Category Archives: Housing

Virginia’s Housing Shortfall

Underproduction as a % of 2015 housing stock.

Between 2000 and 2015, 23 states fell 7.3 million units short of meeting the housing needs of their growing populations — equivalent to about 7.3% of the housing stock of the United States, according to a new study, “Housing Underproduction in the U.S.,” published by the Up for Growth Coalition.

Although not the worst offender, Virginia was one of the states notable for housing underproduction, falling short of demand by 131,000 units over the 15-year period.

Restrictive zoning and development policies in Virginia and elsewhere have created an imbalance in supply and demand imbalance that has dire economic consequences. States the report:

As people migrate toward cities in search of jobs, education and economic opportunities, the demand for housing in our most populous and economically productive regions has far outstripped the production of new housing units. Due to dramatic shifts in generational preferences and household demographic trends, migration to cities over the past decade are at the highest level since World War II, while housing production has fallen to historic lows. This imbalance has led to rapidly rising housing prices, economic displacement of lower income families and communities of color, and increases in homelessness.

Long-term Bacon’s Rebellion readers familiar our Smart-Growth-for-Conservatives critique of Virginia land use and development policies will be right at home with this study. The report blames “restrictive local development and land use policies that reflect opposition to high-density, multi-family urban growth in favor of low-density, single-family, suburban sprawl.” Offending policies include:

  • Zoning restrictions, which create a shortage of zoned, high-density sites;
  • Escalating and misaligned fee structures, such as impact and linkage fees;
  • Poorly calibrated inclusionary housing requirements; and
  • Lengthy review processes that invite gaming and abuse by growth opponents that can delay projects, create unpredictability, reduce incentives to invest and increase the per-unit cost of development.

Not only do dysfunctional housing markets produce fewer units than would be supported by demand, according to the report, they produce units in the wrong locations. The market for housing in walkable, high-density, high-value urban areas is significantly under-served, while housing continues to be built in lower-density suburban communities with a backlog of land zoned for residential.

Average change in home prices by county, 2000-2016.

The study advocates a loosening of anti-development restrictions to encourage  a “smart growth” model of growth that promotes high-density residential development in major transportation corridors. Benefits will include increasing the housing supply, exploiting existing infrastructure, and increasing tax yields to local governments. Four broad tools would achieve these aims:

  • By-right approval. Establish “by right” high-density residential development in a half-mile radius around a transit station (roughly 5 percent of a metropolitan region’s land area).
  • Impact fee recalibration. Recalibrate impact fees to reflect actual costs of infrastructure service for high-density development.
  • Property tax abatement. Use property tax abatement as a gap financing tool to enable denser and more affordable housing production.
  • Value capture. Establish mechanisms to capture value created through up-zones and tax abatement investments to be used as dedicated funding for a range of housing programs.

Clearly, Virginia has a lot of work to do. We’re not as bad as the West Coast, the Northeast, or even our neighbor to the north, Maryland, but we’re the worst state in the Southeast (excepting Florida). The cost of housing is harming our economic competitiveness and hindering our ability to adapt to economic circumstances.

One of the ways to address rural poverty in Virginia, for instance, would be to encourage unemployed or under-employed workers in small towns and countryside to migrate to metropolitan areas offering better employment opportunities. When local governments in metro areas restrict housing development, they block this migration. Lower-income Americans literally can’t afford to make the move. The result is the worst of both worlds: sub-par employment opportunities in rural areas combined with job shortages in the major metros.

The higher cost of housing also helps explain another phenomenon — the shift of Virginia in recent years from a state from a people-importing state into a people-exporting state.

Finally, as the report alludes to, high housing costs disproportionately impact the poor and minorities. High housing costs, not racism, keep minorities trapped in public housing projects and slums. High housing costs block them from becoming homeowners, building home equity, and accumulating wealth, thus perpetuating income inequality.

Where is the General Assembly on the housing issue? Where was the McAuliffe administration? Where is the Northam administration? AWOL, all of them.

Spend Less, Invest More, Improve Credit Scores

U.S. Personal Saving Rate since 1960. Too low for all Americans.

The editorial board of the Virginian-Pilot finds it a matter for “concern” that African-Americans are denied mortgage loan applications in the Hampton Roads region at a higher rate than whites. “In Hampton Roads,” writes the Pilot, black applicants during the study’s period — 2015 and 2016 — were 2.4 times more likely to be denied mortgages than white applicants.

As I began reading this editorial, I braced myself for the usual insinuations that the disparity is due to discrimination, white privilege, institutional racism, or whatever. But I was pleasantly surprised. The editorial writers acknowledged that the study by the Center for Investigative Reporting from which they drew their data did not account for the credit scores of borrowers (or loan-to-asset ratios, for that matter). Indeed, they went so far as to aver, “There is no evidence that the gap is a direct result of discrimination.”

Still, they find the disparity troubling, and they suggest that “something more than economic trends might be a factor.” The report should prompt a “serious review” of lending practices to ensure that there’s “no subtle discrimination at play, no policies or actions that could — even unintentionally — lead to racial discrimination.”

I applaud the Pilot editorial writers for breaking free of the simple-minded institutional-racism narrative. But they don’t go nearly far enough. They remain so ensnared by progressive assumptions that they can’t imagine any other explanation for the disparity than a subtle, as-yet-undetected bias — even though, as they acknowledge, mortgage lenders say it wouldn’t make financial sense to deny a loan to any qualified candidate.

I would refer the editorialists to a December 2017 commentary by Alfred Edmond Jr. in Black Enterprise. Edmond addresses a fact, celebrated in other contexts, that African-Americans were estimated in 2016 to wield some $1.2 trillion in consumer buying power. Buying power is not the same as wealth, he cautions.

Addressing other blacks, Edmond writes:

The ability to build wealth depends on the degree we control our spending, so that after we pay income and other taxes, and for necessities such as housing, food, and transportation, we have something left over to not just spend, but to earmark for emergency savings, retirement savings, an investment portfolio, buying real estate (beginning with our own homes), financing businesses, and acquiring other assets.

Right now, while black income has grown rapidly over the past 70 years, our spending has grown even faster, which means we are spending every penny we make and then some (which is the case for most Americans). And what allows us to spend more than we make? Easy access to credit, of course. …

The truth is that money is in our garage, in our homes, and on our bodies, in the form of consumer goods, such as cars, clothes, electronics, and experiences (such as that daily, gourmet coffee-dessert) that we’re convinced we deserve and can’t live without, or even defer long enough to save, rather than borrow at interest, to have. And far too much of our money is going toward interest payments on the debt we took on (much of it via credit cards) to make these purchases.

Blacks can pursue one of two paths, he says:

A poverty-creation lifestyle. Spend more than you make, regardless of income, and borrow, paying interest and fees, to cover the difference. After providing for basic necessities (and often instead of doing so) you spend all of your income on high-priced, low-value, depreciating assets, such as clothes, cars, jewelry, etc.

A wealth-creation lifestyle. Spend less than you make, regardless of income, and save and invest the difference, earning interest, dividends and capital gains. Invest as much as possible in sensibly priced, appreciating assets, such as stocks, bonds, mutual funds, real estate, etc.

What Edmond writes, of course, is true for everyone, not just African-Americans. Personal thrift and saving were long considered virtues in the United States. But with the general disparagement of “bourgeois virtues” and the rise of hyper-consumerism, the willingness to defer gratification has gone out of style. Savings rates in the U.S. are half of what they were in the 1960s, 70s, and 80s. (See the chart atop this post.) For whatever historical or cultural reason — perhaps attributable to past discrimination and a desire to enjoy the material blessings that other Americans take for granted — African-Americans spend more (thus accounting for their punching above their weight in consumer spending), save less, accumulate more debt, and have worse credit scores. Which means they get turned down more frequently when they apply for mortgages.

Rather than engaging in wild goose chases, seeking auras and penumbras of discrimination in the banking industry, society should be encouraging African-Americans to embrace the virtue of thrift. Resources devoted to underwriting deeply flawed and deceptive “investigative” reporting such as the Center for Investigative Reporting study (see my take-down here) would be far better deployed to teaching financial literacy to African-Americans — indeed, to all Americans, for financial illiteracy and irresponsible spending know no ethnic or racial bounds. Meanwhile, the editorial writers of the Virginian-Pilot would be well advised to broaden their reading list. Black Enterprise might be a good place to start.

Racism, Racism Everywhere You Look

Pseudo-data alleging racial disparities in mortgage lending in Hampton Roads.

The Center for Investigative Reporting has published an in-depth analysis of lending data showing that African-Americans have been denied home loans at a significantly higher rate than whites in 48 out of the 61 metropolitan areas examined. The Virginian-Pilot picked up that research and published an article yesterday stating that African-American homebuyers in Hampton Roads were more than twice as likely than whites to have loans denied.

It just goes to show, if you look for racism hard enough, you’ll find it anywhere and everywhere.

Let’s take two theoretical findings. Let’s say six percent of whites have their loans denied, and 18% of blacks have their loans denied. That means blacks are three times more likely to be denied a mortgage! Now, let’s say that 94% of whites have their loans accepted, and 82% of blacks have their loans accepted. That means whites are only 14% more likely to qualify for a mortgage.

Which one sounds more racist to you? The first statement, right? Of course, the two statements are based on exactly the same data. It’s just that one is framed to make lending patterns look more racist and the other framed to appear the opposite. Which way did the Virginian-Pilot and Center for Investigative Reporting choose to present the data? The way that framed mortgage lending as racist.

Likewise, the investigative report emphasized that racial discrepancies were found in 48 metros, largely overlooking the fact that none were found in 13. Who would be interested in running a headline, “No Sign of Racism in Twenty Percent of American Cities”?

But the problems in the analysis run far deeper. The data is inherently flawed and useless.

The intrepid investigators describe how they adopted a “binary logistic regression” methodology that assesses the relationship between multiple independent variables against a single binary input (whether or not a mortgage was denied). Then it looked at nine different variables:

  • Race/ethnicity
  • Sex
  • Whether or not there was a co-applicant
  • Applicant’s income
  • Loan amount
  • Ratio between loan amount and applicant’s income
  • Ratio between median income of the census tract and median income of the metro area
  • Racial and ethnic breakdown by percentage for each census tract
  • Regulating agency of the lending institution

The authors do concede that they leave out two important variables — credit scores and debt-to-income ratios — because the data is unavailable. However, those are the two of the most important variables of all! If someone has a lousy credit score, regardless of their income or income-to-mortgage ratio, lenders are less likely to finance a mortgage. If someone is loaded up with credit-card debt, student loan debt, or auto loan debt, those other obligations will figure rightly  into a bank’s calculations.

The Center for Investigative Reporting notes in its article that, according to U.S. Census Bureau data, the median net worth of African-American families is $9,000, while the median net worth for whites is $132,000. That’s a real disparity, and it’s based on complex historical reasons arising from the legacy of slavery, Jim Crow, and the Great Society. But racially blind lending algorithms look at credit scores, net worth, and debt obligations — not the historical reasons behind them.

In sum, running a binary logistic regression without including the most critical lending variables is a worthless exercise, and making broad indictments of the mortgage banking industry on the basis of such worthless findings is reckless. Race relations are frayed enough as it is, and the last thing the country needs is another “study” alleging discrimination where it does not exist, and engendering resentment that is unwarranted. It’s bad enough that Russian bots are spreading fake news to intensify racial animosity. We don’t need journalists feeding the fire.

Like the boy who cries wolf, such studies deeply damage the credibility of those who issue the alarms. One is tempted to assume that the methodology of every study showing institutional racism is just as shoddy and the ideological biases of the authors are just as blatant. There is a danger that many people will ignore instances in which claims of racism actually are justified.

If a properly conducted study adjusted for credit scores, net worth and indebtedness, who knows, it might show that residual racism still exists. But after enough studies like this, millions of Americans would slough it off as more noise from social justice warriors passing themselves off as journalists.

The Airbnb Dilemma: Regulate or Not?

Revenue growth in the rental of dwellings in Virginia through Airbnb has outstripped the rental of single rooms. Source: “2017 State of the Commonwealth Report”

Airbnb, the website that allows homeowners to rent rooms and houses for short periods, no longer occupies an obscure niche in the Virginia lodging marketplace. The company is capturing a disproportionate share of growth in lodging industry rooms and revenues, and it depresses the ability of hotels to raise rates during periods of peak demand, concludes the “2017 State of the Commonwealth Report.”

The number of Virginia listings has surged from just over 2,000 in October 2014 to 10,400 in October 2017. Total revenue has increased over the same period from $1.52 million to $17.4 million. Airbnb share of the lodging market rose from less than a half percent to nearly 4.7%.

“While the Airbnb rental sector may be smaller than the traditional lodging sector, Airbnb is a rising competitor,” write Robert M. McNabb and James V. Koch, the lead authors of the report.

The image most people have of Airbnb participants is of homeowners renting out a spare room for pin money. But the data suggest that it’s becoming an increasingly big business in which property owners are renting entire dwellings. While private room revenues increased sixfold over the three-year period studied, the rental of entire places increased thirteenfold, as seen in the chart above.

That reality has implications for how Airbnb should be regulated. Whole-house oceanfront rentals in Virginia Beach have generated numerous complaints regarding unruly behavior, illegal parking, and trash. The lodging industry has argued that Airbnb rentals should be taxed on the same basis and should meet the same regulatory standards as hotels and motels are.

McNabb and Koch are sympathetic to Airbnb to a degree.

It is not the job of government to protect existing firms and industries from new, more efficient or more attractive competitors that would serve consumers better and do so at lower prices. … Enabling citizen consumers to spend their dollars where they wish is a welfare-maximizing stance for government to adopt. … As a rule, challenging competing firms to meet “the market test” — that is offer goods and services at prices and levels of quality that are attractive consumers… — not only is an equitable approach that treats all citizens and firms the same, but also generates the best overall results for the citizenry.

However, they add an important caveat: Government should not intervene as long as the use of Airbnb “does not generate undesirable side effects such as pollution, noise, traffic congestion, crime, unsanitary conditions that impact the public health, and the like.”

While some Airbnb hosts have consciously evaded city regulations and taxes, it does not necessarily follow that localities should devote substantial resources to cracking down on them. Single-room hosts account for a small percentage of rooms, revenues and taxes, and they are rarely the source of behavioral problems. They go in and out of the market, and they’re difficult to identify and force to comply. The payoff for local governments is low.

Cities would do better to devote scarce enforcement sources going after Airbnb hosts offering their entire place for rent. “Plainly speaking, this is where the revenue is and evidence suggests that any behavioral problems that Airbnb generates are concentrated among these properties as well.”

Meanwhile, the authors advise hotels operators to re-evaluate their pricing and quality strategies. “Airbnb and similar rental hosting firms are not going to go away.”

Poverty, Government, and the Bourgeois Virtues

Richmond Mayor Levar Stoney. Photo credit: Richmond Magazine

Unwinding historical injustices that trap African-Americans in inter-generational poverty is “the moral challenge of our time,” Mayor Levar Stoney told attendees of at an anti-poverty conclave at Virginia Union University Tuesday. Policy decisions that hurt the poor “have done more to hold the flesh and blood of our city back … than any bronze and granite has,” he said in an apparent reference to the city’s Civil War statues.

Stoney was right to re-focus the public discourse from removing statues of Confederate generals to fighting the scourge of poverty. But his lofty rhetoric raises new causes for concern. Embedded in his speech is the assumption that government can set things straight. In effect he’s saying, “The social engineers got it wrong when they created the housing projects. But trust me, this time we’ll get it right.”

Promising a “bold and courageous” budget in the future, Stoney spoke of the need to “consider some of our critical needs in housing, in public education and in poverty mitigation.” Better Housing Coalition CEO Greta Harris, co-organizer of the summit, took the opportunity to say that a “dedicated funding stream” is needed to create affordable housing opportunities and redevelop aging public housing projects.

When someone talks about addressing “critical needs” and “dedicated funding streams,” I hear “raising taxes.” When the Richmond Times-Dispatch brought up the tax issue, the mayor responded: “I’m not prepared to today to talk about any specific tax.”

I don’t want to pre-judge what Stoney has in mind, but when you’re mayor of a city, you’re likely to look to government to fix poverty. And when you run a better housing coalition, you’re likely to tout a housing program as a response to poverty. In either case, you’re likely to conflate the amelioration of the material effects of poverty with the vanquishing of poverty itself. While government anti-poverty programs do, in fact, provide shelter, food, and medical care to the poor, they do little to elevate the poor from their condition.

J.B. Bryan. Photo credit: Richmond Times-Dispatch

What poor Richmonders need is more J.B. Bryan, not more government.

“I don’t want to hear stupid crap about government programs and how the city of Richmond needs to give more subsidies,” Bryan told the T-D in a Saturday profile unrelated to the housing summit. “Real wealth opportunities are to build up the disadvantaged, not tear down our examples of success.”

Bryan’s purpose in life is to put people on a path to financial stability and wealth building. As the founder of JB Bryan Financial Group Inc., the only black-owned investment advisory firm in Richmond, she preaches what she calls AfroEconomics.

She preaches self-reliance and responsibility, not dependency. She pushes for investing over spending, the importance of financial planning and having good tax strategies in place.

She talks about the damaging effects of materialism and how people can build or repair their credit, get better jobs and, most importantly, she encourages entrepreneurship and the value of sacrifices needed to run a business.

“I am on a mission to make sure anyone who crosses my path is not broke,” Bryan said. “Success is on your balance sheet, it’s not on your back — on what you wear or what you drive.”

AfroEconomics is not about division, she said. “It stands for building a better tomorrow for everyone.”

In addition to investment advice, one might say that Bryan preaches the unfashionable “bourgeois” virtues such as hard work, thrift, and saving — values that helped generations of Americans bootstrap themselves out of poverty but now are criticized in progressive circles as an ideology of oppression.

The progressive intelligensia makes much of the wealth gap between blacks and whites. “White households in the middle-income quintile … own nearly eight times as much wealth … as middle-income Black earners,” says a recent study, “The Ever-Growing Gap: Without Change, African American and Latino Families Won’t Match White Wealth for Centuries.” And the wealth gap is getting worse. By 2024, the report says, black and Latino households are projected to own less wealth, and if trends continue black wealth will hit zero by 2053.

Somehow, blacks managed to accumulate property and modest wealth (modest by white standards) during the era of Jim Crow segregation and rampant racial discrimination, but now, after a half century of civil rights and welfare statism, they’re seeing their wealth evaporate. The usual response from the progressive camp is to double down on the theory that America is riddled with institutional racism. But, as I have documented on this blog, the decline in black wealth coincides with policies, enacted with the best of intentions, to promote black home ownership and college attendance. The bursting of the sub-prime bubble decimated black wealth after the real estate bubble, and student loans are  saddling a new generation of blacks with debt peonage.

Rising from poverty in Virginia starts with becoming employable. That doesn’t require earning a four-year degree at a residential college. It can mean learning a trade or earning a skill certification at a fraction of the investment in time and tuition. Beyond getting a good job, joining the middle class entails getting married and sharing in a two-income household, having no more children than you can afford, staying sober and drug-free, sticking with budgets, avoiding debt, living beneath your means, and regularly socking away small sums into savings.

This has nothing to do with race. This is a race-free formula. And the beauty of it is that it doesn’t require government. If government wants to help, it can provide good schools and community colleges, keep taxes low, and create a positive climate for job creation.

Richmond City Councilwoman Kimberly Gray. Photo credit: Richmond Times-Dispatch

Much to my delight, it appears that not everyone in Richmond’s African-American community shares an unwavering faith in the power of government to address poverty. City Councilwoman Kimberly Gray was one of those attending the housing summit where Stoney spoke.

Here’s what she told the T-D: “I think [a tax increase] is the easiest out for policymakers. … Ultimately, we need to find a way to sustain this, and we can’t continue to increase taxes because we get to a point of diminishing returns.”

I am pleased to hear such thinking from Gray. As her allusion to “diminishing returns” makes clear, tackling poverty is not just about the taxes, programs and good intentions. It’s about results.

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.

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.”

The Scourge of Rootless, Predatory Males

Travis A. Ball

Last week 27-year-old Travis A. Ball allegedly shot and killed Virginia State Police Special Agent Michael T. Walter in an apparently unprovoked attack in the Mosby Court public housing project. The murder was the seventh homicide and one of about 20 shootings to take place in the troubled housing project so far this year.

The Richmond Times-Dispatch has done commendable work fleshing out the circumstances of the murder and the background of the alleged killer, but a bigger story remains to be told. The crime gives us a window into the pathology of 21st-century American poverty. Through the story of Travis Ball we can gain insight not only into the social breakdown of inner-city African-Americans in public housing but the spreading social dysfunction among the poor of all races and ethnic groups.

The tip-off appears in Robert Zullo’s article in the T-D today: In his arrest warrant, Ball had listed as his address a home on the 1900 block of Redd Street in Mosby Court. But he had been banned from the property in 2016, and his name was registered on a 4,000-person list of people ineligible to live there. Shortly after that ban, according to a second T-D article, an emergency protective order was issued for the mother of one of Ball’s children. Court records show that Ball had engaged in several acts of domestic violence. The T-D articles indicate that he had two children with one woman, and hint that he may have fathered a child with a different woman.

Think about this: Mosby Court maintains a list of some 4,000 individuals who are banned from living in housing project of only 458 units. That is an astonishing number. The T-D reporting does not give us a profile of these people, but I would be willing to wager that the list is comprised overwhelmingly of men, like Ball, and that the vast majority have been blackballed for violent behavior on the project premises.

The problem is that the Richmond Redevelopment and Housing Authority (RHHA) has no effective means of enforcing the list.

“The manpower that’s required, it’s hard to knock on doors on a daily basis,” said RRHA CEO T.K. Somanath. “Neighbors sometimes let us know, and we have our property management [and] maintenance folks inspecting these properties periodically. There are ways to find out if people are not abiding by the lease [which] causes these violations, and we take action.”

The housing authority disbanded its own seven-member police force in 2014 due to budget pressures and the conviction that residents would be better served if the agency deployed its resources consistent with its core mission of providing housing services. It is not clear from the article whether or not the RHHA police were used to enforce the banishment list. Whatever the case, there is no effective enforcement mechanism now.

I am entering the realm of conjecture here, and I advance the following observations not as fact but as operating hypotheses to be confirmed or rejected through follow-up reporting. The RHHA, according to its website, manages and maintains 12 housing developments for low-income families, seven developments for the low-income elderly and the disabled. The low-income housing, I suspect, are dominated by households of single mothers with one or more children. The number of households with married spouses and children approaches zero.

I conjecture the existence of a large floating population of under-employed, unmarried men in low-income communities — be they like Mosby Court or a rural trailer park — who lead a largely parasitical existence. They attach themselves to women as sexual partners, moving into their apartments, eating their food, and contributing only sporadically to the maintenance of the household. These relationships are typically unstable, fraught with domestic violence and child abuse. Men move from woman to woman, impregnating them with no concern for the welfare of the children. Sometimes they establish meaningful relationships with their biological children; often they do not. Nonpayment of child support is endemic. Often, women don’t even know for certain who the fathers are.

I further conjecture that the existence of this population of unattached males explains another widespread and unexplained phenomenon: that of childhood hunger. Low-income families have no trouble obtaining food stamps. Why are children going hungry? Why must school districts maintain breakfast and lunch programs? Why do charities provide children with backpacks of food to take home during weekends? Is it possible that many household food budgets are being stretched by the necessity to feed an adult male whose presence is entirely “off the books”?

The prevalence of unattached, freeloading and often violent males, I submit, is one of the great unacknowledged scourges of poverty in the United States today. Though poor themselves, many of these males are predators and they add immeasurably to the horror of poverty. They prey among the weak in their midst, inflicting routine domestic violence that never makes it into the newspapers (unless a murder occurs). They commandeer the limited resources of the women they live with, often resulting in the abuse and neglect of the women’s children — especially if the children are not their own.

It is not politically correct to portray 21-century American poverty in this way. Progressives are committed to the idea that the pathologies of poverty are the result of endemic injustices such as racism, income inequality, poor schools, and insufficient economic opportunity. Read the academic literature and the politicians’ press releases and you see nothing about the growing population of rootless, predatory males. Unless we acknowledge the realities of poverty, how can we ever hope to combat it?

Let me be 100% clear. Although I am extrapolating from an inner-city housing project, this problem is not unique to African-Americans. Rootless males are prevalent among poor whites, Hispanics and American Indians. (See my post about Jesse Lee Herald, a 27-year-old white man in Shenandoah County who had fathered seven children by six different women.)

This is one of the great untold stories of the United States today. But because of our politically blinkered thinking, we cannot see it.