The public-housing death spiral

Keeping housing affordable is a problem anywhere, but it’s a particular problem in a city built on a foundation of sustainable urban design.

Portland, Ore., might be North America’s best example of sensible urban planning — compact development, lots of mass transit, etc. — and as such it’s a really desirable place to live. Desirable places to live are really expensive: in 2005, Forbes did some math and found Portland was the third-least affordable American city in which to live, better than only New York City and Seattle. So it’s a natural that the city government would spend a lot of time trying to help poorer people get by, particularly in their housing arrangements.

One of their methods is about to bite them, according to the Portland Tribune, which reports on the desperate attempt to keep rents down in 950 privately owned apartment units. They’ve been subsidized by the federal government, but the subsidy deals are all set to expire by 2013, when the mortgages do — the deal with the Housing and Urban Development Department back in the late ’70s and early ’80s was that the feds would subsidize the rents for that long.

The rent is geared to tenants’ income: they pay 30 per cent of what they make, and the government makes up whatever the difference is between that and the market rent. To get in, you have to be making less than half the median income for a family like yours in Portland.

The Tribune reports that the city is trying to scrape together the money from many sources to buy the buildings before the subsidy deals expire, and the process is a mess:

The funds needed to buy the 12 buildings and pay for any needed repairs probably will have to come from a variety of sources, including private financiers, the state of Oregon and the Portland Development Commission, the city’s urban renewal agency.

The city’s share of preserving the buildings will probably total in the millions of dollars. Although the buildings have not yet been formally appraised, the PDC estimates they are worth anywhere from $1.5 million to $25 million each, depending on the size and location.

“This will be a significant resource issue for the city for years to come. It’s going to cost us some money,” [city housing official Margaret] Bax said.

PDC funds may not be available for all of the remaining buildings, however. Six of them are in existing urban renewal areas administered by the PDC. The rest are not.

Although some members of the City Council have suggested that PDC funds should be available for projects outside renewal areas, the agency is not yet authorized to help finance such projects.

Now, this situation was predictable from the very beginning — everyone knew the subsidies would end, because they were time-limited from the get-go, and everyone knew the tenants living in the apartments when that happened would be screwed unless some other subsidy program kicked in. Now the city wants to make that happen, but doesn’t have the money, and is considering using money set aside for urban renewal projects for non-renewal purposes, just because it’s convenient.

Permanent subsidy programs are just a terrible idea. They always end up like this, one way or another.

There’s no easy, principled solution. The traditional approach is to allow ever-more construction out where land is cheap, but that’s off the table in Portland, where a firm urban-growth boundary constrains budget-eating, environment-killing sprawl.

(My libertarian argument for such boundaries is that it’s reasonable to draw a line beyond which many expensive city services simply will not be provided — you want to live way out there, you’re on your own — and a similar principle applies to justify most elements of ordinary zoning within the boundary.)

Instead, the only viable long-term solution is for Portland to loosen its zoning codes to permit even more compact construction, while spending more on transit to make it easier for people to live farther from expensive destinations and still get where they’re going efficiently. Seems to me that’s a much better investment than sinking tens, maybe hundreds of millions of dollars into buying social-housing buildings so you can take over the rent subsidies forever.

Update: More on the Portland housing situation here.

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