December 20, 2010

Toward Fighting the Usual, Expected Interpretation

Justin Katz

This is the sort of claim that begs for a well-researched response:

"The data ... clearly illustrates the need for more affordable homes in the Ocean State," said Nellie M. Gorbea, executive director of HousingWorks. "As lawmakers convene in January, it is imperative that they fund affordable-housing programs like the Neighborhood Opportunities Program ... to immediately address the large number of families on the verge of losing their apartments or houses because they can't afford the rent or mortgage."

The basis for the claim is a HousingWorks study of U.S. Census data finding that 41.7% of Rhode Islanders pay more than 30% of their incomes on "housing costs," which is the highest ratio in the region. Unfortunately, I spent most of my blogging time, the other day, discovering that the Census's new data acquisition tool would eat up most of my blogging time.

The first thing I wondered was whether property taxes are included in "housing costs." The second thing I wanted to research was the significance of average incomes on the calculation. I know from past research that Rhode Island's income level is relatively low, by New England standards.

Both of those considerations support the argument that the last thing Rhode Island should do is to increase government expenditures. Rather, we should lower taxes across the board and lighten mandates and regulations, thereby encouraging economic activity and higher average incomes.

Were Anchor Rising a full-time gig, we would collect the necessary data and post it in the form of a report, which we would promote around local media and bring before any relevant legislative committees — not out of protection of special interests, but out of pure interest in the subject matter and the health of the state.

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.

OK, let me get this straight. RI grants overly generous social benefits, raising taxes to pay for them. As the income and property taxes climb, the property owners raise rents to justify their continued ownership of rental property. Now, since social costs have driven rental rates higher, we must provide more benefits, and raise taxes higher, putting more upward pressure on rental rates, which means we need more taxes to pay for more benefits, etc, etc.
Are these people too stupid to see what is going on here?

Posted by: Mike Cappelli at December 20, 2010 9:33 AM

"Are these people too stupid to see what is going on here?"


Posted by: Patrick at December 20, 2010 11:26 AM

Nellie Gorbea was on the Jim Vincent Show Sunday morning pitching this.Vincent is with RI Housing and impresses me as a snake oil salesman with a preference for left wing people and causes and a lot of ethnic identity politics.
So I gotta be a little leery of Gorbea.
I think she ran for public office once,but I don't recall what office.

Posted by: joe bernstein at December 20, 2010 1:28 PM

Between 2008 and 2009 (when I bought my first home), the tax rate in Pawtucket went from $12.39 to $17.78. Granted, the value of my home dropped a bit, but the rate spiked 43% in a single year, and the overall levy went from $2,400 to $3,100.

That's not such a bad deal, I can afford the extra $60/month, but it now means that the math I used to determine that home ownership and landlording would be profitable no longer applies. Even if I rent both units out, I'll lose money.

Our lack of growth (which would help put a bottom on the real estate market by boosting income and population) and reliance on property taxes has broken one of the most tried-and-true methods to invest, owning rental property. The only people who can play now are those who have the cash to buy houses outright.

Posted by: mangeek at December 20, 2010 4:49 PM

Is there anyone here who is enough of a social historian to know the names of social programs from the 30's through 50's? I recall "subsidized housing" becoming "affordable housing" but I blank on the rest. For mopst of my memory subsidized housing programs have always been refered to by their number in legislation, "Section 8", "40B", etc.

There is an insidious side to "Section 8" and other housing subsidies. they pay 20% over maket rate. this is to encourage owners to accept tenants they might not otherwise accept.

So what is the effect? Let's say you have a 3 decker in Pawtucket. You rent at a "market rate", let's say $700. Your neighbor rents to Section 8 tenants. In discussion, you find he is getting an additional 20%, or, $840.

Thinking this over, you decide "If the government is paying that, it must be fair". Bingo, your rents go up. This both inflates the "market rate" and at the same time deters the two income, childless, couple you might desire.

This has been going on so long, and has so distorted the market, that I am not sure how the government determines the "market rate". I think they have expanded the "market area" to bring less expensive markets into the area average.

Posted by: Warrington Faust at December 20, 2010 6:07 PM

Are these people too stupid to see what is going on here?
Posted by Mike Cappelli at December 20, 2010 9:33 AM

Yes is the obvious answer for many. The rest profit from the system and don't care.

Posted by: Tommy Cranston at December 20, 2010 7:06 PM
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