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October 23, 2005

Should New Houses Be "Affordable"?

Donald Pittenger writes:

Dear Blowhards --

There are many ways governments at various levels try to see to it that poor folk live in what might be deemed decent housing. Implementing the decent housing goal requires some kind of subsidy -- either a direct governmental subsidy or a mandated, indirect subsidy from the private sector. I'll make no comment regarding whether or not such subsidies represent A Good Thing: I might do that another time, maybe when Iím about to leave the country for a long vacation.

But there is one kind of indirect subsidy that I totally disapprove of, and it's called "inclusionary zoning," especially where single-family houses are at issue.

In a nutshell, inclusionary zoning requires new private housing developments to offer a given percentage of their units at an "affordable" price. ("Affordable" is the buzz-word used by politicians, planners and the press.)

For a discussion of various kinds of inclusionary housing schemes, here is an article by two lawyers working for the real estate industry. As best I can tell, their definitions of various "inclusionary" programs are valid; their analyses might be disputed by anti-real estate parties.

An example of inclusionary zoning or something much like it can be found in the large Snoqualmie Ridge development east of Seattle. I had reason to field-check it in 2001 and noticed that, tucked well away to one side, far removed from view-property locations, was a little ghetto of cheap houses.

I have no problem with the fact that these houses were tucked away from the rest of the development. It doesn't bother me that these houses only had views of one other and the nearby wooded hillsides. It bothers me a lot that they exist at all.

Why am I so hard-hearted? It's because there's such a thing as a used house.

People who need an automobile and can't afford a new car wind up buying a used car. Why can't the same logic apply to houses?

I have purchased 11 cars over the years, three of which were used. I don't like buying used cars (two of those three were troublesome), but I do it when necessary.

And I've lived in five different houses in my lifetime and all of them were "used." The only newly-built housing I ever occupied was an apartment in Albany, NY back in 1970-72. And no dwelling had what I'd call a decent view (though that apartment offered a close-and-personal vista of the flight path to the Albany airport, which could be a neat thing if you dug Mohawk Airlines' BAC 111 jets). Somehow I survived this deprivation with my self-esteem intact.

Actually, quite a lot of subsidized housing involves older buildings that are refurbished. And I think that the quality level of a newly refurbished house ought to been good enough for most people.

Inclusionary zoning strikes me as being a below-the-belt way for governments to meet their housing goals without spending money, as they must for subsidized housing.

It also raises the price of the non-"affordable" units in developments and this seems to be a form of punishment for middle-upper income buyers who might have other good uses for the extra money they are paying for housing (and later property tax assessments based on the inflated sales prices).

About the only silver lining I can paint on this cloud is that the developers are probably building "affordable" houses more cost-effectively than housing directly contracted by government.

Now I'll run and hide.



posted by Donald at October 23, 2005


I really don't see any real difference in "direct governmental subsidy or a mandated, indirect subsidy from the private sector" and "inclusionary zoning." Both involve taking money from Billy Joe and providing housing for Mary Sue (or the other way around). I think it's just the lack of a government intermediary that bothers you, the transfer is just to direct.


Posted by: Glennron on October 23, 2005 8:19 PM

First off, while I am all for "inclusionary zoning" and "affordable housing" in their generic original senses (what fair-minded person can be against them?), I too am against what these expressions have come to actually mean in the political sphere -- essentially becoming the code buzz words that underpin a gaggle of mostly wrong-headed gov't programs. (It seems to me that "Inclusionary Zoning" and "Affordable Housing" are another two expamples of expressions that have changed meaning over time and now mean different things to different people in different situations. I submit that other examples of this phenomenon are "affirmative action," "gentrification," and "homelessness.")

The original rationale for inclusionary zoning and affordable housing programs, however, doesn't seem unreasonable to me. Zoning is a relatively new concept and much of the zoning that has guided the growth of post-WWII America, particularly its booming suburbs, is, intentionally or not, "exclusionary zoning" (e.g., requiring minimum 1/4 to five acre lots, etc.). This zoning "artifically" inflates housing costs (limiting supply, requiring outlays for a car, requiring buyer to want and to be able to afford the minimum acreage, etc.), and excludes the lower-middle class and poor (particularly minorities) from virtually entire new communities (in perpetuity, and not just when they are first built and most expensive).

Although I realize this is a somewhat quixotic solution to "exclusionary zoning," I think the real answer is less restrictive zoning in general -- let's not forbide private developers from building privately funded apartment complexes that would be affordable when built (and even more affordable in years to come) and let's not worry about how they might "depress" the property values which are being artificially held up by "exclusinary zoning." Zoning shouldn't be used to keep entire communites "off-limits" to non-affluent, particularly non-lilly white, residents (many of whom would be able to afford privately built apartments, either when they were brand new or, in years to come, when they become more affordable "hand-me downs").

# # #

Posted by: Benjamin Hemric on October 23, 2005 10:24 PM

An excellent post.

It's a topic that I don't know much about, so I'd love to see a rebuttal from someone in favor.

As written, however, I don't see much use in it. The car analogy is great; the only point on which it falls down is that used cars go down in value almost universally, while a great deal of used housing improves over time. Therein may lie the only real defense--it may be that too much used housing appreciates too much.

Still, why a certain percentage of new housing needs arbitrarily to be "affordable?" As long as housing somewhere is affordable, let the market decide. Eventually, some enterprising developer will want to capture all those excessive low-end dollars, and/or other developers will run out of a white upper-middle-classers to sell new houses to.

Posted by: Max Leibman on October 23, 2005 11:01 PM

I've always been puzzled by what the word "affordable" means.

We bought our house and farm for about a third of the market price 12 years ago. We also turned around and within the next 5 years put back into the house more than we paid for it originally. Almost half that was in materials--labor came from my husband and I doing the work ourselves. Without skills and motivation, this house which now has hardwood floors, handmade woodwork everywhere, two baths, a new garage, a bow window with a view to die for and a modern kitchen would not have been affordable for us.

Oh, and we did it all on one income since I was a stay home Mommy with two small children while saving a third of our income for retirement.

Is affordable the purchase price, what the bank will finance, what the income of the purchaser will allow?

Posted by: Deb on October 24, 2005 7:11 AM

I've always hated that word "affordable". If someone says that something is "affordable" it's a sure bet that it's far from affordable for a lot of people.

As for "used housing"... not all used housing is equal. Some is nowhere near "affordable" and some is "affordable" but not fit to live in. One big thing the government needs to do is to stop creating ghettos whether by giving people money to rent homes in older neighborhoods or building "tucked well away to one side, far removed from view-property locations, ... little ghetto[s] of cheap houses. I don't expect the wealthy to be forced to endure the indignity of having actual poor people living next door (a bit of sarcasm there) but it would be better if poor families were integrated into middle class neighborhoods instead of continuing to build more poorly managed "Projects".

Posted by: Lynn S on October 24, 2005 1:52 PM

Thank you for this excellent post. I have tried to make similar points in conversations several times, and people seem to think I'm a monster.

Let's assume for the sake of argument that it's a good idea to provide some sort of assistance for the poor to obtain housing. Shouldn't public assistance housing be, by definition, minimal. Why the set aside in new housing developments? Why give someone a terrific new housing at highly subsidized rates, when their neighbors have had to develop skills, work and save for years to pay for theirs? What is the entitlement to live in great neighborhoods? Isn't living in a great neighborhood something you earn,again, through hard work and savings, like driving a BMW instead of a Chevy?

In a way, these housing rules are like rent control - they are a spefic tax on one type of person (here developers) to benefit another group directly. As such, they discourage development, which make the price of housing higher for everyone else. And also like rent control, it creates massive distortions in the housing market. Someone really needs to explain the "justice" to me of my having to spend much much more to receive so much less than someone else receives because they win the poverty lottery.

Posted by: William H on October 24, 2005 2:30 PM

Lynn S, could you clarify a bit?

How do you think, in practice, would "poor people be integrated into middle class neighborhoods" if "government to stop giving people money to rent homes" there?

Couple of days ago I was told about an elderly woman, mother of an acquaintance, finally (after 10 yrs' waiting) "getting" city-susbsidized apartment in expensive, in Brooklyn terms, neighborhood: huge pre-war 1 bedroom, bridge view, concierge at the fron desk collecting dry cleaning, etc - for $138 a month out of her pocket. In the building where a studio cost $1200 to normal people.

I have nothing against this woman (or any other poor person), but I don't want to foot their bills with my taxes. That's the case of I Owe You Not.

Posted by: Tatyana on October 24, 2005 2:35 PM

The brain surgeons on the County Board here in Arlington, VA tried to make a requirement that each new apartment house be ten per cent affordable. Affordable seems to mean, you can pay for it with a third of your income if you make 60,000. I think this is terrible policy - means in practice that the poor shmoes who are buying the other 90 per cent of the units have to pay an extra ten per cent for their dwellings, and the limousine liberals who are the backers of our County Board get to enjoy their virtue while making other people - less fortunate than they - pay for it.

The developer group challenged the Board in court and the policy was declared illegal. Basically, I think you get much more defensible outcomes if you put them into the budget: if you want to subsidize housing, the way to do it is to use taxes paid by everyone.

Posted by: dave s on October 24, 2005 6:08 PM

Many developers actually like exclusionary zoning because it allows them to develop. In New Jersey, for example, a lawsuit 30 years ago required all municipalities to have a certain number of 'affordable housing" units. Developers then went into towns with "restrictive" zoning (acre lots, etc.) and sued for the right to build on smaller lots etc. because they would be able to provide 'affordable" housing that the town currently didn't have. A big mess that screws up the housing market--as does rent control--forever. In addition to making everyone else pay for the poor, often those homes cannot be sold later at market value so the poor do not even own their house. Habitat for Humanity, btw, also won't let the new "owners" sell their homes for a profit. I'd rather give the poor a home free and clear than continue to artifically depress prices for millenia. After all, most Americans most valuable possession is their home. Giving the poor a home gives them the same capital that the rest of us have. Not me, actually, I'm afraid I may be destined to be a permanent renter.

Posted by: Rachel on October 24, 2005 9:08 PM

Glennron -- Actually, I tried to sidestep the funding question, stating that my main gripe was about new single-family houses as opposed to "used" ones.

Benjamin -- Nice to hear from you again. Interesting thought about easing back on zoning restrictions. The large city notorious for being un-zoned is Houston (which if I remember right has deed or charter-driven controls of some sort) -- have you checked your concept as regards to housing there?

Max -- The car analogy had to do with the purchase and not re-sale end of things, but you're right.

Deb -- Gee, I wish I had been as disciplined and handy as you and your family. I put "affordable" in quotes because there is an economics way of looking at it and a political/media way: the two don't overlap as well as they might.

Lynn -- The projects went big-time back in the 30s when an insurance company (help me out here, Benjamin) replaced a bunch of Lower East Side "dumbell" tenements with high-rise (for the time) apartments. Except these apartments were originally occupied by folks more middle-class than poor. The initial success served to inspire government to do the same thing. Greenbelt, Maryland was of a similar vintage, though the units were low-rise. Again, the residents weren't destitute; I recall once dating a girl back in '62 who lived there, and my impression was the it was working-middle class. But I might be mistaken.

William -- Yes, it's easy for others to call us monsters and hard for us to get the conversation beyond bumper-sticker logic so that we can explain to them that there's more than one way to define "fairness."

Tatyana -- Ditto what I just said to William.

Dave -- Yes, the zoning stuff is sneaky.

Rachel -- Interesting. In Seattle, they're taking what used to be one-house lots and zoning for three houses in the same space. Trying to stop urban sprawl, but the resulting housing is ugly and cramped-looking. Perhaps the square-footage is okay, but some places hardly have room to park a car. Oh wait! Cars are evil too.

And likely so too was Margaret Thatcher who privatized some of England's housing, giving poorer folks some welcome assets.

Posted by: Donald Pittenger on October 24, 2005 10:17 PM

Tatyana - I never said that the government should "stop giving money to the poor to rent homes". What I meant was that they should stop putting large numbers of poor families in one place, thus creating ghettos.

Some of the remarks made here seem to show a biased attitude against the poor, or a misunderstanding of the realities of being poor. Certainly there are some lazy poor people but there are also lazy rich people. Many of the poor work harder than anyone else and they have not "saved for years" to buy good houses because they've been saving every penny just to feed and clothe their families. I'm not saying that anyone is "entitled" to luxury housing but having an underclass is always going to cause problems in society. You say it's not fair for people who have "worked and saved" to get what they have to subsidize the less fortunate but one way or another they will anyway.

Posted by: Lynn S on October 25, 2005 8:03 AM

Thanks for explanation, Lynn.
I hope your second paragraph isn't addressed to me, though, even if you continue to use "you". I haven't say anything about laziness or people who worked and saved.

Having an underclass is going to cause problems in society only in one case: if there are provocators who're willing to misguide the underclass in believing they are entitled to other people's money.
As to "less fortunate" and subsidies they live on being unavoidable... First, I hate that term as much as you hate "affordable", both are hypocritical. I don't own my salary to some fortune, I worked for it. If my hard labor doesn't bring me adequate rewards, simplest solution would be change of activity, to something that pays. I switched jobs many times. I don't see why I should deny this solution, which is just common sense, to poor people as well - that would be condescending insult on their intelligence.

And unavoidable subsidies are only unavoidable if they are being put into laws and enforced by the government. Laws are invented by people and could be changed by people, that's how I see it.

Posted by: Tatyana on October 25, 2005 9:11 AM

It seems to me that there are a number of misconceptions about what the terms "affordable housing" and "inclusionary zoning" actually mean -- especially as these terms may be used slightly differently, and in different situations, in different parts of the country.

- - - - - - - - - - - - - -


For example, although sometimes "affordable housing" refers to brand new housing (especially in certain less built-up parts of the country), it needn't necessarily refer to brand new housing at all.

A specific example: if I remember correctly, as part of the deal to save "affordable housing" on the "gentrifying" West Side of Manhattan, a real estate developer who was building a skyscraper / office complex on the site of the old Madison Square Garden was induced by the City (with some kind of bonus in the development's allowable sq. footage, I believe) to renovate "x" number of tenements on the surrounding blocks for "affordable housing."

Sometimes the term "affordable housing" does not even refer to renovated housing. In NYC, there are a number of state-subsidized apartment house complexes that were due to be converted into expensive condos or co-ops (as the developers fulfilled the requirements of the original subsidy program), but were kept as "affordable housing" by further state subsidies.

And, the term "affordable housing" does not necessarily refer to state-subsidized housing either. In a number of suburban communities efforts have been made to relax the zoning codes in order to allow homeowners to rent out garages as apartments or to divide single-family homes into two-family "mother/daughter" homes, etc. -- to increase the stock of "affordable housing."

Also, it seems to me that in most cases "affordable housing" isn't actually meant to refer to housing for the poor -- or at least it wasn't originally. I think the term originated out of the belief that even working- and middle-class people were being priced out of the housing market and that therefore housing should somehow (usually through some kind of gov't program) be made more "affordable" for them.

I think in general, however, implied in the term "affordable housing" is the belief held by its proponents that, for one reason or another, the marketplace is not working adequately and that, therefore, the gov't needs to step in and help it along.

- - - - - - - - - - - - - - - - - -


Similarly, I think there are a number of misconceptions about the term "inclusionary zoning."

As I understand it, "INclusionary zoning" was seen -- at least in its original sense -- as basically a reaction to and remedy for "EXclusionary zoning." The belief is, in brief, that suburban communities around the country have engaged in "EXclusionary zoning" in order to keep out the less affluent, particularly members of racial minorities, and that "INclusionary zoning" is necessary to undo the damage from this de facto "EXclusionary zoning." INclusionary zoning was seen as a way of preventing the formation of the economic ghettos created by EXclusionary zoning.

It seems that over the years, the term has been expanded to apply to other situations, however. For instance, it is now used to apply even to zoning inside cities themselves -- even though these cities never engaged in true "EXclusionary zoning" (i.e., zoning done to keep poor people outside the city limits), and even though these cities are actually considered to be the victims of true exclusionary zoning (i.e., the victims of the suburban attitude, "Keep the poor out of the suburbs -- and in the cities, where they belong").

In cities like NYC, for example, "inclusionary zoning" is used to refer to programs that encourage the construction or rehabilitation of "affordable housing" in revitalized ("gentrified") areas (in other words, "low rent" housing in "high rent" areas).

- - - - -


Since Houston was famous for its not having zoning laws (I believe it has since adopted some zoning, though), it could never really engage in "EXclusionary zoning" per se. But even in areas without government zoning, there are ways to achieve somewhat similar effects: discriminatory deed restrictions. This was done even in NYC before zoning caught on. I think (but am not sure), that Forest Hills Gardens in Queens, for instance, orginally had deed restrictions against homeowners selling to blacks and Jews.

In a sense, exclusionary zoning might be seen as a subconscious (or conscious?) modern-day replacement of these deed restrictions, once discriminatory deed restrictions were struck down by the courts.

- - - - - -


If I recall correctly, the first housing projects, in NYC at least, were generally built in poor areas to begin with. So people weren't really being ghettoized -- they were just getting more up-to-date apartments in the ghettos they already lived in.

I think the housing projects that Donald is referring to are First Houses on the Lower East Side, and these were essentially renovated tenements. So while these buildings were a little different from the surrounding buildings, they weren't all that different.

It wasn't until the late 1930s, I believe, that the more institutional type housing projects were built -- and these were thought at the time to be actually better than more traditional apartment buildings. (Lewis Mumford, for instance, thought this type of housing was actually better than the apartment houses that the rich lived in on Park Ave.)

This kind of housing was so highly thought of at the time that a number of them were built for middle-class tenants by insurance companies for investment purposes.

# # #

Posted by: Benjamin Hemric on October 25, 2005 11:02 PM

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