Sunday, November 01, 2009

The farce that is affordable housing

Sounds simple, doesn't it? In spurring real estate development in downtown Nashville, Metro has a public interest in stimulating an economically diverse rather than exclusively wealthy community. So, the Metropolitan Development and Housing Authority provides developers tax breaks to build units for residents who must prove that they make 80% or less of the median income.

Then the simplicity is ruined because we start hearing stories of wealthy firms that pay their employees relatively low salaries to qualify for the affordable housing rate, but provide a luxurious condo close to work as part of the incentive package. And now comes this morning's Tennessean piece on affordable housing that seems to confirm the rumors we hear on the street:
Some units have sold for more than $150,000, raising questions about who can afford the downtown condos, especially on a salary of less than $40,000 a year.

"My concern is how can someone manage to afford a $160,000 condo on a $35,000 income?" said Robert Turner, an attorney and vice president of the Viridian Homeowners Association. "The math doesn't seem to work out. Maybe they have other assets or family who is able to help them."

It seems cynical for MDHA to attach a tax increment financing plan to the name "affordable housing," when the primary goal is not to insure that modest income couples and families will have a chance at the new dwellings flying up around downtown. One wonders how frequently these units are going to investors to turn tax breaks into quick capital like at Werthan Lofts in the North End:
Ryan Heath Carver has bought three condos downtown in the past few years, two of them affordable condos. In all three cases, lenders lent him 100 percent of the purchase price, according to records with the Davidson County Register of Deeds ....

Carver said he rehabbed a condo at the Lofts at Werthan Mills but didn't make money when he sold it because of the expense of the rehab. He has since sold two of the condos.

"They are not really affordable," he said. "The developers can get around that, like not providing parking. The taxes went up."

Carver was not the only real estate investor buying affordable condos.

It is hard not to distrust MDHA's all-to-powerful role as government real estate investor, broker, and developer, but when their development director tells the Tennessean that they would rather regulate lowly homemakers than mighty lenders, it's time to don the pitchforks and torches of populist frustration:
MDHA's rules don't specifically prohibit people with assets from buying the condos, and the condo prices aren't regulated by the agency.

"The market would dictate that," Joe Cain said. "A mortgage lender is going to lend you what you can afford to purchase. We were not trying to regulate the lending market."
Because goodness knows the implosion of the lending market during the past three years proves that lenders don't require any local regulation, do they? Is Joe Cain trying to be Nashville's version of pre-melt-down Alan Greenspan? And after the real estate bubble has burst so epically, so appallingly, how does reporter Naomi Snyder get away without asking the critical follow-up: "Mr. Cain, is faith in this lending market misplaced and naive"?

When we see the economic collapse of lending in need of government stimulus, how can anyone familiar with the industry claim with a straight face that the market can fix the debacle the market created? No need to regulate the lending market? Sounds to me like a certain development and housing agency is too enthralled cheek-to-cheek with lenders. Sounds like MDHA needs to be regulated.

And one final irony about MDHA. While they don't believe they should regulate the market, Mr. Cain tells the Tennessean that they believe that they can engineer its stimulation. Doesn't that violate the principle of "with great power comes great responsibility"? It's at least bad faith and and quite possibly artificial manipulation. MDHA shouldn't be allowed to have it both ways. If they're going to be in bed with industry interests, they should exercise some control for the sake the the public interest, too.

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