Category Archives: Poverty & income gap

Even Progressives Acknowledge the Failure of Indiscriminate Student Loans

I’ve been making the case for a couple of years now that if you’re looking for a real example of social injustice, take a look at the United States higher education system. For years liberals and progressives argued that everyone deserves a college education, that government should help anyone with a high school degree attend college, and that poor students could borrow huge sums to pay for ever-escalating tuition and fees without ill consequence. Now even the social justice warriors are waking up to the social disaster they have wrought.

Readers of Bacon’s Rebellion know full well that the policy of indiscriminately handing out student loans to everyone has created a new class of debt slaves. Not all high school graduates are academically prepared for college-level work. Not everyone who undertakes to earn a college degree is financially able to complete their degrees, even with financial assistance. As a result, literally millions of Americans have taken on college debt without earning the degree or other workforce credential that would allow them to obtain a job that pays enough to carry that debt.

The members of the new debtor class are disproportionately poor, and they are disproportionately African-American. This is a real social injustice, not an imagined one, and it has arisen from the blind pursuit of good intentions.

Finally, progressives are waking up. According to an analysis by the Center for American Progress, data from a U.S. Department of Education study provides a “first-ever look at long-term outcomes for student loan borrowers, including results by race and ethnicity.”

The data show that 12 years after entering college, the typical African American student who started in the 2003-04 school year and took on debt for their undergraduate education owed more on their federal student loans than they originally borrowed. This holds true even for students who finished a bachelor’s degree at a public institution. One reason they might not be paying down their loans? Nearly half of African American borrowers defaulted, including 75 percent of those who dropped out of for-profit colleges.

Among the detailed findings:

  • African-Americans borrow more on average than their peers.
  • The typical African-American made no progress over 12 years in paying down his or her loan. African American borrowers who started college in 1995-96 owed 101% of their loans a dozen years later, compared to 60% for whites and 72% for Hispanics.
  • A bachelor’s degree does not insulate African-American borrowers from bad outcomes. College drop-outs are not the only ones who default; college grads do, too.
  • Nearly half of all African-Americans defaulted on their student loans. One reason, suggests the analysis, is that African-Americans take on higher debt on average.
  • Seventy-five percent of African-American dropouts from for-profit colleges defaulted. (No word on how this compares to the percentage of African-American dropouts from public colleges or Historically Black Colleges and Universities.)

A conservative/libertarian reaction to this data is that the system hands out student loans too indiscriminately. Many Americans — of whatever race — would be better off learning a trade in a two-year college than attending a four-year college. Some would be better off not going to college at all and learning on the job. Student loans, like any other kind of loan, should be granted based upon a person’s ability to repay the loan.

The problem is that granting educational loans on the basis of a student’s ability to repay — based upon key predictors like academic preparedness and household resources — would “discriminate” against the poor and, because African-Americans are disproportionately poor, against African-Americans. In today’s political climate, that’s a non-starter.

The Center for American Progress expresses an admirable sentiment when it suggests that policymakers should strive to create a world where African American students don’t start their careers with large loan debts they struggle to repay. But the CAP’s answer is to admit more poor African-Americans into better institutions with more resources to help them succeed. How? By “fixing” admissions practices and funding systems “so that African American students do not end up disproportionately underrepresented at institutions with the greatest resources to educate them.” 

Translation: Get higher-ed institutions to admit more African-Americans in the blind hope that somehow they will do better regardless of whether they are academically prepared. Great idea. That’ll work out well.

For Irish, Italian, Jewish, Chinese, Koreans and other Americans, the typical family’s climb from poverty into affluence took place over generations. Parents sacrificed so their children could rise a step higher on the educational and socioeconomic ladder. Today’s social justice warriors are impatient. They want African-Americans to vault from Mosby Court to the University of Virginia and a job in the hedge-fund industry in a single generation. A handful of individuals are so extraordinary that they can succeed. Most aren’t. Instead of reaching for achievable goals for self improvement, millions are pursuing unrealistic dreams and winding up in debt bondage as a result.

Justice for Whom?

The Legal Aid Justice Center, which has released another report decrying differential rates of suspensions and expulsions in Virginia public schools, is described by the Richmond Times-Dispatch as an organization that “works to fight injustice.” I have no doubt that the Legal Aid Justice Center sees itself on the side of the angels, but I’m surprised that the Times-Dispatch accepts the group’s self definition so uncritically. I’ve never heard of an organization anywhere claiming to fight for “injustice.” It’s really a question of whose justice is being fought over.

In this case, the Legal Aid Justice Center (LAJC) fights for “justice” for black students who commit offenses that get them suspended or expelled. Making an issue out of the fact that blacks were suspended in Virginia about four times as often as Hispanic or white students in 2015-16, the LAJC calls for sweeping changes in school disciplinary policies and, of course, more money to implement them.

The LAJC is not fighting for “justice” for black children whose classrooms are disrupted by trouble makers. While the organization goes to great pains to measure the rates of suspensions and expulsions by race, it makes no effort whatsoever to measure the race of those whose educations are deprived by the ne’er-do-wells. Indeed, its report, “Suspended Progress 2017,” shows no interest in their plight whatsoever.

The front-page Times-Dispatch article quotes extensively and uncritically from the LAJC report. The reporter doesn’t quote anyone else who has studied school disciplinary issues, nor does he quote anyone from the Virginia Department of Education or local school districts. The reporter never informs the reader that parents — including many black parents — are often dismayed by the lack of discipline in many schools.

The report found that Virginia schools issued over 131,500 out-of-school suspensions to over 70,000 individual students in 2015-16, an increase in the overall suspension rate for the second year after several years of declines. Virginia schools use “exclusionary” discipline with very young students at an “astonishing” rate, states the report. And the majority of suspensions were issued for minor offenses — “approximately two-thirds of all suspensions given [were] for behavior offenses, such as possession of cell phones, minor insubordination, disrespect, and using inappropriate language.”

Perhaps most disturbing is that Virginia schools continue to disproportionately suspend African-American students and students with disabilities. The suspension rate for African-American students was 3.8 times larger than for Hispanic and white students. Students with disabilities were suspended at a rate 2.6 times larger than that of their non-disabled peers. When examining the effects of race, sex, and disability, the results are especially troubling: African-American male students with disabilities were almost 20 times more likely to be suspended than white female students without disabilities.

The authors never talk to anyone in the educational front lines — the people meting out the discipline — to get their perspective on what’s happening. The authors assume from the get-go that racial disparities in disciplinary actions are in and of themselves evidence of injustice — no other explanation needed.

The LAJC never pauses to consider that the reason why African-American male students with disabilities are disciplined at a higher rate is that they are committing offenses at a higher rate than white female students without disabilities. Given what we know of the breakdown of the family, the geographic concentration of poverty, and how many poor single mothers lose their children to “the street,” it should not surprise anyone that behavior problems are rampant in poor communities generally and poor African-American communities specifically.

This chart, which appears in the “Suspended Progress” report, shows the school districts where the highest rates of suspensions occur. Every one of these has high percentages, often majorities, of African-American students. Let’s take the City of Richmond, with which I have some familiarity. Most teachers are African-American, most principals are African-American, the superintendent is (or was, before he was canned for political reasons) African-American, and the school board is predominantly African-American. It defies reason to think that anti-African-American bias is permeating Richmond school disciplinary practices.

The real problem is that teachers and administrators in Richmond are grappling with large numbers of students who come from exceedingly challenging environments like housing projects riddled with violence, drugs, crime, and murder where the norms of bourgeois behavior have utterly collapsed. Eighteen percent of the student body was suspended because 18% of the student body committed offenses against school rules.

The LAJC engages in a classic case of defining deviancy down by declaring that cell phone possession, disrespect, and “inappropriate language” as “minor” offenses. We didn’t have cell phones when I was a kid, but I can assure you that being disrespectful to teachers and using profanity assuredly would have warranted disciplinary action at my school. The phrase “inappropriate language” sounds inoffensive, but I question whether students are suspended for using the occasional profanity. As for cell phone possession, the LAJC’s own data shows that the number of students disciplined for that offense is a minor cause of short-term suspensions and a negligible one of long-term suspensions.

The biggest causes of disciplinary action are disruption of classrooms or campus, defiance of authority, disrespecting teachers. Some offenses may seem “minor” if viewed in isolation. But we have no sense from these numbers how often similar offenses are routinely ignored, and we have no sense how often students have been lectured or given second or third chances before finally being slapped with a disciplinary action.

I find especially noteworthy the LAJC’s observation that after two years of supposedly improving statistics that suspensions and expulsions have increased for two years. How do we explain this? Have teachers and administrators become less rigorous in their adherence to the protocols imposed by the American Civil Liberties Union and the Obama administration justice department? Have they become more biased in their attitudes against African-American (but not Hispanic) students? Or has discipline gotten worse under those protocols? Have the supposedly “proven alternatives” like “restorative practices, multi-tiered systems of support, and emotional learning programs” failed to maintain discipline? Indeed, do misbehaving students, perceiving that they are less likely to suffer adverse consequences from their actions under the new regime, felt freer to act disruptively?

Locked into its mindset that views every racial disparity as evidence of a social injustice, LAJC never asks those questions. But Richmond Times-Dispatch reporters and editors should not accept social justice warrior dogma without question. In fact, if the Times-Dispatch were truly interested in social justice, it would conduct its own inquiry into how LAJC-inspired disciplinary policies are working out.

Plugging “Mercy” into the Judicial System

O. Randolph Rollins, founder of Drive to Work.

Just when it looked like the country was so locked in partisan gridlock that no one could agree about anything, along came the Republican-dominated General Assembly, the Democratic governor, and the Virginia Supreme Court to put into place reforms that make it easier for people owing court fines to keep their drivers licenses and continue driving to work.

More than 600,000 Virginians have had their drivers’ licenses suspended for failure to pay court fines, and nearly 200,000 have had them suspended for drug offenses unrelated to driving. The penalties, which arose from war-against-drugs legislation in the 1980s, trapped people in a cycle of poverty. But over the past decade, the unintended consequences have grown too big to ignore.

As House Speaker William H. Howell described it during a panel discussion at the annual banquet of the Drive to Work non-profit Monday, the suspension of drivers licenses for failure to pay court costs is reminiscent of 18th-century debtor’s prison. If someone can’t pay his court debts, he can’t drive. If he can’t drive, he can’t work. If he can’t work, he can’t pay his court fines. And if he gets caught driving repeatedly with an unsuspended license, he goes to jail… where he can’t work or repay fines.

As it became increasingly clear that the license-suspension penalty was adding immeasurably to the hardship of poor Virginians — an awareness raised largely by the Drive to Work program — a bipartisan consensus emerged that the system needed to change. After picking at the edges of the problem for several years, the General Assembly passed six bills in the 2017 session addressing the drive-to-work issue.

Perhaps the most significant reform was the measure that gives judges more leeway to consider an individual’s circumstances before suspending his or her driver’s license. A law enacted in 2015 conveyed a policy message to the judiciary that they should apply the law more flexibility, but provided few specifics. The Judicial Council, which is charged with overseeing the rules and procedures of Virginia’s judicial system, issued guidelines to local judges on how to apply the law. In 2016, the chief justice of the Supreme Court appointed a panel to devise “rules of law” that carried greater weight than the guidelines. Early this year, Del. Manoli Loupassi, R-Richmond, introduced a bill that would embed the rules of court into state statute.

Speaking in the panel discussion, Loupassi described how he thought his bill had “zero percent” chance of passing until Governor Terry McAuliffe and Secretary of Public Safety Brian Moran made it an issue. Before he knew it, other key legislators fell in line. “It’s a great thing,” he said. “There is something inherently good and positive about people working.”

Associate Supreme Court Justice William C. Mims praised the bipartisan nature of the legislation. The reforms have occurred the right way, he said. They weren’t imposed by judicial decree but emerged organically from the interaction between the General Assembly, the Supreme Court and the McAuliffe administration, which added a key provision to the bill.

“The system worked, and it worked for all the right reasons,” he told Bacon’s Rebellion. The courts “plugged mercy into the equation.”

Related laws enacted this year created a uniform set of standards for people with suspended licenses to repay their court fees, and gave judges more discretion not to suspend the driver’s license of some one convicted of a first-time marijuana possess in offenses unrelated to their driving.

In a keynote speech, McAuliffe framed the drive-to-work initiatives as part of a larger effort to make it easier for felons to return to productive lives after their release from prison. He cited other programs such as transferring youths from central state-run facilities to locally based programs near their homes, cutting the cost for prisoners to make phone calls and maintain contact with family members, and starting programs that help felons get their state ID cards and drivers’ licenses before their release from prison. It’s no accident, he added, that Virginia has the lowest recidivism rate in the country.

“We want everyone back in society,” he said. “We want to help their re-entry. We want them providing for their families, and paying taxes.”

While great progress has been made, O Randolph Rollins, founder of Drive to Work, said more remains to be done. Looking ahead, he wants to decouple drug convictions from the loss of driving privileges. The law enacted in the 2017 session, which relaxed the penalty for marijuana possession, was a “baby step” in the right direction, he told Bacon’s Rebellion. He wants to break the link between all drugs — even including cocaine, heroin and meth — and driving privileges.

Roughly 185,000 Virginians have had their licenses suspended for drug offenses, he said. Only about 1,000 of those offenses were tied to driving, such as driving under the influence of drugs. If lawmakers want to put drug abusers in jail or go to treatment, that’s a different debate. But it makes no sense to take away their right to drive, he said. Taking away their license does little to deter them from abusing drugs. But it does interfere with their ability to make a living and support a family.

Second Chart of the Day: Unemployment

Source: Commonwealth Institute

Another chart from the Commonwealth Institute based on the latest U.S. Census data: poverty rates across Virginia metro areas.

Here’s what leaped out at me: Every single metro area, from Harrisonburg to Winchester, had a poverty rate below the statewide average of 11%. How high must the poverty rate for non-metro (aka rural) Virginia be to skew the numbers in such a way? As Augie Wallmeyer says, there are two Virginias.

A Better Model for Lending to the Poor

LendUp office in Chesterfield County. Photo credit: Richmond Times-Dispatch.

It’s time to introduce into the public lexicon a distinction between “social justice warriors” and “social justice entrepreneurs.”

Social justice warriors (or SJWs, as they are known short-hand on some conservative blogs) seek to remedy the conditions of the poor and downtrodden through political action, typically calling upon government to wield its power and money to fix some perceived institutional wrong.

Then there are social justice entrepreneurs. Instead of seeing government as the answer, they look to private action: creating new business and not-for-profit models to help the poor. The entrepreneurs don’t agitate, they don’t wave placards, and they don’t frequent protest rallies. They go out and change peoples’ lives for the better.

Regular readers of this blog know that I have no patience with SJWs, most of whose “remedies” are counter-productive, if not outright destructive. By encouraging the poor to buy houses they can’t afford, take out higher-ed loans for degree students never complete, and shutting down lenders-of-last-resort like payday lenders, SJWs have worsened the plight of the poor — all for the most noble of motives, of course.

California-based LendUp Global Inc., is an example of a social justice enterprise that has the potential to help ameliorate the lives of millions of poor people — without a single dollar of government funding. The company, which has established its first East Coast office in Chesterfield County, was recently profiled by the Richmond Times-Dispatch. I base the following account upon that article.

Sasha Orloff had worked in finance, including an internship at the Grameen Foundation, a global nonprofit co-founded by Nobel laureate Muhammad Yunus that provides micro-financing for poor people in developing countries.  His experience there inspired him and his stepbrother Jake Rosenberg, who had worked in technology at Yahoo! and an online gaming company. They conceived the idea of tapping the emerging FinTech industry to make small loans to an estimated 100 million Americans, mostly poor with low credit ratings and income volatility, who cannot get loans from traditional banks. In early 2016, LendUp raised $150 million in venture capital with the goal of becoming a better small-loan provider.

As with payday lenders, LendUp’s interest rates are extremely high on small, short-term loans. A $250 loan repayable within a month would carry a finance charge of $44, equivalent to an annualized interest rate of 214 percent. Interest payments must cover the transaction costs of making the loans, after all. They also reflect the increased risk on non-payment by low credit-score borrowers. 

As Rosenberg acknowledges, “There is a subset of the population that actually needs payday loans, and for this population, banks cannot readily serve them for a wide range of reasons.”

“Yes, payday loans are expensive. The real problem is there is no other options,” he says. “The average borrower is getting ten [payday loans] a year, and they have no pathway to a better product. The key thing is, we’ve tried to create a model where we win when the customer wins. … We do that by trying to incentivize behaviors that are constructive to the consumer’s financial life. If they do those things, they get access to more, the cost goes down, and the amount of capital they can get goes up.”

LendUp offers customers a “ladder” out of the indebtedness trap. The company provides financial, advising customers on how to improve their credit rating and qualify for lower cost debt. Borrowers can win points by paying back loans on time. As they prove themselves, they can work from payday-like loans to installment loans of up to $1,000 with lower interest rates.

Earlier this year, LendUp passed the $1 billion mark in loans provided. It has made more than 3.5 million loans.

Time will tell if LendUp has a profitable business model. But if it does, it should have no trouble attracting capital and expanding. Most likely it will attract competitors, and it will push the payday lending industry to reform itself — either develop a better business model or get dismembered by new tech-savvy, FinTech enterprises.

Interestingly, although LendUp’s East Coast operation is based in Virginia, the company does not offer loans in the Old Dominion. The article does not explain why, but don’t be surprised if there are regulatory restrictions inspired by do-gooders trying to protect the poor from predatory lending.

Motels as Housing of Last Resort

Flagship Inn, Petersburg

Two Sundays ago the Richmond Times-Dispatch ran a disturbing special report on poverty and housing insecurity along the Jefferson Davis Highway in Chesterfield County. Hundreds of people live in shabby motels, paying $200 or more per week to live in conditions almost as deplorable as Richmond’s public housing projects. These hotels, the housing equivalent of pawn shops and payday lenders, serve the poor and the desperate who have nowhere else to turn. It is depressing to think that people live this way.

People pay huge sums — $200 per week translates into more than $800 per month, enough to rent a nice, two-room apartment in a decent neighborhood — to dwell amidst deplorable conditions. Many hotel rooms have roaches, bedbugs and other insect infestations. The article cites leaking sewage, mold, mice droppings, and inoperable door locks. Conditions sound similar to those of the public housing projects — without the same level of crime.

The plight of some of the residents is truly pitiable. Latisha Ragland, a single mother with three children, lives in the Flagship Inn in Petersburg. The 39-year-old had most of her right leg amputated because of complications from diabetes and high blood pressure. She receives dialysis three times a week, and is waiting for a kidney transplant. She receives $735 a month in disabilities benefits but spends $220 a week for rent. Any unexpected expense is devastating. Stressful insecurity adds to the misery of her circumstances.

It seems absurd that someone must pay the equivalent of nearly $950 per month in rent (4.3 weeks per month x $220) for a literally lousy hotel room. The article prompts the question of why tenants have to pay so much. Are people like Ragland being exploited by greedy motel landlords?

That’s hard to say because landlords would not talk to the reporters. The lawyer for one responded, “There’s plenty of other hotels. Obviously, it’s not that bad or she would leave.” That’s not much of an answer.

But there are hints in the special report as to why the rents are so high. People who live in hotel rooms come only when they can’t find housing anywhere else. Other than living in a tent in the woods, this is truly housing of last resort. Who are these people? For the most part, they live hand-to-mouth and have terrible credit. Who would pay $950 per month if they could qualify to rent their own apartment?

Evidently, some tenants fail to pay their rent. Consider the predicament of the landlord. Anyone who stays at a motel for longer than 90 days has rights under the Landlord-Tentant Act. Landlords can evict clients for non-payment only after giving them a reprieve to allow them to come up with the money, and only after a court proceeding. Sometimes unpaid rent can accumulate to substantial sums.

The T-D cites the situation of Trimaine Reed, living at the America’s Best Value Inn, who took the motel to court after living with cockroaches for three years. In return, the motel tried to remove her for failing to pay $4,016 in rent. The judge ruled against her, she claimed, because she had forgotten the paperwork laying out her defense.

The larger point is not whether Reed was fairly or unfairly evicted. The point is that motel owners are dealing with clients with terrible credit quality who frequently fail to pay their rent. Motel owners either eat the lost rent or attorneys to collect it in court. In either case, they bear a substantial cost which must be compensated for by charging what seems to be unconscionably high rents. The situation is directly analogous to payday lenders who charge what seem to be unconscionably high interest rates to clients with a high propensity for default.

What is to be done? How does society at large deal with the heart-breaking stories of people who live in these motels? Cracking down on the motels does not seem to be a viable option. Driving the motels out of business will leave the tenants with no place to live. Some say Chesterfield County should encourage more affordable housing by requiring developers to add affordable-housing units as a condition of development. That’s fine if you’re OK with wealth transfers from the middle-class to a lucky few who qualify for those apartments; regardless, the lucky few won’t come from the ranks of the motel people because landlords would accept only lower-income tenants with the very best credit. Another option mentioned by the T-D is to create rental subsidy program funded in part by the county. That’s fine if you’re OK with tapping middle-class taxpayers.

None of the traditional remedies look good. But let me throw out an idea. There does seem to be an opportunity to create a charity-based enterprise. Because of their poor credit, motel tenants are paying outrageous sums for terrible living conditions. Address the credit issue, and a charitable entity can get the motel people into better housing at lower rents. Perhaps a charitable enterprise could bundle a couple hundred of these people, in effect pooling the risk and functioning as a co-signor so tenants can qualify for better housing under more favorable terms. Inevitably, some clients would default and the charitable entity would have to eat some bad debt, so it would be necessary to inject some charitable capital or public housing funds to maintain solvency. But in theory, tenants will be at lower risk of falling behind on their rent because they will be paying a significantly smaller percentage of their income. It’s an idea worth noodling.

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.

How Computer Games Are Sapping the Initiative of Young Men and Shrinking the Workforce

We’re all familiar with the stereotype of the young male slacker, disinterested in looking for work and holed up in his parents’ basement, wiling away the time surfing the Web or playing computer games. Many of us have observed such behavior in our own homes. (I’m not mentioning any names.)

Now four economists writing for the National Bureau of Economic Research have quantified how computer gaming has led to a decline in workforce participation.

Writing in “Leisure Luxuries and the Labor Supply of Young Men,” Mark Aquiar, Mark Bils, Kerwin Kofi Charles, and Erik Hurst start with the observation that younger men, ages 21 to 30, have experienced a larger decline in hours worked over the past 15 years than women and older men.

Time-use studies show a dramatic shift since 2004 in the amount of time that 21- to 30-year-olds have devoted to leisure — video gaming and recreational computer activities in particular. On average, the age cohort dedicated 2.3 hours more to leisure activities in 2012-2015 than in 2004-2007. Of that increase, recreational computing and video gaming accounted for 82% of the increase.

The big question: Are young men spending more time playing computer games because they are working less? Or are they working less because they are playing computer games more?

The authors argue that the declining cost of computer and gaming hardware, along with a revolution in online gaming, made gaming late in the decade of the 2000s more appealing to young men.

This chart shows how between 2009 and 2010, the employment rate for young men plunged much more than for those over 30.

Examining the data, the authors rule out differential changes in wages for the shift. Changes in real hourly wages for men with less than 16 years of education tracks that of their elders almost exactly. Rather, in the tradeoff between gaming/video watching and other daily activities (eating, sleeping, personal care; working, job searching, home chores, child care and education), leisure became more attractive. On average, young men spent more time with computers and less time on other things, because they found gaming to be so much more enjoyable.

To some degree, this behavior is subsidized indirectly by parents. In 2000, 23%  of  younger men and 34% of less educated younger men lived with a close relative, the authors write. By 2015, 35% of all younger men, and 49% of those with less education, lived with a close relative.

Young men found this working-less/freeloading-on-parents arrangement to be largely satisfactory, according to happiness responses in the federal General Social Survey. Write the authors:

The happiness of younger non-college men actually increased by 7 percentage points since the early 2000s, from 81 to 88 percent. So, in conjunction with a steep decline in employment, reported satisfaction has increased for these younger men. … Among non-college younger men, both the employed and non-employed exhibit increases in happiness. This pattern stands in stark contract to that for older workers.

After crunching a large volume of numbers and running them through indecipherable equations, the authors estimate that the computer-recreation revolution, by increasing the value of leisure, accounts for 23 to 46 percent of the decline in market work for younger me during the 2000s. “Innovations to computer and gaming leisure may have dynamic effects on labor supply. It is possible that individuals develop a habit (or addiction) for such activities.”

Bacon’s bottom line: Yes, computer gaming and web surfing can be addictive — especially for young men, who seem to be wired differently than women or older men. If you’re down on your luck and can’t find work, it’s easy to get lost in World of Warcraft instead of looking for a job or earning workforce credentials — especially if Mom and Dad are covering the room and board. Some people seek escapism through alcohol and drugs, others through computer games. I’m willing to bet that the underlying brain chemistry — triggering the release of dopamine — is the same. I know from personal experience that it’s entirely possible to blink your eyes and shake your  head, and realize, “holy mackerel, it’s three o’clock in the morning!”

In the ongoing debate over joblessness and income inequality, it is helpful to understand that what many people assume to be a problem of structural rigidities in the economy reflects, in fact, in part a sociological problem. Many young men — enough to affect the workforce participation numbers — would rather spend their time playing games than getting serious about earning a living.

Your Taxpayer Dollars at Work: Stuffing Poor People into Hideous Housing

Mosby Court, one of Richmond’s infamous public housing projects. Photo credit: Richmond Times-Dispatch.

The Richmond Redevelopment and Housing Authority, which provides public housing to about 10,000 Richmond residents, faces a $150 million backlog in repairs for its 4,000 housing units, reports the Richmond Times-Dispatch. “At some point you’re going to have very serious health and safety problems,” agency CEO T.K. Somanath told the authority’s board last week.

The authority is considering converting its six public housing projects from traditional federally funded public housing into the Section 8 housing choice voucher program, which would net the agency $7.5 million a year to apply toward property maintenance and large-scale redevelopment.

The authority has about $750 per unit annually for repairs and upkeep, reports the Times-Dispatch. A May 2016 physical needs assessment found the agency needed nearly $19,000 per unit to make all necessary fixes.

One obvious question is, why did the RRHA short-change maintenance so severely over the years? Were administrative costs bloated? Were other costs out of control? Did the department of Housing and Urban Development (HUD) cut financial support? Could RRHA have charged tenants more rent? The reasons are not clear, either from the T-D‘s reporting or from RDHA documents.

But there’s an even more fundamental question. The entire justification of having the government build and administer public housing is that government can do the job more inexpensively than the private sector. But can it?

RRHA’s budget is about $65 million a year, and it operates 4,000 housing units per year — housing units built decades ago, the original cost of which is almost fully amortized. That averages out to $16,250 per unit per year — $1,350 per month.

Think about that: You can rent new, two-bedroom apartments between 900 and 1,000 square feet in the Manchester neighborhood south of the James River for between $1,100 and $1,300 a month. They come equipped with hardwood floors, microwaves, washer-dryers, and some look like the photo at right:

Here’s the really amazing thing: The private-sector rental units are not fully amortized. Landlords have to pay the financing costs! Yet somehow they can provide quality apartments for less than it costs RRHA just to operate and maintain its disastrous public housing projects.

I’m sure I’m leaving stuff out — the RRHA pays utilities, and I expect that Manchester landlords do not — and I’m sure a fair comparison wouldn’t be as devastatingly bad as the numbers I have presented. This is a back-of-the-envelope calculation, and I would need to vet the figures with RRHA officials before drawing authoritative conclusions. But I suspect that no tweaking of the numbers would change the fact that public housing is a catastrophically failed financial model — and that doesn’t even include the social cost of packing poor people together in isolated, crime-ridden communities.

Surely it would be far better, as the RRHA requests, to convert all public housing to Section 8 vouchers. Going one step further, it likewise would be better to empty the projects, tear them down, let the private sector redevelop them, and get government out of the rental housing business altogether.

Update: Somaneth informs me that only $30 million of the RRHA’s $65 million budget goes to managing public housing. The rest goes to real-estate and community development programs. Thirty million dollars translate into an average expenditure of $625 per unit, which paints a very different picture than the one I describe above. I will have more to say about this in a future post.

Sustaining the Biggest Public Nuisance in Richmond

Mosby Court, public housing project in Richmond

Republished from Cranky’s Blog.

Not satisfied at maintaining the largest public nuisance in Richmond – the one that just led to the shooting death of a State Policeman – the Richmond Redevelopment and Housing Authority (RHHA) now proposes to do nothing realistic about it:

  • Fencing and gates. RRHA says this remedy is “largely . . . impractical.” I guess killing policemen is more “practical.”
  • Parking stickers and IDs. Not a bad idea, but worthless until they have the off-duty cops in place to catch the trespassers.
  • Empowerment programs. So, the problem largely is male visitors and they are going to “empower” the tenant girlfriends who are harboring those males? Please! The remedy is to evict those girlfriends.
  • Summer programs for the kids. Good thing to do but unrelated to the visiting male problem.

This is not rocket science, folks:

  • The feds tell us “(1) that effective property management can have a major impact on the health of a community, and (2) that accessible, legitimate techniques can be used to stop the spread of drug activity on rental property.”
  • Indeed, as to drugs (and certainly as to other crime), nuisance abatement is the sole tactic that has been shown scientifically to reduce crime in residential places. The DOJ monograph says: “With the evidence available we are relatively certain that holding private landlords accountable for drug dealing on their property by threatening abatement reduces drug related crimes.” Whether as to drug activity or other disorder, the landlord is the only entity that can make the physical changes to the property, evict the troublesome tenants, hire the security, control the access, and enforce the lease terms necessary to make the property safe.

Yet, RRHA, aside from the fences they have rejected, is not talking about what we know can help here:

  • Lights;
  • Cameras;
  • Access control;
  • Off-duty cops on patrol;
  • Rigorous trespass enforcement; and
  • Rigorous lease enforcement (i.e., eviction of the girlfriend who harbors the disorder)

As to that last point, the HUD lease [at Para. 25] contains the necessary provisions. These include eviction for, inter alia:

  • Drug related criminal activity engaged in  on or near the premises by any tenant, household member, or guest; and
  • Criminal activity by a tenant, any member of the tenant’s household, a guest or another person under the tenant’s control that threatens the health, safety or right to peaceful enjoyment of the premises by other residents or by persons residing in the immediate vicinity.

Yet, when I spoke with them about this (in the distant past), they said

  • Legal Aid makes it difficult to do anything;
  • The judges are reluctant to enforce the lease;
  • It would be “onerous” to ask RRHA staff to follow up on all offense reports and calls for service; and
  • Given the quality of the people who live in subsidized housing, RRHA can’t be expected to do much better.

To judge from their response to the current murder rate, and the shooting of the policeman by a trespasser who was living at RRHA, their indifferent attitude and the soft bigotry of their low expectations have not improved.

It is clear that RRHA is not serious about controlling its property. City Council is quiescent. The Commonwealth’s Attorney is not prosecuting the RRHA Board for maintaining the nuisance. Your tax dollars at “work.”