Open Thread



Artist – Joel Pett

Bloomberg has an informative piece on the market response, or a lack thereof, to skyrocketing demand for affordable housing.

Spoiler: the invisible hand of the free market is out to lunch.

“The private market doesn’t build housing that low-income people can afford anymore,” said Sheila Crowley, chief executive officer of the National Low Income Housing Coalition. “If there were a market answer to this problem, there would be massive investment going on, because the demand is extreme.”

  • Here’s the perfect example of non-affordable housing. Two years ago I moved into a small two bedroom apartment (about 745 sq ft) in a suburb of Phoenix, AZ. They gave me what was supposed to be a cheap move in rate (about $950 / month). They weren’t luxury apartments but they were decent. I could still hear everything my neighbors did and I could smell their cigarette smoke too (set off my daughter’s asthma and my allergies all the time).
    When my lease ended they wanted to raise the rent up to $1,200 a month to renew. They cited current market value as being the culprit. That’s insane, really to charge that much money for such a small place. I kept thinking how does someone who makes less than I do afford those apartments? How!? Are they paying 50% of their income just to live there? I know many single people had roommates but there were plenty of couples working at non-professional jobs living there too. I don’t know how people manage. I guess I could have spent less but I would have ended up on Crackville and if it was me, I might consider it. But with two young kids, there’s no way I would live in a place that didn’t feel safe for them.

    Here’s another example…downtown Phoenix has been a ghost town on non-event weekends and M-F after all the business people leave at 5 pm. The last few years they’ve been building high rise condos–luxury condos. Then right outside and kind of surrounding downtown are some slums and lower middle class housing. ASU has a satellite campus there and in order to attract students they had to build their own dorms downtown because there was no housing available. All of the non-professional people that work downtown either have to live in the local slum or if they’re lucky the lower middle class neighborhood with a high crime rate or they have to live in some other lower middle class neighborhood way out in BFE and commute four hours every day to get to their job. But there is plenty of housing for rich people. PLENTY.

    The Free Market can make enough money off of the wealthy few to carry on, so it can and does ignore the needs of the many poor.

    Edited for clarity

    • Christopher Foxx

      The Free Market can make enough money off of the wealthy few to carry on, so it can and does ignore the needs of the many poor

      I suppose that must be it. My first thought on reading that the market doesn’t build housing that low-income people even thought the demand is extreme was a little puzzlement.

      I mean, if demand is high doesn’t that mean there is a market? And doesn’t that in turn mean there’s an opportunity there for the person who meets those demands? So why aren’t developers building low income housing?

      And i suppose it’s as you say, they find building for the wealthy more profitable. There isn’t a sufficient rate of return in lower income housing.

      It actually provides (yet another) real-world example of how wrong Republican claims about raising taxes on the rich hurts the lower classes. “They need those extra dollars to invest, to expand their businesses.” Poppycock. They’re refusing to expand their business into another market.

      • They’re refusing to expand their business into another market.

        That’s precisely it. The builders don’t want to be known as the builders of apartment complexes for Section 8 housing. They want their logo writ large on those luxury condos. And the business owners in that area don’t want poor people living near them, they want rich people because they’ll spend more money on higher ticket items. So the surrounding businesses are purposely pushing to limit the types of housing being built.

        The Fair Market fairytale doesn’t make any room for turning down small profits to make larger profits for someone less fortunate. If all actors were rational and cared about justice it would make a difference. But they’re not all rational and they don’t give a shit about justice (which is ultimately in their long term best interests but they haven’t been taught to think that way so they don’t). Government HAS to prompt us to do the right thing because profit motive won’t in every case. Local governments need to plan for more affordable housing and ensure that a good mix of housing is included in all residential zones slated for future building projects. All that they’re accomplishing now is gentrifying or re-building the downtown for the wealthy and pushing the poor further and further out. Will we end up like Mexico City or Rio de Janeiro where the poor live in vast shanty towns on the edge of the city? I hear plywood is far cheaper than luxury condos after all.

        • Christopher Foxx

          Actually, I’m reading in what you wrote an argument that the developers are being rational. They’ve determined that they’ll make more money servicing higher income people than also providing services to lower incomes.

          Having their logo associated with luxury condos and not cheap housing protects their brand, etc. Making the actual computation is harder when you’r dealing with intangibles like brand loyalty and perception. But it can be argued that turning down small profits, even though they are profits, is more than offset by thee large profits they get.

          All of which, in turn, is a strong argument for why one should NOT just let the market rule. Clearly some intervention is needed to provide for the people who a cold business analysis says shouldn’t be provided for.