What If Powerful Non-Profit Housing Builders Listened?

Christel Deskins

The cat is riding the real unicorn. White background. getty I’ve become a nattering nabob of negativism on housing policy in this country. To put it bluntly, what’s happened is a disaster. As housing production roared back in larger cities after the last recession, local governments clamped down on housing […]

I’ve become a nattering nabob of negativism on housing policy in this country. To put it bluntly, what’s happened is a disaster. As housing production roared back in larger cities after the last recession, local governments clamped down on housing production, focused on regressive and unhelpful interference with residents and housing provider relations, and started to impose taxes on what we need most, new housing. Why? To pay for expensive, slow-to-arrive-on-the-market subsidized housing. This has been driven by a loud political left bent on the notion of housing being a “right,” and angling to end the private housing market. What’s my positive solution?

It’s not like I haven’t offered solutions over and over again, the main one being bringing all sides together to do what makes the most sense, give people struggling to pay their rent money to do that. I’ve said from the very beginning of the Covid-19 crisis caused by government actions to stem its spread, that what we need isn’t bans on eviction but money for people who have lost their jobs to pay their rent. But politics and the power of non-profits means the solution has to involve more money for them and free rent for people hit by unemployment, an unsustainable arrangement that will broadly damage the housing economy.

But if somehow was able to talk with someone who had political momentum, what would I ask them to do? First, they’d have to agree that prices go up when demand exceeds supply and that but building subsidized housing is not the same as solving the problem of rising housing prices. Maybe they’d approach powerful non-profits and urge them to support some reform.

If I could get them that far, I thought about it and developed a PowerPoint I’d present. Here are the highlights of “the ask” for big changes in how we’re doing housing. In the end, the real answer is to stop limiting production. But maybe these ideas would constitute a transition. I’ve written about much of this for the Foundation for Research on Equal Opportunity (FREOPP).

Unit Size – Why is the total development cost of new, non-profit housing development so high, reaching up to $700,000 a unit in California? It could have to do with unit size. The market is driving unit size down. Renters don’t mind smaller apartments closer to transit, work, school, and entertainment. Developers and builders get higher financial yields per square foot and renters get lower monthly costs. But non-profit development is divorced from that relationship.

  • Solution: Treat non-profit funding more like an investment and incentivize smaller units; create a quantitative formula that connects people who need housing with those that produce it. Smaller units with shorter waiting lists would mean more funding.

Cash for Rent – I’ve actually had more than one experience with someone on the left saying, “I don’t want someone paying my rent, I want developers to pay for subsidized units.” Another version was a room full of socialists who said they’d rather have higher housing costs than lower ones if that meant more profits for developers. The punitive urge is strong on the left (as it can be on the right, too) and sometimes that takes precedence over solving the problem.

  • Solution: Repurpose a significant portion of subsidies to “buy down” cost burden; if someone is renting an apartment but paying $1000 per month, half their gross income, just give them $400.

Lower Barriers – Any rational person knows when something has a high cost to produce; few people will be able to start up businesses producing it. Given a choice to start a business, I’d rather try a hot dog stand than building housing. Both are hard, but hot dogs aren’t controversial and as heavily regulated as housing. If I did well, I might even be popular and celebrated. If I succeeded at building more housing, I’d likely face more rules and regulation.

Financial Incentives – Since we’re institutionalizing a bribery culture, why not get those bribes to the people who actually permit building and construction? Today, the money that gets squeezed out of development goes to non-profits or government bureaucracy. How about the more your department permits, and the more housing that gets built, you get more money and bigger raises?

These solutions would actually mean the money non-profits are getting could address people who need help the most. When the market is allowed to produce lots of housing prices will go down and the pressure to subsidize people who have jobs will ease since they’ll be able to find solutions on their own. We could then more efficiently help people who are struggling and can’t work, especially people who are chronically homeless.

Maybe it is the 90-degree heat in Seattle or a midlife crisis, but today I thought what if I accentuated the positive and eliminated the negative in my perspective? What if what I saw out of the corner of my eye the other day in the park wasn’t a man walking a large dog but riding a unicorn. I mean, it’s a possibility right?

Here’s the PowerPoint.

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