Contra Subsidized Housing

N. Capitol & K

Photo by Vince Kelley

Times are tough, and transportation programs help all residents, rich and poor, which is why it’s good for DC to be making the investment. Education, public safety, and much more are also critical. But it’s also unfair and unreasonable to make budget cuts disproportionately hurt the neediest residents.

-Greater Greater Washington, “DC budget unfairly hits affordable housing and more

It’s always interesting how specific spending cuts are picked on as “unfair” or cruel or immoral, but rarely do the critics go on to point out areas where spending could be cut that would be fair, humane, and moral. Take the Greater Greater Washington quote above–it applauds Mayor Gray for not cutting in some areas, then criticizes the one area under discussion where he does cut. Meanwhile, there is an expected budget gap of over $300 millionsomething is going to have to be cut.

Nevertheless, what should be cut is a legitimate discussion, so I will briefly state the case for putting this particular item on the chopping block.

At stake is a cool $18 million siphoned from the Housing Production Trust Fund (HPTF). According to the Washington Post;

The trust fund provides direct subsidies to developers to set aside units or, in some cases, entire buildings that they rent or sell for less than market rates. The developers must agree that rental units will remain affordable for 40 years and ownership units for 15 years.

In short, with HPTF the DC government offers developers a bargain–we will give you extra money if you use at least some of it to build apartments that you cannot charge a profitable rate for.

This bundles a housing subsidy with a very specific kind of rent-control. I think all all forms of both are counterproductive, but this one is stranger than most.

Granted this is way, way preferable to old-school rent-controls of the sort enforced in places like New York, where people were just categorically told they couldn’t charge more than a certain price to their tenants. This at least is as voluntary for the parties involved as anything funded with tax money can be.

Nevertheless, subsidies don’t make sense in a city where the supply of housing is increasing like gangbusters (if subsidies in the housing market ever make sense to begin with!). And rent-controls of any kind always suffer from the same problems.

The problem stems from lack of real ownership. Oh sure, some of these HPTF funded rental buildings may be owned by someone. But not in the important economic sense of being a residual claimant.

Econ 101–people have an incentive to invest in their property because they can personally benefit from any increases in its value. When I say “invest”, spending money can be involved, but also things like time and attention.

The pathologies associated with rent control and housing projects are well documented–landlords underinvest in the maintenance of rent-controlled flats, housing projects become dens for crime and violence. When no one owns something, no one has any incentive to see that it is properly maintained, or protected.

When the price system is allowed to work, any increase in the value of a property is reflected in the price. If the price can’t rise, then a big incentive to increase or maintain the value of that property has been erased.

Building entire rent-controlled buildings, or even just rent-controlled units within otherwise free buildings, is to sink resources into something that will inevitably fall into disrepair and display other, worse symptoms of negligence.

So I don’t think cutting HPTF is a bad thing, especially when the District government is already spending above its means.

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A Sense of Entitlement in the DC Arts Community

The bill keeping the federal government open through the remainder of the 2011 fiscal year slashed nearly 70 percent from the National Capital Arts and Cultural Affairs’ grants, a tiny program that supports the District’s cultural scene in a big way. As Washington City Paper reported last week, the cuts will have a miniscule impact on some of the city’s biggest arts organizations—but a devastating effect on its tinier ones.

-Washington City Paper, “Why Cuts to National Capital Arts Grants Are Disastrous for Small D.C. Arts Groups

The article quoted above is written in a traditional new story format, meaning it advances no argument explicitly. As with all stories in this format, an argument is nevertheless quite easy to spot.

First, the spending cuts are causing suffering among the little guys in DC’s arts community.

The Kennedy Center received an NCACA grant last year of $650,000—the largest in raw dollar terms, but barely a sliver of its operating income of $94 million.

Then there are groups like Dance Place, which took in just a hair over $1.1 million last year. The Brookland studio is the smallest and newest NCACA beneficiary. The $290,779 it received was the least doled out by the federal program but accounted for a full quarter of its budget. For a group like Dance Place, the federal grant quite literally keeps the lights on, pays the rent, and hires performers and instructors to fill the calendar.

Even a cold-blooded, heartless libertarian such as myself doesn’t enjoy it when people are put out of business because their government funding is yanked. Still, the same can be said for many other situations where the transition is unpleasant but necessary or legitimate. For instance, the fact that word processors and printers have dramatically reduced the employment in typewriter production does not make me dislike word processors or printers.

Now writer Benjamin Freed could just be telling a straightforward empathy piece for the plight of these small arts groups, but I don’t think so. Through the quotes from people at these groups, an argument is brought forward.

“I think the thinking is, ‘That’s OK, no free art’,” she says. “It’s not just about art. It’s about jobs and cultural programs and keeping teenagers off the street and keeping them employed.”

Further down:

“This is just a terrible time for the city to be losing $7 million that goes to arts organizations and from there into the city’s economy,” Epstein says. “They’re the economic engines that revitalize neighborhoods. They pay vendors and salaries. The nation’s capital should be a shining light where the country showcases its arts and cultural life. This cut is going to diminish that.”

Here we are presented with a defense of spending on the arts–it is good for the economy.

This is disingenuous–you don’t have to spend on the arts to spend on DC. This is an argument against spending cuts overall, not spending cuts in the arts.  I don’t want to tackle the question of federal spending on DC in general–that’s an entirely separate question. The question is why tax money should be spent on the arts specifically.

As you will no doubt be shocked to learn, I am against it. I don’t see why any particular arts program deserves to get any more money than what people are willing to give them voluntarily.

Moreover, comments like this get my blood boiling:

Studio Theatre’s retired founder, Joy Zinoman, was more blunt in her criticism of the federal budget process and angry the slashing of NCACA grants wasn’t noticed sooner. “What [this] will do to the cultural life in Washington is a criminal act,” she said.

Two things bother me about this.

First, the sense of entitlement that people like Zinoman have is unbecoming. Why should citizens in California, New York, Texas, and the rest of the country have to pay for arts programs that nearly all of them will probably never see? Why does Zinoman think that Studio is owed their fellow citizens’ money?

Second, the implication that DC’s “cultural life” needs these subsidies. There are plenty of artists, writers, performers, and creative individuals of every stripe living in the District. Most of them can’t make a living doing what they love but they are still doing it; they are still participating in and contributing to the District’s cultural life. This is how it is in every city, how it would be with or without subsidies.

Moreover, these subsidies always go to a certain category of “cultural life”. I submit that you are unlikely to hear Zinoman calling for subsidizing romance novel writing, or producing soap operas, in the District. That is because there are already big, healthy markets for genre fiction and television dramas of many stripes. The natural market position for the kind of art that the Studio Theatre or Dance Place produces is much smaller than some people are happy with, and so they demand that taxpayers augment them.

When funding for the arts cannot be obtained in the market, they ought to be obtained in civil society or not at all.