A couple of weeks ago, the Statesman reviewed Austin's progress in distributing the 2006 affordable housing bond money. To date, Austin has distributed about $11.8 million of the $55 million we voters approved.
The city is distributing the money to local non-profits. That's a good idea, or at least can be if the city does it right. Competition among non-profits should give us the most affordable housing for the money. (For this to work, of course, the city must turn some of them down.) And turning the non-profits loose should yield some innovative ideas.
I do have a problem with the city's priorities, though. There don't seem to be any. Here are some of the projects the city has approved to date.
- Apartments in South Austin for people with disabilities;
- Energy-efficient homes in East Austin;
- A Habitat for Humanity subdivision in Northeast Austin;
- The purchase and renovation of a single home for a 50 year old woman with disabilities;
- Efficiency apartments for the homeless
- Buying down affordability in a mixed-use project on South Lamar.
- A children's shelter.
I don't like this scattershot approach. The city should try to get the best return on its bond money. It may be counter-intuitive, but this means that all the money should go toward the same goal.
In principle, the city is in the same position as a consumer who has $5,000 to apply to her debt. She has a credit card balance at 15% interest, a car loan at 8%, student debt at 6%, and a mortgage at an after-tax rate of 5%. While she may be tempted to spread the money around, she should spend it all on the credit card, where it will earn the highest return.
We need to decide which affordable housing investment gives us the best return. And then we should put all of our money toward that investment until our second option begins to offer a better return.
Which investment gives us the best return? Efficiency apartments for the homeless or near-homeless? Home ownership for the low-income? Affordable housing in upscale, mixed-use projects?
It's not even close, in my opinion: Our priority ought to be transitional housing for the homeless or about-to-be homeless. We do more for individual welfare when we move someone from the street to an apartment than when we move someone from an apartment into a house or an upscale apartment in a mixed-use development. And there are obvious social benefits from getting a homeless man off the street, or keeping a mother and young child out of an emergency shelter. Stable housing allows these people to pull things together, to re-enter the workforce or pursue more education. Finally, the market seems to do a pretty poor job of providing this ultra-cheap housing.
Regardless, we ought to identify our top priority. And then we ought to keep investing in that priority until diminishing returns steer us elsewhere.
