Category Archives: Poverty & income gap

Slum Maintenance at Essex Village

Crime scene at Essex Village.

Crime scene at Essex Village. (Photo credit: WTVR)

Who needs tenement slums when we’ve got public housing projects? The supposed “market failure” of the private sector to provide the poor and working class with decent shelter provided the justification for the federal government to get into housing business in the 1930s. We all know the result. Uncle Sam turned out to be the worst slumlord of all. In desperation, the government tried outsourcing to the private sector. How’s that working out?

I’ve highlighted the disastrous Kippax Place in Hopewell in previous posts. Now, courtesy of the Richmond Times-Dispatch, we learn that Essex Village in Henrico County has similar problems. Here’s how Debbie Truong leads off the story:

Inside one apartment building in Henrico County’s largest federally subsidized housing complex, the bathroom ceiling leaked, the stove thermostat was faulty and the windows wouldn’t stay open.

Across Essex Village, stairs were in disrepair, and there were mice and leaking water heaters. In November, raw sewage bubbled to the surface of manhole covers and, in December, drains backed up in four ground-level apartments.

Since April 14, 140 cases of building code violations were either reported or discovered by the county as part of an enhanced effort to turn around what officials say has languished into the county’s most poorly maintained housing complex.

Henrico County officials have vowed to get the housing complex back up to an acceptable standard. It will continue to pursue inspections aggressively and it will pilot a “family stabilization” project that will bring health, financial literacy, social services and other resources to the 1,600-resident complex, reports Truong.

Gregory Perlman

GHC Housing Partners, which owns the 496-unit complex, said it has addressed the building code violations, which were “fairly minor” in any case. Also, CEO Gregory Perlman noted that Henrico had failed to support a proposal last year seeking federal tax credits that would have helped pay for renovations.

Who is this Perlman person? In 2012 he claimed to have invented a “new approach to affordable housing.” This comes from a GHC press release:

“We focus on our residents and provide them with the opportunity to better their lives through self-improvement programs as well as support from the non-profit Perlman Foundation.”

… GHC Housing Partners specializes in acquiring and managing primarily Section 8 housing and providing social services and amenities that go far beyond HUD requirements. Vegetable gardens, dog parks, job counseling, college scholarships and summer camps are only part of this transformation of affordable housing. GHC Housing Partners is focused on initiatives and programs that improve lives and provide bootstrap opportunities for residents to achieve a higher standard of living.

Wrapping public services around public housing is the hot concept in the non-profit world. But how has the idea fared in the real world? The building code violations speak for themselves. The T-D also quotes a Rev. Joe Ellison who previously ran a day care at Essex and served as a pastor in the community. He left in 2005 “crestfallen over the living conditions.”

He said he approached management at Essex two  years ago, hoping to establish a program that involved mentoring and job creation. After a lukewarm response, he instead turned his sights to Fairfield Court in Richmond.

GHC warrants a closer look, far closer than I can provide in this quick blog post. The company is part of a housing-industrial complex that has grown up around public housing and, some have told me, exists as much to provide a comfortable living for a vast ecosystem of for-profits, non-profits, consultants and government administrators as for the poor themselves.

On its website, the Sherman Oaks, Calif.-based GHV claims to be the ” industry’s leading affordable housing owner and developer.” Since 1993, the company has acquired 20,000 housing units across 24 states in $1.25 billion worth of projects.

I infer that the company is for-profit, as the website makes no mention of a non-profit status. The parent company, GHC Housing Partners, is affiliated with GHC Investment Holdings, which acquires, owns and manages affordable housing; GHC Development, which develops properties using tax-exempt bonds and low-income housing tax credits; PK Management, a property management arm whose mission includes providing “quality service to its residents;” and a charitable arm, the All Ways Up Foundation.

In 2014, according to its IRS 990 form, the All Ways Up Foundation provided $128,777 in grants to organizations and $123,935 to individuals — sums that work out to an average of $12 per housing unit across the GHC system — and hosted an educational summit.

PK Management, which manages 18,000 units, purports to employ 41 social service coordinators to oversee resident welfare, focusing on delivering expanded services to its residents. It also offers “educational and professional opportunities designed to break the cycle of generational poverty.” (It’s not clear from the website if PK Management serves Essex Village, nor who pays for these services.)

The federal government turned to outsourcing after it became clear that it was doing a terrible job of running public housing projects itself. Perhaps it is time to ask if the non-profits and for-profits are doing any better. Anecdotal evidence is piling up that they are not, although Essex and Kippax may not be representative of performance at other housing projects. My suspicion is that private players master the latest buzz words and throw out a lot of flash-and-dazzle to impress the bureaucrats and win big contracts but that there’s not much follow through.

Perhaps the Times-Dispatch could do a little digging. What is the precise nature of GHC’s relationship with Essex Village? Does it own the property outright? Does it have a contract with the federal government? Does it provide wrap-around social services? Does the All Ways Up Foundation provide any grants? How much revenue does the project generate, and what is the cost structure? Most pertinently, how much money does GHC devote to maintenance and upkeep? Surely, this information would be available through the Freedom of Information Act.

Related questions: Who in the federal government, if anyone, is responsible for looking over GHC’s shoulder to make sure it is maintaining basic standards — and why has Henrico been forced to step in?

A Prosecution or Persecution of Pawn Brokers?

Pawn brokers under the gun. Fredericksburg’s All-Star Pawn & Gold does a good business in pawned guns.

The Virginia Attorney General’s office has extracted settlements from two Fredericksburg-area pawnbrokers for allegedly charging illegal interest and fees. Spotsylvania Pawnking LLC and Stafford-based All-Star Pawn & Gold will provide more than $62,000 in refunds to more than 1,000 customers to resolve the allegations.

The two pawn shops also paid the Attorney General’s office a total of $12,600 reimbursement for expenses, costs and attorney’s fees.

“In recent years we have seen a rash of pawnbrokers around Virginia skirting laws and overcharging consumers,” said Attorney General Mark Herring in a press release about the settlement. “If you’re considering using a pawn shop or other small dollar loan lender, you should always closely review the terms and know your rights before signing anything that might result in even more money coming out of your pocket.”

The press release provided no details about what the pawn shops charged in interest and fees. But in a previous press release, Herring accused B&B Pawnbrokers, Inc., also of Fredericksburg, of “predatory lending.” B&B, Herring charged, had made automobile title loans without a license, charged an illegal 10% monthly “processing fee” on all pawnbroker loans, and exceeded state limits on allowable interest rates and other charges.

The settlements are part of a larger initiative in which the AG’s office has partnered with the federal Consumer Financial Protection Bureau to enforce state and federal consumer finance statutes.

Bacon’s bottom line: Let me be 100% clear about one thing up front. Pawn shops, like any other business, should not cheat their customers. They must obey their contractual commitments, and they must obey the law. If they break either, they pay the price. Very simple.

That said, I’m always a little suspicious about campaigns against “predatory” lenders. The crusade against pawn shops reminds me of the crackdown on payday lenders motivated by a misguided effort to help the poor. In the case of payday lenders, the real offense typically is not cheating customers but lending money on terms that offend the consciences of do-gooders and social justice warriors. Is that what’s happening here with Virginia’s pawn shop prosecutions? I don’t know. I’m just raising the question.

The fact that Pawnking and All Star Pawn & Gold settled the case does not inspire confidence. Maybe they’re guilty as charged — or maybe they didn’t want to fight prosecutors with deep pockets.

Pawnking’s settlement provides a restitution averaging $67.29 per client, and so does All Star’s. Yup, exactly the same amount. That makes it sound like a cookie-cutter restitution. One must ask, is there any relationship between the restitution offered and the alleged harm done? According to the press release, customers who received loans between Sept. 13, 2014, and Nov. 12, 2015, can contact the companies directly. Why isn’t the AG’s office dispensing the checks? Does the AG’s office even know the identities of the presumed victims?

Pawn shops fill an important function in the economy. Most poor people do not have checking accounts, and those who do are required to maintain minimum balances and are punished for overdrafts. For the most part, they live in a cash-only society. When they run short, they don’t have savings accounts or credit cards to fall back on. Here’s the sales pitch on the All Star website:

If you’ve found yourself needing some quick cash recently and if you’ve been turned down for a personal loan, consider heading to All-Star Pawn & Gold.

All-Star Pawn & Gold offers collateral-based loans, meaning the loan is secured by something of value. You bring in something you own, and if we are interested, we will offer you the loan. The pawnbroker, All-Star Pawn & Gold, then keeps your item until you repay the loan.

You will receive a pawn ticket. Don’t lose this! Not only is it the receipt for your loan, but it also summarizes the terms of your pawn loan: fees, expiration date, description of your item, etc. …

If you don’t return to make payments on your pawn loan All-Star Pawn & Gold keeps your item. There are no other consequences: no collection action and no [effect] on your credit report.

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For-Profit Colleges and the Student Debt Apocalypse

Graduates from for-profit colleges account for a disproportionate share of student loan defaults.

Graduates from for-profit colleges account for a disproportionate share of student loan defaults.

Tressie McMillan Cottom worked as an enrollment officer at two for-profit technical colleges before she went on to earn a PhD., join the faculty of Virginia Commonwealth University, and write a book, “Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy.”

Cottom says that for-profit colleges get one important thing right: They invest resources in the front-end process of helping students enroll: everything from applying for financial aid to having their textbooks waiting for them on the first day of class. But she, like many other critics of for-profit education, is concerned by the high indebtedness and high default rate of students. Those who attend for-profit colleges represent only 26% of all borrowers but account for 35% of federal loan defaults.

The high default rate is a sign of the trouble graduates have finding quality, high-paying jobs, Cottom told Karin Kapsidelis, higher ed writer for the Richmond Times-Dispatch. For-profit colleges are a varied lot. While some deliver value for the students’ investment, others are marketing machines designed to enroll students and collect revenue with little heed to results. “The profit motive changes everything. It means that instead of helping students, you’re selling students.”

The industry took off when the financial sector figured out how to make money from it, Cottom says. Wall Street underwrote for-profit educational enterprises to “monetize” peoples’ aspirations and their faith in education as the way to improve their lives.

Writes Cottom in the introduction to her book:

Lower Ed refers to credential expansion created by structural changes in how we work, unequal group access to favorable higher education schemes, and the risk shift of job training, from states and companies to individuals and families, exclusively for profit. Lower Ed is the subsector of high-risk post-secondary schools and colleges that are part of the same system as the most elite institutions. In fact, Lower Ed can exist precisely because elite Higher Ed does. The latter legitimizes the education gospel while the former absorbs all manner of vulnerable groups who believe in it: single mothers, downsized workers, veterans, people of color, and people transitioning from welfare to work.

Bacon’s bottom line: No question, the high default rate is a huge problem — student indebtedness is creating a new class of Americans who have little hope of paying back their tuition and, as the law stands now, little chance of discharging their debts through loan forgiveness or bankruptcy like overextended homeowners can do. But I am concerned by how many people, including, Ms. Cottom, it seems, blame the problem on for-profit institutions and the profit motive.

As the Kapsidelis story points out, for-profit colleges account for 35% of all federal loan defaults. But 65% can be traced to non-profit colleges! The driving force behind high defaults isn’t the for-profit status of the school, I would suggest, but the socioeconomic status of the student. Students from poor families are more likely to drop out and default on their debt than students from better-off families. Historically Black Colleges and Universities (HBCUs), which are non-profit, have high default rates, too, as do institutions that cater primarily to lower-income whites and Hispanics.

For-profit institutions are motivated to accept marginal students in order to fill seats and generate revenue. But guess what, so are many non-profit institutions. They, too, have expenses to cover, salaries to pay, and bonds to finance.

The problem, I would suggest, isn’t for-profit versus non-profit, it’s the erosion in lending standards. Anyone who wants a student loan can get one. Because the repayment risk is transferred to the federal government, the college (be it for-profit or non-profit) has no skin in the game. If a college student is unprepared for college, defaults after dropping out, or fails to find a job, the institution suffers no ill consequence. Why would we expect any other result?


How Much in Tax Breaks Does Harvard Really Need?

Harvard, which has a $36.5 billion endowment (2015), is the biggest beneficiary of any university of the U.S. tax code.

The 281 public universities studied by the Nexus Research and Policy Center received $7,000 a year per student in state support on average over the past three years. But that sum pales in comparison to the indirect support, in the form of tax breaks for endowments, enjoyed by the larger private universities.

Gifts to university endowments are exempt from taxation as are earnings of the endowments themselves, wrote Mark Schneider and Jorge Klor de Alva in a Washington Post op-ed last week. Over the past three years 52 private universities with endowments of over $1 billion have received an average annual taxpayer subsidy per student amounting to more than $26,000 — almost four times as much.

Not only do the wealthiest private schools (and a handful of richly endowed public institutions such as the University of Virginia) receive the biggest tax boosts, the riches are far more likely to be bestowed upon the offspring of America’s highest-income families.

Write Schneider and de Lava:

Students from families in the top 1 percent of the income distribution are 77 times more likely to attend the most elite universities (the eight Ivy League colleges, plus four others) than are students from families in the bottom 20 percent of the income distribution. …

One consequence of that disproportionate flow of taxpayer dollars to the elite private universities is that last year, according to federal statistics, the billion-dollar-plus campuses were able to spend over $41,000 on instructional services for each student. In contrast, regional campuses spent only about a quarter as much ($10,700) on instruction per student.

Bacon’s bottom line: Liberals and progressives focus on the U.S. income tax code as a tool for income redistribution and economic leveling. The problem is that raising income tax rates engenders tax-avoidance behavior, creates disincentives to work, and does not result in the hoped-for gusher of tax revenue. Perhaps egalitarians should redirect their attention to the portion of the U.S. tax code that favors university foundations instead.

Because of the tight correlation between income and SAT scores, the nation’s top universities cater largely to the “one percent.” Graduates of elite institutions enjoy not only the advantage of higher family incomes than other Americans,  better high school educations, and the opportunity to forge relationships with the plutocrats of the future, they attend institutions where massive tax privileges lavish them with the richest of academic and campus experiences.

Consider this: Harvard’s $36 billion endowment (2015 numbers) has the capacity to generate $2.2 billion a year in income (assuming a modest 6% return on investment). Assuming the top corporate tax rate of 35%, that amounts to a tax subsidy of about $750 million a year. That is comparable to the $844 million in state support Virginia provides to UVa, Virginia Tech, Virginia Commonwealth University, George Mason University and Old Dominion University combined. And that doesn’t include the tax breaks — a double-dipper benefit — for the alumni and philanthropists who donate to Harvard!

As Malcom Gladwell observes in his widely downloaded “My Little Hundred Million” podcast, a handful of elite universities receive the lion’s share of donations and benefactions. Gladwell’s focus is on the philanthropists, as opposed to the tax breaks they enjoy, but the point is much the same. An extra $100 million donated to Harvard or Stanford will create a tiny incremental gain to society. But the same gift donated to a middling institution can have a tremendous impact.

Why does U.S. tax policy encourage the continued showering of benefits upon the cognitive/income 1%, while the institutions catering to the rest of America are left scrounging for  crumbs? If liberals and progressives — and conservatives, too, because we don’t like to live in an oligarchy any more than anyone else — want to even the playing field, I would suggest that it makes far more sense to target tax breaks for rich endowments.

College Graduation Rates and SAT Scores

This table shows the math and verbal SAT scores for Virginia's public universities, along with college graduation rates.

This table shows the math and verbal SAT scores for Virginia’s public universities, along with college graduation rates. Table credit: Cranky’s Blog

John Butcher, of Cranky’s Blog fame, is turning his analytical gaze from K-12 schools to higher education. In his latest post, he explores the strong correlation between a Virginia public institution’s six-year graduation rate and the average SAT scores of its student body, as seen in the table to the left and the plotted chart below of median SAT math scores. (See his post for the chart of English SAT scores.)

The commentary in his post is sparse, but he makes interesting points in his email correspondence with me:

UVa and Mary&Bill both take very smart kids and graduate nearly all. The middle-tier colleges take less bright kids and graduate fewer. VCU takes still less bright kids and graduates still fewer. All these sit pretty well on the fitted line, except that JMU under-performs on the math datum.

Why should schools taking less able students graduate a smaller proportion? If they were doing their jobs, they would adapt to their clientèle and give them degrees. Doubtless the market would discount those degrees (surely it does already as to the kids who graduate now). But we wouldn’t see the kids being sloughed off.

VSU and Longwood both over-perform, albeit not by nearly enough. But they are doing something better, if not entirely right. What is it?

Image source: Cranky’s Blog

Six-year college graduation rates are the standard performance metric for U.S. colleges and universities. Four years to graduation is the ideal. Six years contain a lot of slack and, to my mind, and represents a shamefully low hurdle. The inability of a student to graduate within six years constitutes a total failure, either on the student’s part, the university’s part or both. It represents a misallocation of resources by the higher ed system and a personal tragedy for the student, who typically accumulates thousands of dollars in loans and has no sheepskin to show for it.

We need to better understand the key variables affecting six-year graduation rates.

John gets the conversation rolling by noting that the odds are stacked in favor of smarter students (with smarts measured by SAT scores). Indeed, SAT scores account for almost 80% of the variation in the graduation rate. Smarter kids come disproportionately from well-off families that raise them in an environment that rewards educational achievement and also have the means to support them financially while in school. These students can spend more time studying and less time worrying how to pay tuition, fees, room, board and incidentals.

But the correlation is not perfect. Some institutions do better with the raw material (students) they are given than others, as can be seen by the squares above and below the plotted line. (Old Dominion University may be an outlier because its student population contains a high percentage of military personnel who leave when they rotate to an assignment in another location.)

John asks if institutions are gearing their curriculum and academic standards toward the students in their student body, as opposed, perhaps, to the students they wished they had. That hypothesis is worth pursuing.

Here’s another: Could the guidance and support given students play a role in college graduation rates?

In 2011 the University of Virginia performed slightly above expectations in six-year graduation rates, but only slightly. As part of its strategic plan (the Cornerstone Plan) instituted in 2013, UVa is pioneering the concept of “total advising,” which integrates academic advising, career advising, and coaching. One would hope that the program will show higher six-year graduation rates for the class of 2017.

Likewise, it would be interesting to see what the Virginia Military Institute, Christopher Newport University, and Mary Washington University — all of which performed above expectations — are doing differently from other universities.

One way or another, we need to figure out how to help students graduate on time and on budget.

Fighting Food Deserts One Neighborhood at a Time

Inspired by a desire to wipe out food deserts, Jim Scanlon opened this Newport News store.

Inspired by a desire to wipe out food deserts, Jim Scanlon opened this Newport News store. Photo credit: Richmond Times-Dispatch.

The Richmond Times-Dispatch ran a profile today of Jim Scanlon, a former Ukrops Super Market executive who opened a grocery store near downtown Newport News and plans another in Richmond’s East End. His mission is to eliminate Virginia’s so-called “food deserts” one neighborhood at a time. The story of how Scanlon has worked with local economic development authorities in Newport News and with the backing of philanthropist Steven Markel in Richmond creates a message of hope.

But one must ask, how will Scanlon succeed where others have failed? As the article notes, the Brooks Crossing area of Newport News, where one of Scanlon’s stores is located, had been served by an unnamed grocery store until about two years ago, when it abruptly closed. Likewise, the East End of Richmond had been served by Community Pride, which shut down in 2004 after its African-American owner-entrepreneur, Johnny Johnson, encountered major financial difficulties.

I’ve read dozens of articles about food deserts and the effort to coax grocery stores into those areas. Reporters frequently describe how the old grocery stores closed but never seem curious about why. It’s not as if their customers suddenly became penniless. Poor people get food stamps to supplement their other sources of income just the way they always have. Social critics have argued that food stamps don’t provide enough money for a nutritious diet, and perhaps that’s true, but it’s not as if food stamps were ever sufficient by themselves to support a healthy diet.

Grocery stores in poor urban areas encounter problems that stores in affluent suburban areas do not. Urban stores have a higher incidents of theft and pilferage. They also have more “slip and slide” insurance claims, as I learned from Johnson. Before expanding too aggressively and getting overextended financially, Johnson was successful because, as an African American, he had a keen understanding of the markets he was serving. He knew how to hire reliable employees. He dispatched to pick up little old ladies who couldn’t drive to his stores. The demise of his business was a tragedy for many.

Ironically, while grocery stores have failed in poor urban neighborhoods, convenience stores have flourished. In Richmond’s East End, these stores are typically owned by Koreans, Middle Easterners or other ethnic minorities not bound to conventional white, professional-class thinking. Invariably, these are small, family businesses. The owner-shopkeepers work long hours, drafting spouses, children, cousins and other relatives as employees they can trust, and I would wager they accept smaller profit margins. They develop personal relationships with their customers, often extending small sums of store credit in a way that a conventional grocery store never would. Perhaps most important, convenience stores stock what their customers are buying, which, unfortunately, is heavy on junk food and cheap sources of carbohydrates like rice and pasta.

Food products that sell in middle-class neighborhoods don’t sell as well in the inner city, where poor people don’t have the same tastes, don’t have the same disposable income, and make different trade-offs between cost and quality. Grocery-store business models built around catering to the middle class don’t work in the ‘hood unless the demographics are shifting — which happens to be the case in Richmond’s Church Hill area and is likely so in Newport News’ Brooks Crossing redevelopment as well. If Scanlon’s ventures pay off, I expect the credit to go to middle-class gentrifiers.

What worries me is that, as we see in efforts to ameliorate the housing and transportation issues of the poor, fixing the food-desert problem deals with a symptom of poverty without addressing the underlying causes. What poor people really need first are stable jobs and higher incomes so they can afford to buy better food.  Then they need to cultivate a taste for healthier cuisine. Otherwise, they’ll end up like a lot of better-off Americans, using their money to buy more expensive junk food.

Poverty and the Virginia Welfare State

Greetings from the Virginia welfare state

Greetings from the Virginia welfare state

Let’s say you’re a woman living in the City of Richmond. Let’s say you have two children, ages three and seven, but no husband. Let’s say you work 40 hours a week earning the minimum wage, or $15,080 per year. How much can you potentially receive in public benefits?

Sean Gorman, the Richmond Times-Dispatch PolitiFact reporter, added up the numbers based on a report by the Virginia Department of Social Services:

  • Welfare — $3,840
  • Food stamps — $2,268
  • Women, Infants and Children food basket — $600
  • Child care assistance — $12,468
  • School lunch — $1,296
  • Housing voucher –$10,692
  • Family Access to Medical Insurance Security Plan — estimated $9,807 (based on comparison to Medicaid)
  • Total — $40,971

Add that $40,971 to the wages the woman earns, and we’re talking $56,000 a year. Then consider that the $40,971 in benefits are not taxable income. To earn the same amount in take-home pay– accounting for social security, Medicare, federal income taxes and state income taxes — the same woman would have to earn $5,000 to $10,000 more, depending on what assumptions you make. (That is a back-of-the-envelope calculation derived from running numbers through a federal tax calculator.)

Thus, under the Virginia welfare state, a woman with two young children working for minimum wage enjoys roughly the same standard of living as a woman with two young children earning $60,000 to $65,000 a year. Then consider that the 2015 median household income in Richmond was $60,700, and consider the fact that the median household income includes many two-income families.

Discussion questions:

  • Income inequality. What do these numbers imply for the debate over income inequality in the United States? Does it make any sense to decry the disparity in income without taking into account benefits that low-income households receive from the welfare state?
  • Upward mobility. What do these numbers imply for social mobility? If a woman cannot better her material condition by working diligently and acquiring the skills needed to earn more pay, do welfare benefits act as a deterrent to self-improvement?
  • Poverty and marriage. Given the incentives of the welfare state, what reason do poor women have to get married and to raise their children in a stable partnership with their father? To what extent do welfare benefits render low- and working-class men economically peripheral and irrelevant for any role other than as sexual partners?
  • The nature of poverty. To what extent is the scourge of poverty in Virginia — substance abuse, domestic violence, child neglect, ill disciplined behavior, crime, dropping out of high school, out-of-wedlock births, and associated dysfunctional behaviors — the result of material deprivation or the consequence of welfare-induced family breakdown?

I would guess that the $40,000 tally of welfare benefits is a high number — not all similarly situated women apply for and receive the full gamut of benefits. Even so, the number is extraordinary. It is a testimony to the upward-striving nature of American society that anyone makes an effort to improve themselves at all.

Reinventing another Failed Public Housing Project

Kippax Place represents another in a long line of initiatives to reimagine public housing.

Kippax Place — “reimagining public housing.” Image from the website of the Virginia Community Development Corporation.

Kippax Place, a seven-story building in downtown Hopewell, is a product of 1970s-era public policy housing. Like so many public housing projects, it became almost unlivable. In an effort to restore the facility to habitable standards, the Hopewell Redevelopment and Housing Authority has contracted with the Community Housing Corporation to give the home for more than 100 elderly and disabled residents a $13 million, top-to-bottom overhaul.

As described by the Richmond Times-Dispatch today, the apartment building had deteriorated to an atrocious state of disrepair: broken water pipes, mold, rodents, bed bugs, leaking ceilings and windows, intermittently operating elevators, an antiquated HVAC system, and a dysfunctional trash chute that had filled up to the top. When both elevators broke down, residents would get trapped in their rooms for days at a time.

How had the situation gotten so bad? One problem is that the business model was fundamentally unsound. In  2015 article the Hopewell News quoted Steven Benham with the Hopewell housing authority:

“Kippax … was losing about $90,000 a year when you look at the revenue that we get from that building and the overall expenses that it takes to run that building. We’re losing about $90,000 a year.”

To help stop the financial bleeding, Benham said HRHA has tried to reduce services at the building, closely monitor the utilities, and reduce staff. He said the cost has been brought down quite a bit but it has not been enough.

Notice the phrase, “Reduce services at the building.” That’s another way of saying, “Reduce maintenance.” Not that Benham had any choice. The housing authority has to live within an inadequate budget.

The situation is Hopewell is little different from the situation anywhere else in the country. The TD provides some perspective:

[Kippax residents] are on the receiving end of historic indifference toward maintaining the nation’s public housing stock — a problem so dire that experts say 10,000 units go offline annually because they have become uninhabitable.

There’s a documented $26 billion backlog of capital needs for such things as bad boilers and faulty pipes across the nation’s 1.2 million public housing units. … The actual need is likely twice as high.

Affordable housing advocates warn some complexes have deteriorated to the Depression-level conditions that first prompted the federal government to become involved in housing issues in the 1930s.

Bacon’s bottom line: The original justification for public housing was that there was a “market failure” in housing that justified government stepping in and creating a supply of “affordable” units.  Politically progressive reformers argued that government could provide decent housing at a lower cost than could the market.

Eighty years of experience have demonstrated with startling clarity that the “public failure” is just as bad, if not greater than, the “market failure.” Even when supplemented by federal subsidies, the pitiful income streams generated by low-income residents are inadequate to sustain the public housing projects. Invariably, the path of least resistance is to defer maintenance. Over time, the public facilities deteriorate to a level that would be intolerable if they were operated by private-sector slumlords. Not only does government build and maintain slum-style housing, public projects concentrate poverty, often making them projects cesspools of crime and violence. (As a home for the elderly and disabled, Kippax does not appear to have a significant crime problem.)

The housing-industrial complex — an ecosystem of federal and local agencies and authorities, financiers, contractors, and consultants — has been impossible to dislodge. Like any other special-interest group, it is politically powerful. Over the years, the industry has tried to reinvent itself based upon trendy new concepts and theories, all leading so far to disappointing results. The idea at Kippax is to convert the property to private ownership and management in partnership with Christiansburg-based Community Housing Corporation, with rental assistance to keep rents affordable.

The infusion of capital and major renovations will improve the quality of the housing stock in the short run. Residents will appreciate having someone repair their apartments, seal the building against the elements, fix the elevator and put the trash chute back into working order. Also, a modernized HVAC system should generate savings through lower electricity costs. The question in my mind is whether the facility is financially sustainable over the long run. If not, it matters not whether the landlord is the public housing authority or a non-profit enterprise. If not, Kippax will enter into another downward spiral of deferred maintenance and disrepair.

Suspended Licenses in Virginia a Social Scourge

Suspended licenses have created a major social problem in Virginia.

Virginia suspended licenses at the rate of 160,000 per year in the first quarter of fiscal 2017. Image credit:

In the fiscal year ending June 2015, the Old Dominion suspended licenses of nearly 39,000 Virginians for drug convictions unrelated to driving. The practice is a relic dating back to 1991 and the war on drugs, and all but 12 states have abandoned it.

Suspending licenses for drug possession is just one facet of a widespread abuse, which we have highlighted on this blog, of depriving Virginians of their driving privileges. In just the first quarter of the current fiscal year, 10,900 Virginians lost their licenses for drug-related offenses, 20,700 for failure to pay court fines, and 8,000 for failure to pay child support, reports Frank Green in the Richmond Times-Dispatch today.

The irony of the suspended-licenses policy is that depriving Virginians of their right to drive narrows their options for getting to work and makes it more difficult to maintain the employment they need to pay the fines and child support. Estimates show that nearly three-quarters continue to drive illegally. Many get caught, and their court-related troubles compound. The practice has created a treadmill of indebtedness that keep hundreds of thousands of Virginians trapped in poverty.

A new rule quietly adopted by the Virginia Supreme Court, effective February, will require all courts to offer more flexible terms for paying off court fines.  One option is to pay on a deferred or installment plan. Another is to assign people to community service.

Meanwhile, Sen. Adam P. Ebbin, D-Alexandria, has introduced a bill to the General Assembly that would halt the automatic stripping of drug offenders’ driver’s licenses — contingent upon written assurance from the U.S. Department of Transportation that Virginia would not lose any federal transportation funds. (In 1991, Green explains, Congress had threatened states with the loss of federal highway funds if they did not automatically suspend the licenses of drug offenders.)

Bacon’s bottom line: There is no rational nexus between committing a drug-related crime and having a driver’s license suspended or revoked. Ebbin is right, Virginia should reverse the policy. The appropriate way to punish drug dealers — I’m side-stepping here the debate over whether we should decriminalize marijuana — is through sentencing and parole, not depriving offenders of the means to earn a livelihood.

While Ebbin’s legislation is reasonable, we need to go further. Any system that deprives Virginians of drivers’ licenses for non traffic-related offenses at the rate of 160,000 a year creates an enormous social problem. Virginia’s courts have become an engine of oppression and immiseration, perpetuating poverty. We need to find a better way.

Food Pantries, the Latest College Craze

An increasing number of college food pantries in Virginia provide emergency rations to hungry students. Photo credit: VCU's Rampa

An increasing number of college food pantries in Virginia provide emergency rations to hungry students. Photo credit: VCU’s Rampantry

There’s a new wrinkle on the college affordability crisis. Some students are so strapped for cash that colleges are setting up food pantries. As CNN reports, membership in the College and University Food Bank Alliance has quadrupled in the past two years to 398 members.

“Even if you don’t hear about hunger being a problem, there’s probably a population on campus in need,” said Megan Breitenbach, a student who volunteers at the pantry at Montclair State in New Jersey.

Food Bank Alliance members include these Virginia institutions:

Virginia Commonwealth University. The mission of Ram Pantry is to “to provide VCU students with healthy, culturally appropriate, emergency food.” Due to limited resources, the website says, the pantry can no longer service VCU faculty and staff!

Virginia Tech. Tech won reknown for its No. 1 ranking in the “best food” category of “The Princeton Review’s” 2015 best colleges review. But in December 2015, according to the Roanoke Times, the food pantry was serving 50 to 75 students per week.

Old Dominion University. ODU launched Ignite Pantry in October.

Northern Virginia Community College and Eastern Shore Community College also operate food pantries.

Bacon’s bottom line: In their never-ending quest to recruit more elite student bodies, Virginia colleges and universities are placing more emphasis on the kind of food that kids from affluent families are accustomed to. Virginia Tech is a case in point. As I blogged last month when discussing the rising cost of food services at the University of Virginia:

Upgrading from the crappy cafeteria food I ate back in the 1970s to trendy, locally sourced food is expensive, and the lower-income and middle-class students whose families live on McDonalds or Olive Garden budgets are hard-pressed to pay for it.

Little did I realize that the situation was so bad that colleges and universities were setting up food pantries!

With every passing day, it seems increasingly evident that colleges and universities in Virginia (and across the nation) are engines of exploitation, running up the cost of attendance (tuition, fees, room, board), encouraging indebtedness, and sending their graduates into the workforce deeply in hoc — all to acquire the resources to boost institutional prestige in a never-ending race with other institutions doing the same thing. Starving students are the latest symptom of a system that is terribly broken.