places being built are accepting Section 8 vouchers, it seems that they are targeted to those who are working class or maybe lower middle class, definitely not the welfare class.

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Nick
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Re: Affordable Housing

Postby Nick » December 11th, 2012, 7:03 pm

Tcmetro wrote:If you want to see truly market rate conditions in housing look at any third-world city. Mumbai, Bangkok, Lagos. Everyone gets what they can afford. So if you are poor you live in a dirty slum without AC, water, electricity. If you are rich you live in a fancy highrise with all the modern amenities. While the extremes in income inequality are not as pronounced in the US, you will basically have the same situation. Poor people will live in the run down housing (and thanks to the high drug use amongst Americans, high crime neighborhoods), and wealthier people will live in neighborhoods without all of these problems. Basically, if you are for market rate conditions, don't be hypocritical and advocate the cleaning up of neighborhoods where the poor people have to live. If the houses in the high-crime poor neighborhoods start being demolished, where are the poor supposed to live?

In any case the US probably subsidizes housing the least in the first world, and transportation the most. Basically the government here promotes mobility for those who can afford it, but you are near SOL if you are poor and want a decent place to live. The government hands out peanuts to the poor in comparison to all the subsidies on those who can actually afford to pay their way.

As more related to the discussion on development in the Twin Cities, I don't think that a lot of these places being built are accepting Section 8 vouchers, it seems that they are targeted to those who are working class or maybe lower middle class, definitely not the welfare class.
Well in the third world you have an extreme example of the market doing it's thing--which I'm not considering. You can have regulation without subsidization. I'm all for a strong housing code. We have the ability to enforce standards to a much higher level than insert-third-world-mega-city-here.

And I don't know that pointing out that we have a relatively low rate of subsidization in the first world is necessarily a great point. Remember that summer a few years ago when all the cars in France got set on fire? Intentionally ghettoizing the poor and giving them even more generous subsidies also seems like a bad idea if the point is to eventually get everyone on the same page.

Again, kinda just thinking out loud here. I'm gonna change the title to "subsidized" housing to make it clear that that's what I mean.

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Re: Subsidized Housing

Postby David Greene » December 11th, 2012, 8:47 pm

Affordable housing can integrate very well with market-rate housing. There are good examples in Baltimore where a single development has both affordable and market-rate units. One of the things that makes it works is that the exteriors are all basically the same quality - it's the interior amenities that differ.

I'll just put a stake down and say that it's unacceptable for anyone to be homeless in a country with as much wealth as ours. Now, that doesn't mean I think that we can completely eradicate homelessness but it does mean we have to do a lot better than we have been and that means expanding our ability to provide affordable housing.

One of the things we really need to do is place affordable housing so as to integrate segregated communities. Among other harms, segregated communities impact children because segregated neighborhoods create segregated schools. It affects ALL kids negatively, not just the poor. That has been documented in multiple studies and is one of the reasons Dr. Krull in Eden Prairie pushed so hard for integration. The fact that she was forced out is a great tragedy for our region. Fortunately, she is working for integrated schools in other powerful ways.

So we definitely should not concentrate affordable housing in one or a few places. But then again, we should not *force* the poor to live somewhere they do not want to live. Real choice is what we need.

It's important to understand that the definition of "affordabale" is actually quite expensive. Units built by private developers with public subsidy are not accessable to the most vulnerable among us. We have to figure out a way to close that gap.

I have seen projects that get an "affordable housing" subsidy where I really questioned whether we made a good investment for the commmunity rather than lined a developer's pockets. I am far for an expert in this area but this is what I have learned from talking to the experts and just watching things myself. I certainly don't have all the answers but I do know we need to find them.

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Re: Subsidized Housing

Postby VAStationDude » December 11th, 2012, 9:35 pm

The "market" simply can not provide adequate housing for low income individuals. Ringing up Target purchases all day or cleaning hotels does't pay well enough to provide adequate, humane housing for an individual much less any dependents. Now, there are probably problems with how housing policies are implemented but I'm knowledgeable enough to comment on possible improvements.

I'm not sure if housing subsidies for well off individuals are germane to this thread but it should be noted that the mortgage interest deduction alone costs the federal treasury roughly $100 billion of income tax yearly. Real estate taxes and interest just barely put my itemized deductions above the standard deduction, saving me less than $100 a year in federal taxes and $0 on the state side. Rich people, on the other hand, are allowed an interest deduction on $1.1 million of housing debt and are also allowed to include a second home in this deduction. At the 33% and 35% bracket this deduction is a significant tax savings.

Section 8 vouchers run under $20 billion and low income housing tax credits come in at roughly $6 billion. I'm probably missing a program or two but I'm sure they're peanuts compared to the mortgage interest deduction.

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Re: Subsidized Housing

Postby David Greene » December 11th, 2012, 9:47 pm

VAStationDude wrote:I'm probably missing a program or two but I'm sure they're peanuts compared to the mortgage interest deduction.
This is an excellent point. I would completely support eliminated the mortgage interest deduction as well as a number of other tax expenditures.

Tax expenditures make up ~$1.4 trillion of the federal budget, by far the biggest portion, much bigger than defense and much bigger than health/Medicare.

To put some perspective on this, eliminating all federal tax expenditures would almost completely close the deficit.

Since this spending primarily benefits the wealthy, it makes perfect sense to me to apply some of this savings to do better by our most vulnerable people.

helsinki
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Re: Subsidized Housing

Postby helsinki » December 12th, 2012, 4:23 am

David Greene wrote:
VAStationDude wrote:I'm probably missing a program or two but I'm sure they're peanuts compared to the mortgage interest deduction.
This is an excellent point. I would completely support eliminated the mortgage interest deduction as well as a number of other tax expenditures.

Tax expenditures make up ~$1.4 trillion of the federal budget, by far the biggest portion, much bigger than defense and much bigger than health/Medicare.

To put some perspective on this, eliminating all federal tax expenditures would almost completely close the deficit.

Since this spending primarily benefits the wealthy, it makes perfect sense to me to apply some of this savings to do better by our most vulnerable people.
Piling on, I must completely agree. The mortgage interest deduction is generally quite regressive. Ask the pitchfork-toting socialists at the Wharton School and Fox Business:

"According to a study by The Wharton School at the University of Pennsylvania, mortgage interest deductions for households with incomes between $40,000 and $75,000 average just $523, while households with incomes above $250,000 enjoy an average write-off of $5,459, or more than 10 times as much.

You must itemize on IRS Form 1040 Schedule A to claim the deduction. If you do, you can also deduct the interest paid on a second home. The rich do both, but most of the middle class does neither.

'For millions of taxpayers, therefore, the mortgage interest deduction provides no added incentive to buy a home," says Hanlon. "It makes no sense in terms of targeting the incentive at the people who need or could use it.'"

See: http://www.foxbusiness.com/personal-fin ... avor-rich/

In addition, I think the point about not concentrating poverty is well put. A subsidized or fully state-funded apartment building, regardless of the benign intent to shelter the indigent, creates a ghetto (defined as a space that isolates socio-economic deprivation). If instead, the people who would have inhabited such a building are nestled within cohesive pre-existing communities, the likelihood that the poor will thrive (and that the other classes won't fear the poor as much) is higher, in my opinion. This essentially entails designing a financing mechanism that incorporates small, modestly priced units into renovations or new construction (located, ideally, near transit to employment and within walkable distance of grocery stores). That said, we should always be vigilent against armchair theorizing about what's best for the poor; it is probably important to ask them first.

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Nick
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Re: Subsidized Housing

Postby Nick » December 12th, 2012, 10:42 am

VAStationDude wrote:The "market" simply can not provide adequate housing for low income individuals. Ringing up Target purchases all day or cleaning hotels does't pay well enough to provide adequate, humane housing for an individual much less any dependents.
Yeah, but that's the thing though. We see that there are people making $7.75 an hour at 30 hours a week and can't imagine living like that. We hear about Wal-Mart paying their employees far below a livable wage and literally telling them to apply for Medicaid and EBT. Is subsidizing housing kind of the same thing? Shouldn't we be expecting people to be paid a livable wage? I guess I'm trying to think deeper about what some real solutions could be here, instead of just giving money to/not giving money to people. We've created a system where, while being poor certainly isn't easy, it is very easy for the poor in this country to end up living completely outside the regular economy. I don't know that that's a good setup if we're trying to get people out poverty and into the legitimate workforce.

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Nick
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Re: Subsidized Housing

Postby Nick » January 11th, 2013, 10:11 am

A new piece from Marlys about the mortgage interest deduction:

http://www.minnpost.com/cityscape/2013/ ... our-cities

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Re: Subsidized Housing

Postby VAStationDude » January 11th, 2013, 6:04 pm

Good article. I like the housing credit idea. Eighteen percent of rent, mortgage and property tax maxed out at $3000. Throw in a very gradual phase out between $100k and $200k of income. Not likely to happen but such a policy change would be a boon to Minneapolis. Nasa's friends in the trades would be busy with at least a couple new towers.

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Re: Subsidized Housing

Postby Andrew_F » January 14th, 2013, 6:15 pm

What I don't understand is the idea that subsidized housing needs to be new construction. Why are we paying people to build apartments that would rent for $1400 so they can rent them for $600 when instead we could go out and pay landlords who have $800 apartments to rent them for $600? I realize there are county programs that do this-- what is wrong with doing this for all subsidized housing? The idea that plenty of people receiving assistance are living in nicer places than those without assistance really bothers me.

Obviously switching the formula of welfare isn't going to fix everything-- increasing high school graduation rates and access to/quality of trade and 2-year schools to make more of our population competitive in a global employment marketplace is IMO the most important thing.

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Re: Subsidized Housing

Postby garfield » January 17th, 2013, 12:27 am

DaPerpKazoo wrote: The idea that plenty of people receiving assistance are living in nicer places than those without assistance really bothers me.
I totally agree. I have a small rental building in Whittier, and last fall I was going to rent to someone receiving assistance from the county (he was disabled, and a county program was paying for 100% of his rent). Nice guy, and I think it's great that we have assistance programs for those that are unable (not unwilling) to provide for themselves.

The inspection for the unit was the same inspection as Section 8. I was fine with some things that were called out in the inspection, like a missing screen from a window and a burner on the range didn't light every time the knob was turned. But there were also things like a rust stain on the bottom of tub (right next to the drain on a thirty-year-old bathtub). The toilet seat was slightly loose. There was a tiny bit of loose paint on the ceiling in the bathroom.

My sentiments were exactly the same as yours... why should someone who is not paying for their own rent have a nicer place than those that do pay for their own rent? I basically refused to fix those tiny things, so the assistance program wouldn't let the guy move in, and found a renter immediately...who is very happy, even if some tiny things in the apartment aren't perfect.

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Re: Subsidized Housing

Postby mark » January 17th, 2013, 2:12 am

Nick wrote:
VAStationDude wrote:The "market" simply can not provide adequate housing for low income individuals. Ringing up Target purchases all day or cleaning hotels does't pay well enough to provide adequate, humane housing for an individual much less any dependents.
Yeah, but that's the thing though. We see that there are people making $7.75 an hour at 30 hours a week and can't imagine living like that. We hear about Wal-Mart paying their employees far below a livable wage and literally telling them to apply for Medicaid and EBT. Is subsidizing housing kind of the same thing? Shouldn't we be expecting people to be paid a livable wage? I guess I'm trying to think deeper about what some real solutions could be here, instead of just giving money to/not giving money to people. We've created a system where, while being poor certainly isn't easy, it is very easy for the poor in this country to end up living completely outside the regular economy. I don't know that that's a good setup if we're trying to get people out poverty and into the legitimate workforce.
Not a problem, I have a 4 step solution that includes short-term stimulus and long-term entitlement reform, while drastically increasing manufacturing production in the US.
1. identify every country with which the US has a trade deficit. Bomb them, eliminate their manufacturing capacity and destroy their infrastructure.
2. sell these countries the goods they'll now need
3. Per Lewis Black, identify the poorest corner of the US. Build a gigantic trebuchet, have a big ribbon cutting, make it a tourist destination, so development happens all around it
4. Launch our seniors into the sun.

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MPR discussion about housing policy

Postby exiled_antipodean » March 19th, 2013, 1:03 pm

http://minnesota.publicradio.org/displa ... ing-policy

Not as much discussion as I'd like about supply and construction. A lot of it was about financing and subsidies, though one of the discussants mentioned "well-intentioned restrictions on construction" or something along those lines.

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Mortgage Interest Tax Deduction

Postby mulad » May 22nd, 2013, 1:16 pm

I guess this has been out for a few weeks, but it just popped up on a Streetsblog post today: Pew Research recently did a study of the geographic distribution of the mortgage interest deduction for income tax, showing how it's heavily biased toward suburban/exurban areas at the expense of urban core areas and empty rural areas, creating donut shapes in metropolitan regions. They also have some interactive maps which go down to the ZIP code level, although most of their maps are presented on a state-by-state basis.

http://www.pewstates.org/research/repor ... 5899471375

This is a regressive deduction. It benefits high-income earners with expensive homes the most while minimizing the benefit to poorer homeowners -- and zero benefit to renters.

In Minnesota, we do have property tax refund through the M1PR form which balances this out to some extent (and includes renters), though it seems to cut off relatively quickly once you reach a moderate income level (at least in my experience as a renter).

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Affordable Housing

Postby ECtransplant » December 11th, 2013, 1:05 am

I didn't see another thread for affordable housing, but perhaps the mods feel it belongs with the subsidized housing thread. I'm sure they'll merge them if they feel it's appropriate.

Anyway, I know a common complaint of current construction is the lack of more affordable units. Although I agree with the point that building more today means those future old buildings will supply more affordable housing in the future, I'd thought I'd point out that in cities that aren't tying developers' hands with parking requirements, developers are actually responding to market demands for affordable units.

Eliminating on-site parking brings down the cost of apartment construction, Knoll estimates, between 20 and 30 percent. That makes it possible for developers to deliver more affordable housing. Knoll’s California Avenue development, for instance, is targeted at people making 60 percent of area median income, or about $15 per hour.
http://dc.streetsblog.org/2013/12/10/re ... buildings/

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Re: Affordable Housing

Postby mulad » December 11th, 2013, 12:17 pm

I've half-written an article based around the fact that parking spots take up quite a lot of space compared to the size of a typical apartment -- Basically, the minimum average size of a stall (including some space to access it) is 250 square feet if half of your spaces are compact-only. I believe there's an average of 350 square feet of asphalt per space for the surface lot by my apartment building, which is more than 1/3 the size of my apartment itself. If the parking lot wasn't there, an entire second building could fit in its footprint.

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Re: Subsidized Housing

Postby mattaudio » December 11th, 2013, 1:01 pm

Here's a great infographic from Alan During over at Sightline.
I cannot seem to embed the image due to max height. http://daily.sightline.org/files/2013/0 ... resize.png

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Re: Subsidized Housing

Postby mulad » December 13th, 2013, 10:19 am

This report from the Seattle area asserts that apartments subsidize their parking to the tune of $246 per stall each month (how many places do you know of which charge more than $50-75 per month?). Someone should probably do a similar estimation for commercial districts like Minneapolis's downtown core -- I'd bet the number would be several times higher.

http://www.sightline.org/research/who-pays-for-parking/

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Re: Subsidized Housing

Postby mulad » December 19th, 2013, 7:09 pm

More than half of all federal housing benefits go to households earning over $100k per year, and other interesting stats here:

http://www.cbpp.org/cms/index.cfm?fa=view&id=4067


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