Tuesday, March 20, 2007

Can Peekskill "afford" any more affordable housing?

Part I: The Cause of the Problem

Everyone seems to acknowledge that there currently is a "housing crisis" in the nation, and in Westchester County in particular. Take, for instance, a December 18, 2006 article published in Nation's Building News, which states, "The cost of affordable housing climbed for the eighth consecutive year, continuing to outpace the wages of the low-wage households who need it the most...."

What few people agree upon is what the cause of this crisis is and how it should be dealt with. What follows is my take on this situation, in Westchester County, in general, and in the City of Peekskill, in particular.

While the roots of this problem are varied, two key primary causes are clear. Both of these causes are part and parcel of the creation of our county and local governments, over a period of many years: exclusionary zoning practices and rent control.

The first part of the problem was exclusionary zoning practices, which had been adopted by many of the more affluent communities in our county. Such restrictions included
  • severely curtailing what could be built,
  • severely curtailing how structures could be built,
  • severely curtailing when structures could be built, and
  • severely curtailing where structures could be built.
These exclusionary policies,which the Westchester County Planning Board recently acknowledged (PDF) to be a leading cause of the lack of affordable housing in the county, were implemented to such an extreme degree that it made it all but impossible for developers to build any housing that the average, middle-class home buyer could afford. Ostensibly, the reason most often given to justify these restrictions was to "preserve open space" but, in many instances, this really was just a subterfuge for the wealthier communities to hide behind. The real reason for this restrictive development process was because the more affluent communities wanted to preserve their communities as the bastions of wealth and privilege, and exclusive zoning helped them very well to do just that.

The second governmental policy that made worse the availability of affordable housing in Westchester was the adoption of rent control. By capping the rents of some rental housing units, the supply of market rate housing in Westchester shrank, which artificially inflated the rents of those remaining units that were available at market rate.

The end result of rent control was that developers refused to build more units, knowing that they couldn't get a fair rate of return on their investment, as rent protected tenants stayed in units they had outgrown because they "had a bargain" and, having adjusted to paying below-market rates, they couldn't afford to move even if they had wanted to do so.

Additionally, the tax value of rent controlled units declined, as they no longer had the income flow that they had received in the past. That decline in tax value was passed on to other home owners in the form of increases in the property tax, which in turn caused these homes to become even more unaffordable as they were saddled with an extraordinary property tax burden.

After 30-plus years of these, and similar, policies to dry up "affordable" home ownership in Westchester County, the county realized that it had a "housing crisis" on its hands. So, just what did our great county do?

Logic would dictate that the policies causing the problem either should be modified or (preferably) eliminated. However, politicians being politicians, the county was unable and unwilling to take this course of action. Instead, our government decided to establish yet another government solution to a problem that it created in the first place: Westchester County would enter into the housing business via legislation that it enacted in the early 1990s, using the tax revenue garnered from the county's hard-working homeowners to assist developers in building housing that prior county policies made impractical for them to build.

In part two, we'll examine how the county's solution to the shortage of affordable housing also made the problem worse.

No comments: