Public Housing Vs. Private Housing, Round Two

A couple of weeks ago, I published a post, “Your Taxpayer Dollars at Work: Stuffing Poor People into Hideous Housing,” trying to put the $150 million maintenance backlog at the Richmond Redevelopment Housing Authority into context. I noted that the RRHA’s $65 million budget, spread over 4,000 public housing units, amounts to $16,250 per unit per year, which would buy luxury digs in the private rental market. That seemed like an outrageous amount of money, I wrote. However, I made it clear to readers that I needed to vet my “back-of-the-envelope calculation” before drawing any authoritative conclusions.

It’s a good thing I added that disclaimer because, in fact, I did omit relevant information. Hang with me because this gets a bit involved. The Richmond Times-Dispatch ran an unsigned editorial citing my numbers, unfortunately without noting my caveats. RRHA CEO T.K. Somanath took justifiable umbrage at my suggestion that for the money it spent, the authority could put housing project residents into a posh apartment in Richmond’s Manchester neighborhood. In point of fact, he said, the RRHA spends only $30 million maintaining its public housing project. The rest of the budget is dedicated to real estate and community development projects.

Somanath chastised the T-D for “parroting the grossly inaccurate musings of libertarian blogger Jim Bacon,” although he did acknowledge that my piece had contained the aforementioned caveats. The T-D reprinted Somanath’s letter and responded, as appropriate, that he was “quite right. We’re grateful for the additional context, and we should have included it in the original piece.”

But Somanath doesn’t get off the hook so easily. Let’s take a closer at the numbers.

The figures at right come from the RHHA’s 2014 annual report. (The numbers in the 2015 annual report are not as detailed, and the 2016 annual report has not been published yet.) The heading atop the column refers to the “Total Low-Rent Housing Fund Group,” which, if I am not mistaken, refers to public housing.

Thus, we can see that the RRHA spent $31.2 million in 2014 on Richmond’s public housing projects. Of that amount, “operation and project cost” amounted to $28.4 million. Averaged over the 4,000 housing units, it cost about $7,100 a year per unit to operate and maintain Richmond’s public housing. Please note: That’s just to operate and maintain the properties.

To make an apples-to-apples comparison between the cost of public housing and the cost of private-sector housing, we would have to include the capital cost of purchasing land and making improvements equivalent to the public housing units.

We can get a sense of the capital cost by looking at the City of Richmond assessments. I looked up the assessments for Mosby Court, South Mosby, North Mosby, Whitcomb Court, and Creighton Court, accounting for 1,501 apartments all told. (If I had all day, I’d dig up assessments for the other public housing units, but this is a blog — I don’t have all day.) The land and improvements for those properties totaled $47.4 million, averaging $31,600 per unit. If assessments are similar for the other public housing projects, that extrapolates to a value of about $126 million for the entire portfolio of public housing projects.

Now, let’s say the RRHA tried to replicate its public housing portfolio from scratch, selling $126 million in 30-year municipal bonds paying a 3% yield to purchase the land and build the apartments. That would amount to an average financing cost of $1,525 per unit per year. Add that cost to RHHA’s “operations and project cost, and you get a total annual cost of $8,625 per year, or $718 per month per unit.

What can you rent in the private housing market for $718 or less per month? Well, you can rent a two-bedroom, one-bath, 800-square-foot apartment at Nottingham Green for $645. You can rent a two-bedroom, one bath, 795-square-foot apartment at Village South Townhomes for $629. You can rent two-bedroom, two-bathroom apartments at The James on W. Bacon Street (cool, huh?) for $709. The James includes a pool, fitness center, water, heat, cable and air conditioning!

You pick:

Mosby Court

or…

The James

I’m sure these comparisons could be refined. I made three requests, one by email and two by telephone, to interview Somanath and make sure I was using the RHHA numbers correctly. He never responded. If he doesn’t like these numbers, I gave him every chance to shape this article. If he changes his mind, I would welcome his input after the fact.

The disparity between public housing and private housing may not be as great as I conjectured in my original article, but it is still significant. And, to return to the point of my previous post, the original justification for public housing in the 1930s was that government needed to address the “market failure” of private builders. If the private sector couldn’t provide affordable housing for the poor and working class, government needed to step in. From the evidence provided here, it still appears that the private sector can provide superior housing in the Richmond region at a lower rental price.

My point is not to condemn the RHHA. I’m sure RHHA employees are doing the best job within the constraints they are working under. The point is that public housing projects are a failed model for sheltering low-income Americans. The logical solution is to get government out of the business of owning and operating low-income housing. Tear down the projects, let the private sector re-develop the land, and empower the poor through vouchers to seek their own accommodations.

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3 responses to “Public Housing Vs. Private Housing, Round Two

  1. “Tear down the projects, let the private sector re-develop the land, and empower the poor through vouchers to seek their own accommodations.”

    Now there’s a good libertarian approach to the problem which respects the individuals involved, and I applaud vouchers in lieu of government-run housing as the way to satisfy this safety-net need. But so many such well-intended approaches that give choices to the poor are undermined by the ignorance, the inability to plan, the lack of foresight or goals, the drugs, the depression, the greater problems faced by some families even than housing — how can vouchers be combined with oversight and guidance to prevent abuse? One feature of the “projects” is the isolation of these problems in one place: out of sight, out of mind. Vouchers of any kind lend themselves to another problem: being sold or traded at a deep discount for cash for drugs.

  2. Agreed. The original authors never expected the over reaching govt. they invented to be like this.

  3. Well – it appears that Richmond Redevelopment & Housing Authority
    HAS Vouchers:

    The Richmond Redevelopment & Housing Authority (RRHA) Section 8 Housing Choice Voucher waiting list is currently closed. It was last open for four days in April 2015. There is no notice of when this waiting list will reopen.

    Applications were accepted online only.

    After the last opening, the RRHA placed 10,000 qualified applicants onto its waiting list by random lottery.

    As of March 31st, 2016 the Richmond Redevelopment & Housing Authority manages 3,150 active Housing Choice Vouchers.

    The following is a summary of the types of vouchers managed and the monthly costs of each:

    https://affordablehousingonline.com/housing-authority/Virginia/Richmond-Redevelopment-&-Housing-Authority/VA007

    I suspect the problem is they want to have more vouchers but getting the commitments t pubic housing unwound.. is not a fast process.

    but I also think the practice of blogging something with a headline and using words like “it appears” and then at the end a “disclaimer” – can and does lead to wrong impressions – like happened here..

    To Bacon’s credit – he did come back and discuss it but I would hope the lesson here is to back up a notch on the practice of running up to the edge of some accusation.. then giving a “disclaimer”.. I don’t think that’s a good journalistic practice… myself.

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