"Whenever I go into a restaurant, I order both a chicken and an egg to see which comes first"

Wednesday, November 6, 2013

‘Affordable’ Housing–Can Government Please Help Me Live In St. Tropez?

Here is where most people would like to live – St. Tropez - a sophisticated European city with a perfect climate, excellent French Mediterranean cooking, a lively port, access to Portofino, Nice, and Cannes, a short rocket ride to Paris. The problem is they can’t afford it.

 Here’s a listing for a very desirable home in St. Tropez for only $20 million.
La Grande Clarté in the village of La Croix Valmer near St Tropez is just the kind of house buyers are looking for. It's a belle époque villa hidden among palm trees in a large, colourful garden, with views straight out to sea, a swimming pool and terraces. There are six bedrooms and staff quarters; it's a short drive from the beach clubs of the Plage de Pampelonne and the nightclubs of St Tropez, yet surrounded by vineyards and a short walk from the local market. (Telegraph 9.09)
Of course not everyone can live in St. Tropez, but the housing market offers many options. Buyers have always balanced home, lot size, and price; neighborhood quality, status and allure; security, commuting distance and the increased value of urban work; and made rational cost-benefit economic decisions to find the right place to live.  The well-off have homes in close-in neighborhoods. New immigrants share housing in far-out suburbs and ride six-to-a-car to get to work.  Middle-income civil servants find modest ramblers or inexpensive condos on the subway line.  All without government assistance.

The point is that you live where you can afford.  Many would love to live on Park Avenue or in Bel Air, St. Bart’s, or in a hotel particulier in Paris; and wouldn’t mind a place like the palazzo Gritti near the Grand Canal in Venice; or an English country home.  The only problem is nie mam pieniędzy – no money.

A lot has been made these days of ‘affordable’ housing, but the concept is troubling.  It has come to mean that government programs should be undertaken to ensure housing for low-income people in high-rent cities like New York, San Francisco, or Washington, DC.  According to this theory people who could not otherwise afford to live on Park Avenue, Pacific Heights, or Spring Valley have a right to do so. 

It is not clear at all on which Constitutional principle this right is based; but affordable housing advocates push on nevertheless, basing their arguments on the notion of ‘diversity’. A community is healthier, progressives say, if it is comprised of a mix of rich and poor, white and black, Latino and Anglo. It is good thing for wealthy Americans to see exactly how a poor family lives.

This of course is a specious argument.  The white 30-somethings moving into LeDroit Park or Bloomingdale - two hot, up-and-coming transitional neighborhoods in DC – like the diversity as long as their neighbors don't litter, drink on stoops,or  make too much noise after 9pm.  In other words, black people and Latinos are OK as long as they act white.

What happens, of course – and what most 30-something urban pioneers want and expect – is that the 'diverse' residents of their new neighborhoods pick up and leave so that their communities can be safe and economically and socially homogeneous, and property values can rise.

People have the right to live close to their work, affordable housing advocate say.  Why should a fire fighter, police officer, or janitor live far from their places of employment, spend valuable family finances for the commute, and arrive home tired and dispirited from the long journey? These civil servants provide a critical but undervalued service to the community and should at least be afforded the benefit of close-in living.

Of course doctors provide an equally important service to the community; and in this increasingly complex age so do lawyers, accountants, and financial advisers all of whom find their own housing and pay for it accordingly.

Governments have no business in social engineering. Labor follows employment, and every family, wealthy or low-income calculates cost and benefit in the same way. How much is anyone willing and able to pay to live close to work?

Former New York City Mayor Bloomberg was criticized for allowing Manhattan to become a wealthy enclave; and while it is true that Americans and foreigners alike are buying up pricey real estate, New York is becoming an even more exciting place to live – an urban architectural landscape bar none.

Bloomberg invested in the development of Battery Park and the entire West Side riverfront; helped foster development along the High Line, and followed in former Mayor Giuliani’s footsteps to create a safer, cleaner, and more appealing city both for residents and visitors.  Without a doubt lower income residents left Manhattan; but the increased tax revenues have allowed the City to make public investments in Brooklyn, Queens, the Bronx, and Staten Island, improving the entire city, not just Manhattan.

The free flow of labor and capital has always been a principle of America’s market economy; and recent (2012) IRS figures confirm that over 40 million Americans move their residence every year.  While net in- and out-migration rates vary by region and by decade, constant movement is the rule rather than the exception.  While there will always be populations that are less mobile than others, most Americans have the wherewithal to follow better opportunities.  As suggested by the IRS, legions of us move every year.  We move from cities to suburbs, suburbs to suburbs, county to county and state to state.  Move we do and as we always have done.

The central issue of the affordable housing debate is this - what is the rationale for disrupting the market and using taxpayer dollars to enable citizens to live where they could not otherwise afford to? There is none.  In fact, government subsidies aimed at keeping people in place discourage the incentive to move and to seek new economic opportunity. If you are poor, unemployed, and on welfare, government will add another perk – low-cost housing; thus increasing the incentive to stay poor, unemployed, and on welfare.

Taxpayer investment, if considered at all, should be used to build the infrastructure and provide the services necessary to attract employment.  If every jurisdiction has the same goal in mind – increased economic activity – the movement of labor to opportunity will increase and wages will rise thanks to competition.

‘Affordable’ housing, rent control, rent stabilization and any other distortions of the housing market only discourage private investment, economic growth, and individual opportunity, and should be discontinued.

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