Affordable Housing Institute : US

The brigadier general was biting his lip. 

 

Does this mean I’ll grow up to be a brigadier general?

 

I was merrily outlining what I thought was a rather nifty and flexible approach to recapitalizing a particular Army post’s affordable housing inventory.  Nothing too strenuous, you understand — something well within their execution capacity.  Yet this commander of men, who could easily handle (and later would handle) life-or-death decisions in minutes if not seconds, was consumed with anxiety.

 

He would go on to do great things in Iraq.  I would go back to Boston and start a housing blog.

 

Yet he was intimidated by me.

 

It was then I realized that affordable housing program design is hard stuff, for at least seven reasons:

 

1.         Housing is high complexity

 

The elements of construction are simple, but housing is much more than construction.  It includes:

 

• Properly diagnosing the housing ecosystem and proposing the right intervention
• Closing the cost-value gap
• Finding the government funding
• Using the right mix of the four kinds of money
• Achieving long-term sustainability

 

Complexity can be quantified, and in decision complexity it is the number of wrong answers available per right answer.  (Think about that one for a while.)  By this standard, housing is very high complexity, perhaps as complex as any public-policy challenge except health care.

 

No nation’s affordable housing past is un-checkered (certainly not America’s!).  No nation’s affordable housing present is rational or optimized (certainly not ours!). 

 

Judging simply by the world’s track record, failure is vastly more common than success.

 

2.         Housing requires basic knowledge; many are unqualified to opine

 

Yes, we all live in housing; yes, we all imagine ourselves knowledgeable, but that’s a fool’s confidence. 

 

I own a television and can program a VCR, but I’m utterly incompetent to design either one. 

 

Though I have a brain, I am unqualified to perform brain surgery.

 

“We’re gonna have to yank it right out, pilgrim.” — John Wayne, brain surgeon

 

To have an opinion that is worth anything, a housing pundit

 

“I’ve published a minor monograph on the 151 different kinds of taxable tail”

 

should be properly knowledgeable about:

 

• The rings of finance, especially hard-debt mortgage products
• The four kinds of money
• Tenure alternatives
• The current ecosystem and its ecota. 
• Affordable housing history
• Public-private partnership
• Tax law, accounting, and existing housing programs
• Negotiation, especially multi-party negotiation
• How ideas become legislation

 

“Pull over and let me see your housing pundit’s license.”

 

It also helps to have been in the arena, making deals or designing programs, and then seeing what works and what doesn’t.  Experience isn’t the only teacher, but its lessons tend to be both unique and memorable.

 

Have I mentioned the value of numeracy?

 

3.         Long cycle times: investment and use

 

A property’s use half-life is over thirty years; in political terms, this is an eternity beyond measuring. 

 

Yet true success — economic, social, or physical — is achieved not at ribbon-cutting but only over decades.  Everything good can turn bad.

 

Among the great myths of affordable housing is that it is hard to build, easy to manage.  The reality is diametrically reversed.  It’s easy to build — just throw money (as our Federal government will soon demonstrate in New Orleans) — and hard to manage.

 

4.         Between the idea/ And the reality … falls the election

 

A housing programmatic development cycle also spans multiple event horizons, as it comprises:

 

Program development step	Min months	Max months
1.       Need identification	1	6
2.       Emergence of political consensus need’s validity and plausible solutions	2	6
3.       Conceptualization of a program	4	12
4.       Legislative enactment	9	12
5.       Implementing regulation	3	9
6.       Property construction and rentup	9	18
Total	28	63

 

In other words, barring extraordinary circumstances (and seldom even then), programs take anywhere from 2½ to 5 years between initial “Help!” and “Here I come to save the day!”

 

“Mr. Mouse is currently in a rules committee meeting ….”

 

This works in reverse as well because pipelines take time to empty: sometime in 1972, President Nixon ordered an immediate halt to new Section 236 approvals.  The last Section 236 reached completion sometime after 1979, seven years later.

 

5.         Mistakes are visible, and often large

 

Doctors bury their mistakes, runs the gallows humor.  The housing counterpart is, Housing mistakes show up on TV … for twenty years.  There’s nowhere to run, nowhere to hide. 

 

Even more intimidating for policymakers, mistakes often take years to manifest.  Whether it’s mold, or structural flaws, about the time the mistake surfaces, it has become an enormous problem.

 

I once worked on the recapitalization of a historic rehab in downtown Cincinnati, where the concrete fa√ßade restoration had been applied to rebar that had been washed in salt not fresh water.  This might sound trivial … until the concrete began falling, in large chunks, eight floors to explode on the sidewalk with a loud thud.  Very embarrassing … and very expensive to fix.

 

That’s gonna be expensive to fix ….

 

Nancy still joshes me about the video inspection of another property, a two-story walkup in the Florida Keys, where gentle tapping of a hammer on the exterior steps — tink, tink, tink – would yield chipping and flaking concrete.

 

Or the time, very early in our relationship, when I drove her through another large family property with an unsavory reputation (”You don’t want to go there,” said the horrified McDonald’s kid when we asked for directions), where she wryly demanded that I stop the car so she could get out and lecture the young black men negligently leaning over their second-floor balconies that their smoking marijuana in public was lowering the value of the tax shelter property in which the rich white folks had invested.

 

6.         Mistakes are hard to correct … and expensive

 

Buildings are exoskeletal, location is forever (unless flooded), and major capital improvements require resident relocation.  Moreover, not only do they cost a lot to fix, they seldom add to the building’s economic value — indeed, since affordable housing always costs government money, funds must typically be government grants, soft debt, soft equity, income subsidy, or other social capital.  All of which is extremely scarce.

 

Costing so much means resource assembly is painful, and slow.

 

7.         Housing is high-political-risk/ high-political-cost

 

Add up the foregoing, and developing new affordable housing programs requires very large expenditures of political capital, and the incurring of high political risk.

 

In astrophysics, an event horizon is a point beyond which it is impossible to see, and thus impossible to project.  For all too many public officials, every election is a new event horizon, and housing impacts span multiple such.  Brave (or secure in his gerrymandering) is the elected who will look across an event horizon and commit substantial political capital.

 

If you’re Josef Stalin, urban planner, you can build all the monolithic prison look-alikes you want,

 

Certainly, comrade, it beats heck out of the gulag!

 

secure in the knowledge that anyone who criticizes you will soon check in at a gulag.  For everyone else, especially those accountable to the notoriously fickle and amnesiac (”what have you done for me lately?”) voters, taking the plunge is politically risky.  Why not just kick the can down the road a while, and make it someone else’s problem?

 

That’s why I have so much respect for elected members like Barney Frank, who really does understand the issues and routinely takes aggressive but well-reasoned positions.

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