What does NFL football have to do with affordable housing? More than you think.
Last week, at the end of a game his team really needed to win, the Minnesota Vikings’ star player, Randy Moss, walked off the field before it was over. Despite this, he has neither been disciplined nor criticized.
Moss … had an hour-long phone conversation with [his coach Mike] Tice afterward. They talked again Monday morning in the coach’s office for the same amount of time. Tice declined to comment about a possible disciplinary measure, but he indicated Moss knows he messed up.
“I understand his frustration,” Tice said, “but we can’t let our frustrations make us make poor decisions of poor judgment.”
And why wasn’t he disciplined? A matter of dysfunctional economics:
Owner Red McCombs gave Moss an $18 million signing bonus (and a $100 million contract) just before training camp opened in 2001, which just happened to be Green’s final miserable season in
Minnesota.
It’s impossible to motivate, discipline or control a young man with Moss’ attitude and personality once you’ve handed him lifetime financial security and surrendered the only piece of leverage you ever had over him.
Under the NFL salary cap (an economic system), teams are economically motivated to pay star players very large signing bonuses up front in exchange for a multi-year contract with lower salaries. Which means that to recoup the investment, the owner depends on the player performing, and if the player is subsequently cut – that is, if the owner acknowledges a mistake – the owner suffers a “salary cap hit,” which is seldom a good idea:
You can’t cut Moss once he’s holding $18 million of McCombs’ cash flow. You really can’t afford to cross him or tick him off, either. You can only beg and pray.
NFL coaches are playing catch-up. They’re just coming to grips with the negative influences of gigantic signing bonuses.
So what, my gentle reader wonders, does this have to do with affordable housing?
Development fees, folks, development fees.
Developers are motivated by cash. Like pampered athletes, developers (or, for that matter, disgraced corporate titans) think themselves stars, and once they have been paid, the leverage shifts.
Affordable housing is a bargain whose payback is measured in decades. Paying too much development fee up front, and not enough over time (through cash flow or residuals), renders lenders and subsidy providers vulnerable to non-performance downstream:
“That’s Randy Moss. He can do basically what he wants to do. Definitely, he did what he did.”
So do you really want government to provide mortgage insurance on zero-down-payment loans?
I don’t.
