Blog #50 – Inclusionary Zoning: Good and Bad

Blog #50 – Inclusionary Zoning: Do’s and Do-not’s. —

[Slightly revised version incorporated in Blog #53, Density, Inclusionary Zoning, Housing Planning: Cautions on de Blasio’s Plan]

Inclusionary housing can lead to neighborhoods further functionally segregated by race and income, if not controlled, and can be an inefficient use of governmental subsidies if provided.Inclusionary housing only works where the market is strong enough so that a developer or landlord can make a profit from market prices high enough to cover the provision of below-market rate units. Thus, it will only work in higher income neighborhoods, predictably more non-Hispanic white than the in the city as a whole. That effect will be particularly strong the lower the income of the target population to be benefited, in the development. And if it is limited to already higher income neighborhoods, it is likely to increase the concentration of significantly segregated residences in the city if it provides bonuses for buildings which , net, increase the proportion of high-income uses in a community. A very delicate balancing is required, with opposing dangers.

Further, the higher the effective subsidy needed, the higher the rents/prices of the market rate units needed to make inclusion profitable. If owners are permitted to select tenants providing inclusionary benefits, they will discriminate in favor of the highest permitted income and the most “responsible” (“acceptable” ) tenants, creaming among applicants by considerations other than the need for housing. With the large majority of residents of an inclusionary development paying market plus rents, their demands on neighborhood facilities and services will be very different from those of the residents of the below-market rate units, to the latters’ disadvantage. Identifying the below-market rate units as such permits a likely stigmatization and pressure to separate out their residents. The worst case scenario might be the equivalent of servant’s quarters in a private residence.

But there are good ways and bad ways of designing and implementing inclusionary zoning, if the purpose is to address housing needs in an equitable fashion.

Bad:

• Permit the market to determine where inclusionary housing will be provided.
• Implement it particularly in transitional neighborhoods where the probability and disadvantages of gentrification are greatest.[1]
• Let owners determine selection of residents for below-market-rate units.
• Permit external identification of affordable units, or their isolation.
• Ignore neighborhood impacts of construction, and neighborhood needs for facilities and services.
• Make inclusionary development financially profitable by allocating public subsidies , including tax and other benefits, to support their rentals, effectively reducing the pressure on market-rate rentals and reducing cross-subsidy effect.
• Provide as bonuses deviation from neighborhood planning and construction standards and limitations, e.g. height limits, zoning restrictions.
• Permit obligation to provide below-market rate units to expire.

Good:

• Make inclusionary housing mandatory, and target city programs of support in such a way that they draw on the developer’s profits over subsidies to support them.
• Require a high enough number of below-market-rate units in any building to permit the provision of neighborhood facilities and services for the needs of all residents.
• Permit city control of tenant selection for below-market units, perhaps using Housing Authority waiting lists and criteria.
• Hold to planning-established limits on height, set-backs, etc. avoiding the granting of zoning and building exceptions’ or bonuses for inclusionary developments.
• Provide for major participation in design and implementation of proposed beneficiaries in need of affordable housing

Conclusion: Inclusionary housing can be an excellent program, but requires caution in its application. The devil is in the details. On-going effective participation of intended beneficiaries in need of housing is key in design and implementation.

[1] De Blasio’s plan speaks of focus on transitional neighborhoods, p.8 but it also calls for it “in all medium and high density districts where rezonings provide an opportunity for significantly more housing.” P.30

Blog #49 Picketty, Leonhardt, and Market Economics

 

Blog #49 draft Picketty, Leonhardt, and Market Economics

David Leonhardt writes: “What is it about market economies that typically causes the assets and incomes of the rich to rise more rapidly than those of everyone else?”[1]

Picketty’s First Law of Inequality explains some – they accrue capital, invest, it,and benefit from the return on it (although the rich don’t invest all of their profits in capital to make more profits, but send a good bit of it on consumption, , from yachts on down. And a good bit of investment capital comes from borrowing from the savings of the non-rich, e.g. pension plans and savings accounts).

But isn’t there something else going on too? The rich get rich by owning capital that they use to buy machines and hire workers to use them to produce value. They profit by the difference between what they have invested and what they sell the end product for, minus what they pay the workers that have produced that product. The less they pay the workers, the higher their profits. When unemployment is low and workers are well organized and strong, labor’s bargaining position is strong; profits are less, workers’ incomes rise, inequality is reduced. When unemployment is high and labor weak, the rich who control are strong, not just in bargaining but also in shaping labor and social welfare legislation, their profits go up. Inequality increases. The rich get richer, because the non-rich don’t.  That’s the way the market works.

For more on the political end of this, and fighting poverty just by anti-poverty measures, see pmarcuse.wordpress.com, Blogs #43-48.

The rich aren’t job creators, they’re job reducers and wage reducers, if they want to be profitable. They have to be. That’s the way the system works.

[1] David Leonhardt,”Inequality Has Been Going On Forever … but That Doesn’t Mean It’s Inevitable,” New York Times, Magazine Section, May 2, 2014

 

 

 

 

 

 

Blog #48 – Writing About Inequality

To the Editor, The New York Times,

(re: Changed Life of the Poor: Better Off,but Far Behind”.. (Front page, May 1, 2014)

 A researcher is quoted as saying: “the poor are better off than they were… but they have also drifted further away.” “Drifted away,” indeed! The story says: “…the poor have fallen further behind.” They have “fallen?” What images does such writing conjure up? Inequality increases because the poor drift away from being better off, the silly, ne’er-do-wells? They can’t keep their balance, these helpless people? That’s surely not the intent, but it’s the effect of using stock formulations without thinking about them.

Would a formulation like: “While the poor fell behind or drifted away,the rich rose higher and marched further ahead” pass muster?

Or would formulations to explain increasing inequality like: ““The rich have gotten even richer on the backs of the poor,” or “The poor have been pushed even further down by the growing wealth of the rich” pass muster at the Times? After all, it takes two to be unequal. The victims shouldn’t be blamed for their poverty without examining what happened at the other end of the divide. Inequality increases because the rich get richer as well as the poor getting poorer. A coincidence?

 Peter Marcuse                                                            May 1, 2014.