affordable housing – The Menace of Privilege

Distributing privilege differently

Some land in Woodlawn (15 years ago). Image credit: Eric Allix Rogers CC BY-NC-ND 2.0

A D Quig reports in Crains that the City of Chicago’s Housing Commissioner says “everyone who lives in Woodlawn now should be able to stay in Woodlawn.” This can be a challenge as housing costs in the area rise. According to Crains (not corroborated by any press release I can find on web sites of the Department of Housing or the Mayor’s Office), support for housing affordabiity in the area will involve six strategies:

Right of refusal for large apartment building tenants if a landlord seeks to sell his or her building
Helping apartment building owners refinance properties to keep renters in place with affordable rates
Giving grants to long-term homeowners to help with home repairs
Financing the rehab of vacant buildings
Setting guidelines for how city-owned, vacant, residentially zoned land can be developed into affordable or mixed-income housing
Requiring developers that receive city-owned land to meet enhanced local hiring requirements

Details, of course, are yet to be defined, and the whole thing requires action by the City Council. Still, assuming that the program is effectively structured and implemented, what we have is the designation of a privileged class– people who live in Woodlawn– receiving benefits that might otherwise accrue to another privileged class — people who own land in Woodlawn, with a new layer of bureaucracy established (or repurposed) to administer it, including investigating and monitoring the reported income and behavior of the people who are granted permission to live in the area.

Whereas, under a land value tax, the area would now have little vacant land, presumably a lot more housing, probably quite “affordable.”

Of course if you’re the Mayor, you do what you figure is politically feasible and within your power, not what is morally right and economically efficient, but would require persuading a lot of uninformed voters and obtaining cooperation from quite a few other governmental actors.

Why does public policy favor homeowners over renters?

It’s certainly true here, where owner-occupants (of houses or condos) pay less tax than renters occupying units of the same value, with additional discounts for old people, some military veterans, and some poor old people. Some owners also still benefit from deductability of mortgage interest and/or property tax. So why do renters put up with this discrimination?

I have always thought, and some data seems to confirm, that it’s because homeowners vote, and renters don’t. But according to this interview, the problem is similar, perhaps worse, in Australia. Voting in Australia is compulsory, which apparently means one is fined if one fails to at least show up at the polls (the fine is up to $79AU, less for their Federal elections). They also vote on Saturday, and seem to make a party of it, according to various posts such as here and here.

Of course just showing up doesn’t mean that you vote, nor that you pay much attention to candidates and issues, but the problem of low-information voters isn’t unique to Australia. Maybe there’s something about the worldview of people who rent vs. that of people who own….? Dunno.

U S jurisdictions do often provide some protections for tenants, which can disadvantage landlords, but they wouldn’t affect the status of owner occupants.

Buyers can’t afford houses, so land prices go … up?

Crains reports today that rising land costs, as well as increases in construction costs and uncertainty about real estate taxes, is slowing construction of single family housing on the north side. One might think this would result in lower land prices, but a builder is quoted as saying lots in Lincoln Park and Lakeview, which recently sold in the $700,000 range, are now going for $900,000 and up. This makes it difficult or impossible to build a new house selling for the $1 to $1.5 million that buyers seem willing to spend.

So if it’s not demand for houses, what is driving up the price of land? Possibly more multi-family is being built? Or other uses? (Other than the City’s massive database — which doesn’t specify type of structure nor how many units, except as inconsistent text fields — I can’t find any statistics on housing construction within the City. Must be somewhere…)

Or possibly the supply of vacant lots, or deteriorated structures on lots that could be made vacant, has depleted? Or purchase and sale of vacant lots is used to launder money?

The article also notes that land costs are much lower in an isolated part of Bridgeport/Chinatown, specifically Throop & Hillock, where a recent development of attached and detached houses paid $55,300 per unit for land.