The affordable housing myth.
The NJMC's misguided notion that government can regulate housing stock and force inclusionary zoning practices doesn't make any sense in a state where home values and property taxes are sky high!
Does an unelected regional
state agency have the authority to impose inclusionary zoning restrictions upon local municipalities that have governing bodies directly elected by the
voter?
Can the NJMC dictate to municipal planning and zoning boards as
well as to member municipalities mandatory
guidelines for affordable housing?
In a state long known for home rule, The Home
Rule Act of 1917 granted to all municipalities powers
previously granted to only a few. It also established broad areas of
governmental services and controls that were to be available to all. These
powers were bolstered by the declaration in the NJ
Constitution that statutes conferring
powers upon municipalities and counties should be liberally construed in
their favor. It has therefore been politically difficult for the state
legislature to recapture these powers.
Like elementary and secondary education, the issue of housing has been for the most part one of strict local
control.
But the Meadowlands, the area with marquee views of Manhattan
has been for the most part polluted marshes and salt water swamps that
have been destroyed by decades of illegal dumping, landfill operations and a
host of other unsavory usage have tantalized developers for centuries. With
Brownfield remediation and landfill cleanup now attainable, a host of legal obstacles such as reclamation,
title inquiries and fragmented government control all playing a role in the
lack of progress in this fourteen town district.
In effect the creation of the Hackensack Meadowlands
Development Commission in 1968 (now the NJMC) was to provide orderly development of the some 19,000 acres of
valuable wetlands in Bergen as well as Hudson counties. At the same time,
the original intent of the law was to also create disposal facilities for solid waste operations for all of northern
New Jersey.
Since the NJMC can dictate a master plan, an adversarial relationship with the agency can
complicate matters as it has with the failed EnCap project.
And while the NJMC has had some great accomplishments as it
pertains to the construction of the Meadowlands Sports Complex and the
preservation of environmentally sensitive marshes, the overall vision of the Meadowlands has changed from preservation of
open space to the promotion of affordable housing and the overall urbanization
of South Bergen County.
As we see the Meadowlands Sports Complex rapidly change from a revenue positive facility derived from
para mutual handles, it is now a revenue negative unit of government that
relies on subsidies of $100 million dollars due to declining
para mutual revenues and the addition of casino gambling alternatives in Atlantic
City as well as various locations along the
east coast and as far away as Pennsylvania and Michigan.
So why is an agency that was originally conceived to create an
orderly development process seeking a
transformation of the area as it applies to the number of units of housing that
they seek in a down real estate cycle? Secondly, how will any builder make the
necessary profit on market rate housing when it costs virtually the same price
to build affordable housing that will be sold at roughly 67% less the current
median home value?
In effect, is affordable
housing economically realistic?
Secondly, and probably more importantly, is home ownership now an entitlement granted by the
government?
In a country where the free market drives healthcare, is it
practical to impose public policy mandates that guarantee subsidized
housing for the few at the expense of everyone else?
Practically speaking, how will
local government assess the value of homes that are not driven by market
conditions? Is it fair to place a cap on property taxes of owners of
affordable units and thus pass the costs to every other homeowner? What if that
affordable housing homeowner has several children who also attend public
schools.
Is it fair that his or her taxes be in effect capped despite the
sizable service they require?
These are issues that get lost in the affordable housing
argument.
Instead, the affordable
housing issue is driven on emotion, not common sense.
Those in government plea for fairness and opportunity for all.
But what they do is create mandatory
entitlements subsidized by everyone else who earns a home through hard
work, savings and investment.
Why would the government want
to undermine those values that created the American dream of home ownership for all in the first place?
A perfect example of this is the current housing crisis.
While homeownership increased at a wicked rate since 9/11, the
Federal Reserve cut interest rates at such a pace that it created interest free
loans for just about anyone who could qualify to purchase a home. But predatory lenders destroyed the market by
approving loans for people with FICA scores so low it would make it impossible
for these individuals to retain these properties in the long-term. The subprime explosion is directly credited
to the fact that about 20% of all loans written were approved to individuals not
with the sufficient income, but with deficient credit histories worthy of home
ownership!
In the case of the affordable housing prospect, you have a
situation in which income and credit history
are probably both at risk and thus one wonders how the notion of something
one cannot really afford makes any economic sense in the first place?
But most importantly, affordable housing only seems to work when the density of the project is such that it
can carry the decreased values of the low income units by imposing an even
higher price on the market rate units. This was the foundation of Arlington
Valley.
Increased density (1,650 units) to subsidize the implementation of low income
properties.
But density urbanizes a suburban municipality. Density increases
the cost of government, property taxes and essential services. In effect, what
you sought in affordable housing is a direct
opposite effect on the entire community!
In a community like North Arlington, the Area
Median Income or AMI is quite compatible to
most homebuyers. It is by definition, one of the more affordable places to
live in all of New Jersey when you consider accessibility, employment
opportunities, public school access and overall costs to own a home.
At the end of the day no matter what the price, the homeowner must have an ability as well as
willingness to pay for homeownership.
The willingness to pay comes from the desire to live in an area
that is conducive to a productive lifestyle. The
market in effect ensures that willingness to pay for a home as well as maintain
it and protect the investment. If affordable units are by nature
artificially depressed by a government regulated ceiling that controls price, where is
the willingness for the owner over time to protect or retain that initial
investment?
With speculators thankfully out of the housing market, the
proper price corrections will take place and balance out the unrealistic upward
surges that must come down. For the market has not been driven by job creation
or even job loss, but by predatory lending
practices that put just about anyone with a job in the position to purchase
a home.
In effect, affordability was
created across-the-board by low interest rates that set prices and home equity
values to record levels.
The truth about this housing market is that wealth has been
built in equity, not income.
Those smart enough to get into the market have seen personal wealth boom because of homeownership.
Wages for the most part remain static and job creation remains mediocre.
With the foundation of income based in job creation, just how
will these low income earners with practically no net worth hang on to these
affordable units?
Again, a question never
addressed by the NJMC or anyone else for that matter.
Basic economics cannot and should not be driven by public policy that seeks to right some perceived wrong.
Why is it when affordable housing or low income housing is ever discussed, it never makes it way into Franklin Lakes, Old
Tappan, Upper Saddle River or Alpine?
The case for affordable housing is noble, not realistic.
If public policy focused on job
creation, research & development and education instead of $1.3 billion
dollar subsidies to build football stadiums that are used by two teams sixteen
Sundays a year, the notion of affordable housing would no longer be in our
vocabulary of what government can and cannot do.
