Throw More Money at the Problem
Problem: Housing in the Seattle area is too expensive.
Government solution: Artificially inflate the buyer pool by throwing millions in government loans at the problem.
Seattle will soon stake low-income housing developers in the cutthroat bidding wars for building sites.How does "spend more money" make sense as a solution for the problem of something being too expensive? I'm no economist, but I'm pretty sure that projects like these only serve to further drive up prices.
The idea, which the City Council's Housing, Human Services and Health Committee approved as a two-year pilot project earlier this week, is to lend developers money fast and early — up to five years before they're ready to build.
The program will help non-profit developers secure sites before Seattle land costs get even more out of hand and better compete against their for-profit counterparts, who often can move more quickly, said Kollin Min, regional program director in Seattle for Enterprise Community Partners, an organization that helps fund low-income housing.
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The program will get $2 million a year through 2009 from the city housing levy's operating and maintenance fund.
That's just a start, Min said.
"It's a very good first step," he said. "We need to have a larger pot to really make a dent in the problem."
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The Legislature authorized a separate $1 million earlier this year for a similar program statewide.
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Forty percent of the program money would go to home-ownership programs for residents earning 80 percent to 120 percent of the median income. Other money could go to rental housing for people making no more than 80 percent of the median income.
Should local and state governments bother trying to get involved at all, or should they just let the market work itself out?
(Aubrey Cohen, Seattle P-I, 05.03.2007)
20 comments:
Throwing money at the problem is actually the essence of how markets stabilize. Look at the market for flat panel televisions. The profit became too great, so many parties began throwing money at the problem and it has now caused a precipitous drop in the price of that television segment.
If we threw enough money at building cheap housing it would have a significant effect. Throwing money at financing housing on the other hand is what caused our current problem.
A $600,000 SEATTLE HOME HAS AN APPROXIMATE PROPERTY TAX AT $5000/YR EACH
Where is Seattle inhaling all its property tax revenue, with its streets of over-priced home values?
Schools you say? Nah, they want to close half of 'em down because of Seattle revenue shortages???
Yet, get away from Seattle to the King County subburbs and the home values and property values collapse about 50%. Yet they're building schools and adding students in the subburbs.
Seattle better get off its Elite fat bottom and use the MASSIVE property tax revenue it collects more wisely. Why does Pioneer Square look like a WAR ZONE? Cracked roads, decrepit buildings and assorted giant sidewalk cracks that could kill pedistrians. Yet we have shiny new Stadiums for Stuper Bowl(s) (remember the fall of Rome and the Gladiators in their stadium).
Its time to oust ALL the Seattle and King County Elite politicians (I'd call 'em liberals, but Fascists are a better description)and put in some common sense subburb Candidates that OBVIOUSLY know how to budget FAR BETTER than Seattle's Circus Clowns.
This Seattle Budget Crisis for affordable housing needs far more than worthless squirt guns spraying wasted money on a blazing fire of over-valued real estate. The problem is, the Seattle Buffoon Elite have loaded the squirt guns with gasoline instead of water.
Have these ELITE BUFFOONS (liberals? LOL) ever thought of, God Forbid, OVERPOPULATION reduction in Seattle?
The $11,000,000 Hotel de Drunks at 1811 Eastlake is a great example of your tax dollars hard a work. Pay people to drink all day.
BTW, that $11,000,000 was only the cost to build it. It costs $1,000,000/year to operate it.
I am sure the Seattle School District would have no need for that kind of cash. It is a real shame when 75 drunks can suck that much money out of government. If we keep this up, we will buckle under the weight of these insane programs.
I live in a suburb. My taxes are higher than in Seattle. Compare your taxes to other parts of the country. Unless you are poor, we gots it good, baby. No income tax. Low property taxes. I am frankly at a loss as to how we have money to pay for things like mass transit and road infrastructure and upkeep. Oh, wait a sec...
The thing I found most disturbing about the article is that they aren't considering what happens when land values decline. Why would you want clueless non-profits snapping up properties at their peak value?
biliruben - Higher business taxes!
Along the Washington/Idaho boarder you see significantly more businesses popping up on the Idaho side due to much lower taxes on operations...
My wife's a small business owner. I just paid her taxes. Dinner at the flying fish would have been more.
The reason why businesses open on the other side of the Idaho (and Oregon, btw) border is not because of business taxes. It is because of sales tax.
Can the sales tax (which is extremely regressive), replace it with an income tax, and support retail business and increase income to pay for all the things we have to pass referenda for now.
Most studies rank Washington State about 15th in the nation when it comes to overall tax burden.
But I do agree with your other point Biliruben. If you rent, save your money instead of buying useless crap, and go easy on the gasoline, you can really stack the deck in your favor and pay almost nothing.
It is almost criminal, but I am very happy letting homedebtors and uber-consumers fund state and local goverment for me.
"The thing I found most disturbing about the article is that they aren't considering what happens when land values decline."
What, are you sick? Land values NEVER go down. Real estate ALWAYS goes up. Man, where have you been?
I guess I missed the government program that subsidized flat panel TVs, Benjamin. I thought the reduction in price was due to free market supply and demand, silly me.
BTW, we had a message on our answering machine that sounded like they were giving away up to $60,000 downpayments for "first time homebuyers." Actually it's downpayment assistance loans for lower-income people and naturally we don't fall into that category. So they'll be taking from the middle-class to subsidize this program and possibily the n-p land purchases. I think both these programs may counter the downward trend that should be taking place in the real estate cycle. Here's the link to the downpayment program: http://tinyurl.com/3bbw6t
I'm as pessimistic about this mess as the next guy, but I wanted to point out how throwing money at a problem can change it in unpredictable ways.
If the city of Seattle subsidized the production of 100,000 brand new condominiums and marketed them to poorer people, it would flood the market with cheap housing. Simple supply and demand would mean that all Seattle housing prices would plummet.
How is this like flat-panel televisions you ask? Our government may not subsidize production of televisions, but the Chinese government does. They are so desperate to produce jobs for their work force that they subsidize all sorts of outlandish things. This force helps flood the market with cheap televisions.
Yet this force was happening this time last year and prices were dropping slowly. Like what housing will ultimately do. What really caused tvs to drop in price was when Walmart slashed their price. This forced other sellers to meet the new going price or loose massive market share.
Back to housing. If builders flood the market with housing, it might take a long time for price drops. But if subsidized builders flood the market with cheaply priced housing, your median housing prices and other barometers which people use to select a fair price would plummet. Dropping expectations would further exacerbate the trend.
Will this plan have any such effects? NO! It will not produce enough housing, to have much effect. But the point is that enough subsidization can help if it cuts the price. On the other hand, if the government just provides cheaper loans(bailouts), that would only push prices up further.
Can the sales tax (which is extremely regressive), replace it with an income tax, and support retail business and increase income to pay for all the things we have to pass referenda for now.
I don't see the wisdom in taxing production and subsidising consumption. This is the major problem on the national level.
The last thing I need to do is fill out another ream of paper telling some functionary in Olympia how my household cashflows. We have enough civil servants poking around our lives.
The Founding Fathers set up the Constitution to protect us against an income tax and horribly intrusive government. Even though we amended the Constitution, we still have to violate most of the Bill of Rights in order to collect the damn tax.
I don't need that at the state level. I've done this in Hawaii, California, and Maine. Texas, Florida, New Hampshire, and Washington are a breath of fresh air.
Trust me when I say that I would rather pay a 40% sales tax than a 1% income tax. The sales tax will be reduced below 10, and the income tax will grow to double digits in no time.
If income were strongly correlated with production and sales tax didn't so heavily touch the poor and middle class, leaving the rich unscathed relatively to their wealth, income and the benefits they derive from the state, then I would agree with you Eleua.
Like some many things, tax theory falls down when thumped over the head by reality.
Sales taxes are largely vouluntary. Food, medicine, education, and shelter are already exempt from sales taxes.
If 'Shug makes $10M per year as a minstral, but only spends $50K, he has essentially donated almost his entire year's labor for free. Money is worth nothing until you spend it.
Income taxes give WAY too much power to the government. People spend too much time and money trying to slither around the tax code.
I have never heard a reasonable argument for an income tax. The only reason is for:
-more money to the government (bad)
-punishing the rich (bad)
-income redistribution (really bad)
-social engineering (straight from hell)
I can not think of one income tax jurisdiction that has a surplus of tax revenue, a declining tax rate, and a decreasing scope of government. Not one.
Almost all have deficits, expanding government, and higher taxes.
The Founders knew this and is why the US Constitution expressly prohibited the practice. We still have to violate almost every part of the Bill of Rights to collect the tax.
Example: You are REQUIRED by law to submit a 1040. REQUIRED!! Failure to do so will lead to prison. Yet, if the IRS brings about a criminal case against you, the primary evidence used against you will be that very 1040.
No person shall...be compelled in any criminal case to be a witness against himself...
-Amendment 5, US Constitution (12/15/1791)
Normally (if you watch 24 or CSI) a person can be called to testify, but is given immunity against prosecution (thus taking out the "criminal case" portion of the problem). Not so with the IRS.
The same amendment also prohibits the siezure of property without due process of law. Up until Schulz vs IRS, the IRS would just seize your stuff and YOU had to go to court to get it back. After the Schulz case, the IRS appealed on the grounds that it would severely hamper the collection of the IRS tax.
They lost on appeal, and they DO NOT want this to go to the SCOTUS, for fear of making the Fifth Amendment the law of the land.
Search and seizure of personal papers? Try opening a Cayman bank account. Try telling the IRS they need a warrant to snoop around your WaMu account - good luck.
Simply advocating the non-payment of taxes is a criminal offense.
The IRS is the single biggest beneficiary of the PATRIOT act provisions. Read it. It is supposed to be about terrorism, but is aimed at money laundering, drug money, and tax cheats.
BR,
This is just a friendly disagreement. I hope you see it that way.
E
BTW, lest anyone think I am a kooky "tax protestor..."
I do believe the tax is supported by the 16th Amendment, and current law. My only point is the collection and enforcement methods are in violation of the Bill of Rights.
In order for 99% of criminal tax cases to proceed, the IRS has to violate the defendant's Constitutional rights against search and seizure, and testifying against himself under penalty of law.
When you look at the Constitution in a holistic manner, you quickly see that the 16th Amendment stands out as a classic "one of these things is not like the other."
Eleua - I totally agree with you! You da man!!! Love how you made your arguement.
Hey Eleua - hey everyone's entitled to their opinion, even when they are wrong. ;)
When I see the sorry state of education, healthcare and basic infrastructure in this country I know we have a problem. Maybe those things aren't a priority for you, but they are for me and most Americans. Addressing those problems means a reasonable tax base.
I also see the dramatically expanding gap between the rich and less than rich combined with the decrease in taxes paid by the rich. The capitalist system we have in our country enriches those who already have money at an ever-increasing rate. The only mildly effective checks we have on this ever-expanding wealth at the top are our tax structure and regulation. Both has been decimated. It's not even close. The rich have won in a rout.
I find this sort of imbalance anti-democratic. Money is power. Money is influence. It buys you far more than the vote you were alloted.
Maybe you don't agree. Perhaps you would prefer living in the Grand Duchy of Gates or the Barony of Buffet. I would prefer to keep in the good ol' US of A.
Hey! You've got Finance on your side. You must be right. ;)
Hey! You've got Finance on your side. You must be right. ;)
Ouch! That hurt. (vbg)
I don't see the tax code as the cause of "the rich." I see an unchecked finance industry, complacent shareholders, passive board members, and an irresponsible FED as being the problem.
If the SEC was doing its job, and if shareholders were allowed more latitude to sue execs for not running the company on shareholders' behalf, that would solve much of the problem
I also think we need more unionization, and less (far less) trade with slave nations and peasants (China, Bangladesh, India, Mexico, Vietnam, etc.)
Seal the borders and chase out the gatecrashers and you will see lower end wages double overnight.
I don't see how more money makes education better. My kiddies go to private schools that can give a better education than the local public schools on a lower budget. I do not know of any correlation between greater academic achievement in public schools and more lavish budgets.
I can see a direct relationship to the amount of "administrators" the district employs and the school levy.
How can Texas students outperform California students? Texas spends less (FAR LESS) per student than California. Both are states with heavy immigration issues.
Granted the following stat is over a decade old (and I don't want to Meshugy-ize this), but New Hampshire had the lowest expenditure per pupil, and the highest standardized test scores in the nation. DC and CA had the highest, but were ranked with Hawaii, Arkansas, and Mississippi.
I would be more open to the Socialist idea if the proponents could actually put forth an intelligent argument, based in fact, on how higher government involvement would improve the lives of the population. Education is usually the human shield they like to use to justify higher government budgets, greater spending, more intrusive regulations, and higher taxes.
Quite frankly, I don't want to throw any more money at failing districts until the locals actually show they would put it to good use. Urbanites will routinely riot if they perceive a court case didn't break their way, or a cop shoots someone looting a retail establishment.
When they riot for more homework, higher standards, and greater parental involvement, I'll vote for more money for the district. When the urbanites threaten to burn down the district HQ and shoot the Superintendent in order to pressure her into purging all the feel-goodism classes and inserting more Algebra 2, US History, Expository Writing, Chemistry, and Physics, I'll join the mob - checkbook in tow. Today's schoolteachers are not teaching in the inner city. They are warehousing kids to keep the crime rate down between 8am and 2:30pm. Nothing more.
When kids/parents put their priorities into "pimping their test scores" rather than their ride, I'll divert more money their way.
How many "graduates" in Detroit, and DC can read their diploma? What percent of kids actually "graduated?" I could dump the entire budget of the DoD into Metro Detroit, and I don't think it would have any discernable positive effect
(unless you are an administrator).
Our money is better spent in putting public money in the districts that show it will go to good use. If we are going to compete, let's let the top end fly.
At $10K+/pupil-year, I have done my part. If they can't put that to good use, I'm afraid that $100K/pupil-year isn't going to help.
$10K/pupil translates to $250K per classroom. The teacher's salary takes about 20% of that. Books are cheap and used for an entire generation. How much is the light bill? Desks are cheap and have a 20 year lifespan.
WTF happened to all the money?
Remember how lotteries were going to end all the financial concerns of schools?
We have lotto-out-the-ass, gambling in every state but Utah and Hawaii, and our schools are FAR, FAR worse than ever before.
I can send a kid to the local private school, pay for braces, send them on Christmas vacation to Hawaii, and have money left over when compared to what the NK school district would spend just to warehouse them for 6.5 hours per day.
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