Affordable Housing Institute : US

[Previous Months In Review available here: Jul 09, Jun 09, May 09, Apr 09, Mar 09, Feb 09, Jan 09]

  

[Continued from yesterday's Part 1.]

 

By: David A. Smith

 

Continuing our review of August’s posts, we saw in yesterday’s Part 1 that housing is local, because the property cannot move.  But housing finance and policy are far from local – usually national – even if the impact of their work once again is felt solely at the local level. 

 

I’m from the government and I’m influencing your local markets

 

Cities manage their property uses through zoning, by that zoning, they also influence who lives in their town.  For over forty years national and even state or local policy has been predicated on the belief that economic class, as expressed by house price or lot size, is a stand-in for race, a finding made judicially in Westchester County, as profiled in Anti-black or anti-green? Part 1, we won … didn’t we?, and Part 2, what did we win?:

It was at about this point in the Times article that I realized New York must lack an essential tool that Massachusetts has:

 

Not another failure?

 

New York needs a powerful inclusionary-zoning law like Massachusetts’ Chapter 40B. 

 

As I’ve posted before, Chapter 40B enables states to compel injection of affordable housing into recalcitrant localities, because it uses the override power of a higher unit of government (the state) to nullify the exclusionary restrictions promulgated by a lower unit (the town or village).

 

Making the Westchester case remarkable was the use of a circuitous yet successful private legal claim – a tort under the False Claims Act that Westchester was fibbing when it told the Federal government it was taking steps to desegregate.  That’s novel – one might say either ingenious or unscrupulous – and yet it worked.

 

It has only just dawned on me that Chapter 40B works for the same reason the False Claims Act does – it privatizes enforcement by giving private actors a financial motivation to enforce.  Chapter 40B does for affordable housing development what the False Claims Act does for desegregation.  As shown by this map, 40B works – it builds properties in suburban cities and towns:

 

Notice now many suburbs have 40B properties

 

I have no doubt that in any group of us – whoever us is – we’d like not to have to live with ‘those’ people, but who are ‘those’ people?  Are we so sure that ‘those people’ means race?  It’s not what I’ve seen in South Africa, not what we saw in Jordan Downs in Watts.  ‘Those’ people means ‘not my tribe,’ and human beings have an infinite capacity to create, divide, and subdivide tribes.

 

 

With us we have a tribe of people who need more than shelter, those unfortunates who by accident or choice have found their lives wrecked.  Out of charity and self-interest, we put them into permanent supportive housing, where some have their lives restored, as explored in Pushing PSH, Permanent Supportive Housing: Part 1, housing is critical, and Part 2, assistance is critical:

 

[Moving in to permanent supportive housing] also means a big boost in income:

 

This is big movement too

 

The result?  Lives change:

 

“My parents and I get along very well. Since I have had my apartment, it has made it easier to get into treatment, which strengthens my relationships” (Tenant quote from Quality of Life Survey)

 

Not just adults’ lives, their children’s too.

 

“Before we ate poorly, especially myself as I would give most of the food to my children. I usually ate once a day. Now we eat a relatively good diet and we all have enough to eat 3 meals a day plus.” (Tenant quote from Quality of Life Survey)

 

Previously we’ve seen that childhood poverty damages your mind and perpetuates an intergenerational cycle of poverty.  Permanent Supportive Housing is one of the very few paths out.

 

I’ll find my way out somehow

 

During August, while most federal elected officials fled Washington for the expected sanctuary of their districts, the financial policy makers were hard at work not reaching consensus on any form of regulatory overhaul, despite the urgent need to do so, thus reducing Treasury Secretary Geithner to profanity, at least as reported in the Wall Street Journal and snarked upon in Cutting turf: Part 1, the driver, and Part 2, the sand traps:

 

You won’t like the Treasury Secretary when I get mad

 

In many ways our current banking regulation operates like the Articles of Confederation, where each regulator is akin to a sovereign state that can safely ignore what the others are doing, and may certainly ignore the dictates of any purported central regulator.  Now what Mr. Geithner wants is to force through a new federal financial Constitution that makes the Federal Reserve the truly national supra-regulator:

 

The administration’s proposal would give the Fed broad discretion to supervise any major U.S. financial company and would also create a “financial services oversight council” to coordinate policy and help resolve disputes among regulators.

 

One ring to rule them all, one ring to bind them. 

 

One conference table to seat them all …

 

That may sound ominous, but it’s the right approach to multi-jurisdictional regulation, otherwise boundary effects and borderline behaviors proliferate and swamp desirable and capital-enabling behaviors.

 

My territory!  No, mine!

 

The effort to create a rational national banking regulatory structure comes against the backdrop of our successful investments in several TARP-related institutions, who have been buying their way out of administrative servitude by repaying their TARP and repurchasing their warrants, as presented in Who says the price is unfair? Part 1, there’s what we think …, and Part 2, there’s what we did:

 

A month ago, Treasury first cleared ten banks to repay their TARP funding, creating rules to sell its glass financial menagerie:

 

Submitted for your consideration, as discussed in this Wall Street Journal article, is a gargantuan Federal government that, for one good reason or another, now finds itself holding warrants in a series of financial institutions that it has forcibly recapitalized.

 

At the time, I speculated:

 

Knowing this, I expect Treasury’s advisors to be shrewd and to drive fairly tough bargains.

 

And not a groat more!

 

Did we drive tough bargains?  It depends who you ask, and let’s start with some shrill Monday-morning warrant buyers over at the Huffington Post, whose title leaves no doubt where they stand: Ignoring Watchdog Report, Treasury Gives Three Major Banks Sweetheart Deals:

 

Less than two weeks after a congressional watchdog called attention to backroom deals in which the Treasury Department repurchased stock warrants from bailed-out banks at well below market value, three more such transactions have now been reported. The big loser: The U.S. taxpayer.

 

It was easier in the old days of smoke-filled rooms

 

Before we can call the taxpayers ‘losers,’ it’s as well to remember that any bank that has repaid its TARP has cost taxpayers nothing, and in fact we made money on the interim TARP dividends. 

 

[Also, don't forget that many banks, Goldman Sachs among them, took the TARP under extreme duress, and were not happy about having to do so. – Ed.]

 

The warrants are additional consideration, so here’s the equation:

 

What we put in                                     What we got out

            + Capital advanced                             + Capital repaid

                + Risk of losing capital                       + Dividends (at 5% annually)

                                                                                + Value of the warrants

 

In lighter news, I explicated the obvious – the reappointment of Ben Bernanke – in the virtues of not changing horses, and we tuned in on Planet Malcolm in Great Blog Posts by Others (GBPO) 03: I think, therefore I win:

 

Nothing either good or bad, but thinking makes it so,” says melancholy Hamlet, counting himself a king of infinite space and that, in a nutshell, is the trap of overconfidence. 

 

Unzip your mind, and the rest will follow

 

1. I think, therefore I win

 

Or so says the logorrheic Malcolm Gladwell, in yet another of his probably-unsound-but-vibrantly-intriguing monologs, as captured in The New Yorker:

 

The hair has a purpose, doesn’t it?

 

Who’s the top dog around here?

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