Politicians Love Making The Same Mistakes On Housing Policy

The world has changed since February — unless you’re a United States Senator, specifically Maria Cantwell of Washington state. In February the Senator sent out a press release highlighting her in a hearing roughing up the Trump administration about the fact that,  “we certainly have a supply problem” when it comes to housing. But as I pointed out then, when Cantwell says, “more supply” she really means, “more money” not more housing. Not long ago I got another press release from the Senator using the same language. When she repeats the language about lack of supply of “affordable housing” it is worth repeating a correction. 

A couple of weeks ago, Senator Cantwell’s office released a press release saying she had introduced legislation to “Build 500,000 New Affordable Housing Units.” The language in these releases can be as breathless as Pheidippides when touting what the Senator’s have done. But in two paragraphs the release tells the story of what’s wrong with our approach to housing in the United States. Here they are: 

“’We have an affordable housing crisis across the United States. Demand continues to grow, and our supply hasn’t kept up,” said Senator Cantwell. “The Low-Income Housing Tax Credit is a proven, successful, bipartisan tool that builds 90 percent of new affordable housing nationwide. The proposals in this bill will help build 500,000 units of affordable housing and give communities the resources they need to fight back against this crisis.’

More than 221,000 Washingtonian households are “extremely low-income”—meaning their incomes are at or below the poverty level or 30% of their area median income—and 72% of those households spend more than half of their incomes on housing, according to a report by the National Low Income Housing Coalition. There are only 31 available affordable rental homes for every 100 extremely low-income renter households in Washington state.”

• “We have an affordable housing crisis across the United States. Demand continues to grow, and our supply hasn’t kept up” – No, that isn’t how it works. Housing prices, like the price for anything else, go up when there is scarcity. Price is a measure of supply and demand, while affordability is a relationship to price. Housing is scarce, more expensive, and out of reach for people with less money because local government has choked supply of housing in the market. That’s why we don’t need more affordable housing, but more housing so that it will be affordable. 
• “The proposals in this bill will help build 500,000 units of affordable housing and give communities the resources they need to fight back against this crisis.” – When Senator, will all this housing be built? Where? And in what sense will tax credits –challenging to access even for experienced developers – help communities to “fight back” against local city councils and juntos of socialists and angry neighbors that keep housing scarce and expensive? The truth is that the Low Income Housing Tax Credit (LIHTC) program is a shift of wealth from poor people into the pockets of the people who get the tax break and incumbent property owners who see their property values go up when housing is scarce. I’ve called this out over and over again. 
• “And 72% of those households spend more than half of their incomes on housing.” – So there they are, all those households, scrimping, saving, working two or three jobs to make ends meet and Senator Cantwell’s answer is “Tax credits are on the way!” Again, when, Senator Cantwell? How about instead of wasting a bunch of time on the LIHTC program, the Congress just appropriate the amount of money needed to lower the cost burden of those households with direct cash payments? 
• “According to a report by the National Low Income Housing Coalition. There are only 31 available affordable rental homes for every 100 extremely low-income renter households in Washington state.”—I’ve explained in detail with the Coalition’s report is bogus. Yet year after year, the media uncritically report about the report without asking why a minimum wage worker in some of the most expensive housing markets in the country needs a two-bedroom apartment. Senator Cantwell is a smart woman with squads of Ivy League trained staff at her disposal, yet blurting out the Coalition’s report is all that they seem to be able to find to justify keeping the LIHTC program as is while local politicians and social justice warriors make things worse with more regulation. 

So there you have it all in one press release. The most powerful political leaders of both parties in the country continue to support a system that turns a blind eye to local misgovernment on land use using regulation and taxation to drive up housing prices. As those prices rise, groups like the National Low Income Housing Coalition demand more and more money pointing to rising prices (often using bad data) saying that we have an “affordability crisis.” Then Senators like Cantwell and her colleagues shake out more tax credits that are leveraged with even more money to dribble out very expensive and inefficient subsidized projects. For profit construction companies, tax credit lawyers, and for-profit business who get the tax credits laugh all the way to the bank.

Of course, nobody points out that the rules and regulations that vex non-profit subsidize housing projects – like local prevailing wage requirements, for example – can make LIHTC projects even more difficult and expensive to build than market rate housing. When waiting lists for these 500,000 prospective units grow to be years long, what do you think the problem might be? Well, there’s not enough money, of course! Return to the top of this page and start reading again. I suppose George Santayana gets a nickel every time his quote gets repeated so I’ll use Karl Marx instead who said history repeats itself, “the first time as tragedy, the second time as farce.” But for poor people in this country, the result of repetitive bad housing policy is no laughing matter.