Some citizens seem to object to “taxpayer funds” being used to subsidize quality affordable housing. On a surface level, I would agree. But there is much more to the picture.
We live in a capitalist system. I think it works. It is what makes this nation great and living in this nation great. I view capitalism as the engine behind the creation of maximum innovation and wealth.
That being said, no system is perfect and capitalism is no exception. Distortions in the economy inevitably occur. Left uncorrected, certain sectors of the economy and groups of the population benefit or suffer disproportionately. Here’s an example. Housing is a commodity. People cannot live without shelter. Yet, in our capitalist system, housing is also an investment, just like stocks, bonds, precious metals, and commodity futures. Because of this (and other factors), housing prices went through the roof during the last 10 years. Those who were sufficiently fortunate and skillful made great profits. Millions who were on the “home ownership edge”, got priced out of the market. Home rents co-vary with housing costs, so quality home rentals got priced out of range as well.
These “distortions” in the system are to be expected, particularly in a capitalist system that is relatively unregulated (compared to those in Europe and even the developing countries in Asia). But it is this (relative) “free market” that allows citizens to gather great wealth. It also allows government to amass wealth by taxing those who benefit from this free market system. So, I consider it a small price to pay for the government (actually the taxpayers) to fix this distortion in the system. It’s not only a matter of need (which is important in itself), but a matter of fairness.
In other words, if our system were more restricted (i.e. Europe) there would not be as much wealth to go around to begin with. What might another solution be to correct for this distortion of high housing prices? Would we rather have more regulation, i.e. home-ownership restricted to only one per family?
Michael Karp
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I am posting this for "Anonymous". I accidentally deleted it, but it appeared in my e-mail as a backup copy. I'll attempt to answer it shortly:
NO, government should NOT interfere with the housing market.
I my college economics classes we studied the effects of price floors and price ceilings on housing and the results of these artificial limits always lead to in-efficiency..
(READ: WASTE!)
There may be a fallacy in your assertion that housing is an investment. There are many calculations that show that renting an equivalent house to buying one costs less / month historically. If you invest that monthly savings from renting over the time frame of owning a house you would have a larger nest egg in the end. So while in the past decade homes have often been considered an investment, you would have to show, in these times of "housing crisis", with falling prices, that over the past decades homeowners have fared better than renters.
It may be intuitive that owners do better but its not usually the case:
NYTIMES rent vs. own calculator:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html
Many people would argue that it was a government shift in policy that has caused the current housing boom/bust cycle. Govt. decided more people should own homes, they changed the rules of responsible lending, this led to housing bubble that is now bursting.
I believe that the less you change the rules through government programs, the more stable the economics of a society will be.
How can families or small business owners make investment decisions when the rules keep changing?
It sounds very benevolent to provide housing for low-income people. But what are the economic side effects?
For instance, lets say we build 150 new dwellings in Big Bear and subsidize the rent on these units to $400/month. We then fill these dwellings with 150 applicants "lucky winners".
If these winners don't move from off the hill, they will move from other apartments or houses in Big Bear. Now the owners "unlucky losers" that just lost their renters are the flip of the "lucky winners". These owners now have to pay their mortgage, taxes, ownership expenses out of pocket.
Will the owners of empty housing then have to sell these properties into an already depressed market at a loss while further contributing to falling real estate prices.
We have just legislated some winners/losers.
With all the overhead involved in construction, it would be much better to help low income people with a direct payment / minimum living wage law, instead of a crazy program of winners/losers.
Its government actions like these that create conservatives (in favor of smaller government) since those that have worked hard to buy a house see housing subsidies as a waste of tax dollars at work.
Shouldn't the City have to demonstrate a need before having to comply with a state program that might not make sense in our localized situation?
If housing was really THAT expensive in Big Bear. It should be easy to make the 'numbers' work on a housing project. If we can't even figure out how to build these units and not have to rent them at a loss then it shouldn't be done..
The other reason these projects don't make sense is that the City of is Big Bear Lake is not isolated. 92314 is right next door and rents for resort employees / seasonal workers are not unaffordable there.
Don't change the rules and legislate winners and losers based on ill-conceived govt. programs that don't even make sense in our little town!
While not all these links support my argument, the more information the better:
A must read for anyone considering this issue:
http://www.monocounty.ca.gov/cdd%20site/Planning/Documents/AffordableHousing_MountainResortTowns.pdf
http://www.hcd.ca.gov/hpd/mythsnfacts.pdf
http://www.extension.umn.edu/distribution/familydevelopment/components/7565_09.html
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