Building Affordable Housing Is Easy. Getting Someone to Pay for it Isn't.
One sure sign a housing program has failed.
Olivier Le Queinec/Shutterstock
Every once in a while something sticks in my heart or my craw. This one was heart. Last week, writing about a city-funded program to build houses in central oak Cliff, I quoted Raymond Crawford, who lives in one of the target neighborhoods, as saying, “Everyone knows the city really doesn’t do anything good on this type of project.”
But not just the city. The state has a dodgy track record. The biggest devastations from bad housing programs have come from the federal government. And all of that sticks in my craw. Oh, wait, I said heart, didn’t I? Well, that, too. Heart and craw.
I’m a liberal. I want everybody to live in a decent shelter of some kind. My heart cringes before the sight of people living in wasteful opulence in the same city with people who live in bitter squalor. As a reporter, I see both ends of it all the time. As a bleeding heart, it seems to me the government has a duty to do something about it.
What about the ability to do something? Does government have that?
When I thought about what Crawford had said, I counted back through the disastrous government housing debacles I have covered. By now most people have forgotten — or weren’t born yet for — the HUD mortgage debacle of the early 1970s under Richard Nixon. There’s a ton of academic debate about why it happened, but I saw the bottom line with my own eyes in Detroit as a young reporter. Vast neighborhoods were laid waste, enough land and property to make the 1967 race riot look like a Boy Scout jamboree, because HUD put into houses people who could not or did not keep them up or pay the mortgages.
Ah, ah, my fellow white folks, easy on that trigger now. I know where some of you may want to go with that one, but what about the more recent Fannie Mae/subprime catastrophe? Again we saw entire neighborhoods boarded up and gone to weeds, and I think the ethnic mix was pretty balanced on that one, was it not?
Well, wait, we left one out in between the other two. What about Ronald Reagan, the 1982 Garn St. Germain Depository Institutions Act and the resulting national catastrophe known at the time as the savings and loan scandal? The debacle that ensued from Garn St. Germain was much broader than housing alone — it pretty well wiped out the entire Texas economy — but in looking back it feels like the same thing, basically — people walking on mortgages, property going to seed, neighborhoods damaged, some beyond salvation.
I can’t look back at all of that government effort and just dismiss it as mendacity and stupidity. Some of it may have been no better than that, but we must assume that in every one of those debacles an awful lot of smart sincere people were trying to do good. So what happened? What happens?
In the last week I have been chatting with people involved in low-income housing in Dallas, none of whom would talk to me for attribution, because they all want to go to the city for money at one point or another, and they don’t want the city to know they even know me.
I didn’t talk to a huge group, just a handful. They were a mix, nonprofit and for-profit. They said a number of interesting things, and some consistent themes emerged. I heard several versions of this theme, for example: Anybody can build a house. I might have thought building the houses was the hard part, but the people I talked to said no. That’s the easy part.
Selling the house is the hard part. Selling is way harder than building. You haven’t sold your house until you get paid, which does not mean signing a contract. Getting the money, getting the check to clear, and, if you are holding the mortgage, continuing to get paid on time — that’s the home run.
A huge number of poor and working class people out there will never miss a rent payment, I was told, assuming they started out with payments they could reasonably manage. But, as one landlord told me, the person who does not pay his rent will not pay his mortgage. That doesn’t change, from rent to mortgage. Not paying is the consistent principle.
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So the successful private sector people I talked to, who happened to be involved both in selling houses and in holding the notes on them, told me they expend their greater effort not on building but on vetting the people they hope to sell to. One guy, a seller of houses to people who have been renters, told me he doesn’t rely on credit ratings, because most of his buyers are renters and don’t have much in the way of meaningful credit ratings.
He calls former landlords, and, if that doesn’t help, he drills down into court records to look for evictions. He said if he finds a person with a track record of staying in one place and paying the rent, he knows that person is pretty likely to stay in his house and pay the mortgage. If not, then no.
A person involved in a nonprofit described an equivalent process of due diligence, in part to make sure the purchaser is a bill-payer but also in part to make sure the bill will be within the person’s means. No use setting somebody up for failure.
This is entirely anecdotal on my part, but it does go all the way back to Detroit and then comes forward through savings and loan, subprime, the whole schmear: Somehow whenever government enters the housing business, it is focused on that first part, the easy one, the production of the units.
They call in the media when the units are done, do a big la-la ribbon-cutting, show off their bright shiny work and the huger the better. But when it comes down to that hard part, the vetting, the saying no, the turning some people away, the subsidized programs just don’t seem to have any flair for that.
I don’t think that’s exclusively a trait of government. In the Bush subprime debacle, where people could make money whether the mortgage was paid or not, so-called homeowners were given the keys to McMansions when the so-called lenders knew in advance the buyers could not or would not pay.
If there’s unifying principle — something Raymond Crawford’s neighborhood could look to — it’s that houses built by the city or by charities or by landlords are not the thing that does damage to a neighborhood. It’s entirely a question of who winds up in the houses.
The danger in a city-run housing initiative is that the city doesn’t care the same way a private for-profit developer or even a private nonprofit cares about getting paid. And even if the city says they care, they don’t know how to do the vetting the right way. Or they don’t have the time. Or they really don’t have the stomach.
Telling people no is hard, especially for people who want to do good — bleeding hearts like me. I could probably put a small bank out of business in a week, if they would hire me.
The last theme I heard, however, was this, and it came from both nonprofit do-gooders and a couple of hard-nosed landlords: Where there is no vetting or bad vetting, where houses are filled with people who are not going to make the mortgage payments for one reason or another, the damage to those people is at least as great as the damage to the seller.
Eventually the seller can get a house back and sell it again. But a family who thought they finally had gained their own home but then failed out of it may be propelled down a bleak path probably already littered with heartbreak. Nobody did them a favor by putting them in that house.
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