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Business Observer Friday, Oct. 8, 2004 15 years ago

Affordable Housing: Not a Problem

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Editor Matt Walsh discusses the affordable housing problem and why its an issue for the market not government.

Affordable Housing: Not a Problem

As Vice President Dick Cheney said many times out of frustration and dismay Tuesday night in his responses to Sen. John Edwards, "There's so much, I don't know where to begin."

So it is with the Sarasota County Commission's ongoing efforts to have the county government take over and socialize the county's housing industry.

Yes, socialize.

It came as no surprise whatsoever that the five commissioners voted nearly two weeks ago to create an affordable housing land trust and affordable housing trust fund. In nearly 10 years of observing the activities of the Sarasota County commission, every year the commissioners vote again and again to spread their control and involvement in Sarasotans' lives. It is not hyperbolic to say the current board of five county commissioners have become a cabal of insatiable Big Government, socialistic activists. Oh, they don't want to take over the means of private production as the old-school Socialists desired, but they see no problem with socializing the results of production, with forcing their social engineering on everyone else. The affordable housing land trust and trust fund are the latest examples.

Note to our business readers: You can count on the following - there will be a funding mechanism attached to businesses in some form to help fund the land trust or trust fund. Just talk to your county commissioners. You'll hear it as plain as day.

We spoke only to two of the commissioners - Paul Mercier and Jon Thaxton. Here's an irony: Says Mercier: "I don't believe government should be intervening." Says Thaxton: "I hesitate for government getting involved at all. I've pretty much convinced myself the market will eventually correct itself." And yet both of them are ready to have government intervene again. For one, they voted for the trusts.

Said Mercier: "My vision would be to work through incentives" - a government-directed program. He suggests, for instance, that if a luxury home builder wants to build 200 homes in a development, the county might consider letting him build, say, 40 more homes if the builder contributes a percentage of the sales to the trust funds. Call it an incentive, but we'll call it what it is: a tax.

Thaxton hasn't made up his mind on how to capitalize the trusts. He wants to hear more about such possibilities as imposing "linkage fees" - taxing large industries or luxury homes, for instance. But he also told us that in his 20 years of selling real estate he has never seen a free-market approach of allowing increased densities - more homes, more supply - lead to increased units of affordable housing.

We'll repeat: Count on a new tax to fund the trust funds.

In four conversations about affordable housing, we heard each source use the same metaphor: There's no silver bullet, no one answer to making the cost of housing more affordable. The trusts are, as Mercier sees them, "another tool in the toolbox" to help the lower rungs of the economic ladder be able to buy a home.

We don't need another tool. We don't need another government program.

Go to Sarasota County's Web site. One of its "top topics" is "affordable housing links of interest." Click on that and you'll find an Internet warehouse the size of a Sam's Club of government Web sites chock full of federal, state and county government affordable housing handouts and subsidies. If saving up for a down payment is a problem, wander through the Internet. Trust us, finding financing is not a problem.

Indeed, we know of two instances in recent months in which two sets of couples employed at Sarasota Ballet each purchased homes with 100% financing. They qualified for mortgages between $150,000 and $190,000 with incomes that definitely do not put them in the top tax bracket.

What's more, they found homes in those price ranges in north Sarasota County. The affordable homes are out there.

Look at the accompanying table. An examination of the Sarasota County property records show:

× 68% of all single-family homes and condominiums in Sarasota County have a just market value below $200,000. (Just market value is the closest record to actual sale prices.)

× 73% of all single-family homes in Sarasota County have a just market value below $200,000.

× And 70% of all mid-rise condominiums have a just market value below $200,000.

Here are few more statistics to digest:

When you compare home ownership rates around Florida, Sarasota County has among the highest rate. A few examples:

× Sarasota County, 79.1%

× Lee County, 76.5%

× Pinellas County, 70.8%

× Florida, 70.1%

× Hillsborough County, 64.8%

× Orange County, 60.7%.

A shortage of affordable housing?

The homeownership rate suggests not. It is the number of owner-occupied housing units divided by the number of occupied housing units or households.

We'll concede, though, that the largest segments of the county's affordable housing is in the North Port area and often requires its owners to commute to north county or perhaps Lee County for employment. But think about your parents who raised you in Pittsburgh, Philadelphia or Detroit. Many of them had 30- to 45- to 60-minute commutes to work from their starter homes in the suburbs in the 1950s and 1960s.

As Sarasota County Administrator Jim Ley noted diplomatically: "There are some expectations on the part of the consumer community that also through our discussion need to be aligned." Here's the translation: Ley said when he bought his first home, it was a used dump. In other words, people need to adjust their thinking that first-home buyers should not expect a new house. Was your first car a brand new Mustang convertible?

If anyone in government really understands all this, it's Ley. He sees the inconsistencies in the debate. "We asked citizens in focus groups: Do you think affordable housing is an issue? They said yes. But they also said, 'Don't use our tax money for it' and 'We don't like the idea of density of bonuses.'

Adds Ley: "That's the world my job lives in - between incongruent wants and needs. That's why government exists - to try balancing what everybody values."

The balance is becoming increasingly unbalanced, however, tilted to more and more government intervention. It's the Milton Friedman theory of government. "A real or fancied evil leads to demands to do something about it," Friedman wrote in "Free to Choose" in 1979. "A political coalition forms consisting of sincere, high-minded reformers and equally sincere interested parties." They pass a law. The interested parties go to work to make sure that the new power is used for their benefit.

But this success typically breeds inintended consequences, which spawns more government intervention. "In the end," Friedman said, "the effects are precisely the opposite of the objectives of the reformers. Yet the activity is so firmly established and so many vested interests are connected with it that repeal of the initial legislation is nearly inconceivable. Instead, new government legislation is called for to cope with the problems produced by the earlier legislation and a new cycle begins."

This is Sarasota County. Affordable housing wouldn't be an issue at all if the body politic and special interests hadn't intervened with what are now the county's Byzantine land-use and zoning regulations.

Next: Monterey, Calif., and 10 steps to increase the supply of affordable housing.

SHORTAGE OF AFFORDABLE HOUSING IN SARASOTA COUNTY?

The table shows the number of single-family homes, mid-rise condominiums and high-rises for all of Sarasota County by market value, as appraised by the Sarasota County property appraiser for fiscal 2003-2004. The percentages indicate the percent of the category's total.

SINGLE-FAMILY HOMES

<$1000003424632.0%

100000-1499992965327.7

150000-1999991459513.6

200000-2999991473513.7

300000-39999952654.9

400000-49999923332.2

500000-59999916171.5

600000-6999999380.8

700000-7999996460.6

800000-8999995710.5

900000-9999993730.3

1000000-199999915901.5

2000000-29999993180.3

3000000-399999980-

>400000056-

Total107,01677.7

CONDOS (2 to 6 stories)

<$100000830336.8%

100000-149999483421.4

150000-199999272612.1

200000-299999295913.1

300000-39999917777.8

400000-4999998593.8

500000-5999994071.8

600000-6999993211.4

700000-7999991120.5

800000-899999480.2

900000-999999520.2

1000000-19999991040.4

2000000-2999999260.1

3000000-39999992-

>40000003-

Total22,53316.3

CONDOS (High-rises)

<$1000002783.4

100000-1499993193.9

150000-1999994135.0

200000-299999144717.7

300000-399999165320.2

400000-499999125215.3

500000-599999101412.4

600000-6999994525.5

700000-7999991782.2

800000-8999992883.5

900000-9999991812.2

1000000-19999995767.0

2000000-2999999951.1

3000000-39999992-

>40000008-

Total8,1565.9

THOMAS SOWELL

ON AFFORDABLE HOUSING

"Within living memory, there was a time when there were no government housing programs ¦ How could there have been affordable housing back in the bad old days, before there was so much compassion, social justice and a Department of Housing and Urban Development? This was back when people built, sold and rented housing for the sake of - you should excuse the expression - profit.

Did those greedy builders and unscrupulous landlords we hear about actually provide housing that the poor could afford?

Since there are only limited numbers of rich people, anyone who is serious about making money usually has to offer something that most people can afford - even when that something is housing. Builders seldom build housing explicitly for the poor, but most of us don't live in brand new housing anyway.

But housing changes hands over time and, in a free market, the poor end up housed in places that used to house more upscale people.

It is precisely the government which has made it virtually impossible to build affordable housing in places like coastal California and other places where there are severe land-use restrictions, such as "open space" laws, as well as rent control and a crushing amount of red tape."

Thomas Sowell is a senior fellow at the Hoover Institution in Stanford, Calif.

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