Today September 03, 2010

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Wagenseller Law Firm

Is ‘Affordable Housing’ The Right Thing To Do?

Is the concept of “Affordable Housing” morally supportable? While voters prepare to vote on a $1 billion “affordable housing” bond (Proposition H) in Los Angeles and a $2.9 billion state-wide “affordable housing” bond (Proposition 1C), commentators and politicians alike bemoan the “severe shortage of affordable housing” and its threat to the American Dream of homeownership. While this makes for alluring campaign rhetoric, is the concept of government intrusion into the housing market in order to benefit certain segments of society the right thing to do?

The economic effects of affordable housing measures do not appear to be seriously questioned: the cost of new housing becomes more expensive and the quantity of new housing declines. Unfortunately, politicians cannot bear to be shackled by the law of supply and demand, regardless of how immutable that law may be. Just as the feel-good idea of “affordable” college education through government subsidies has driven up the price of college and the policy of government-funded health care has increased, not reduced, the price of health care, the infusion of “affordable housing” money into the housing market likewise increases the costs of housing.

While some may question the economic effects of this government intervention, no one wants to tackle the basic moral question of whether “affordable housing” is morally justified. For those who favor a collectivist approach to government, “affordable housing” is but a facet of the overall statist utopia: government will provide you with housing, healthcare, and a (politically correct) education. Government (through your enlightened politicians) will decide that you may only shop at union-organized supermarkets and not at Wal-Mart despite your individual feelings on the matter. Individual freedom will be subjugated to the ‘common good.’ The more libertarian-minded would let the chips fall where they fall. If an area becomes unaffordable, people and businesses will move away (or governmental regulations will be reduced) until demand is more in line with supply. The market will correct itself.

When an “affordable housing” complex opened up west of downtown Los Angeles last year, the Downtown News trumpeted it for its “52-inch flat-screen television, a player piano, billiards and ping-pong tables.” (“A New View of Affordable Housing”, August 15, 2005) Each unit came complete with a dishwasher, patio and courtyard view while the complex offered a gym, a computer lab and basketball court, set amongst a “richly landscaped courtyard of wending paths, lush community gardens and arching trees.” A one bedroom unit was artificially priced at $353 while a four bedroom unit was capped at $935. As one of the new residents proudly proclaimed, “Can’t ask for nothing better.”

One might be tempted to ask why “society” has elected to tax all of its citizens to reward that one resident with flat screen televisions, player pianos and lush gardens. What is the moral justification for awarding 72 select people (out of millions) “luxury-style apartments and townhouses on a park-like campus” at the expense of others? And who are we rewarding with this taxpayer largesse? (The fear of being labeled some type of “-ist” prevents fuller discussion of the perverse incentives of rewarding those euphemistically labeled “the less fortunate”, but are we not engaging in the proverbial race to the bottom?) Rest assured, we are told, it is for the “common good.”

Ayn Rand, in her seminal essay entitled “What is Capitalism”, addressed the notion of ‘the common good’ as the moral justification for government imposed social systems. Noting that there is no such entity as ‘society’, only a number of individuals, Ms. Rand argued that it is precisely the elasticity of the term ‘common good’ which allows government-sponsored programs to escape from morality. Under the guise of promoting a ‘common good’ that is separate and superior to individual good, government programs actually elevate the good of some over the good of others. The resident in the new “affordable housing” complex is but an example of one person being given taxpayer funded benefits that millions of other individuals are not only excluded from but must pay for as well.

“Affordable housing” will continue to drive existing house prices up for the majority of residents while benefiting a select few with brand new housing. More importantly, it will perpetuate a government-controlled system that fosters an entitlement mentality and government dependence while diminishing incentives to earn and save for market rate housing. That is morally insupportable.

Laine T. Wagenseller is the founder of Wagenseller Law Firm, a full service business and real estate law firm in downtown Los Angeles. The firm represents real estate developers, owners, and investors. For more information visit www.wagensellerlaw.com or contact Mr. Wagenseller at (213) 996-8338.