Low-Income Housing

I am a retired senior, and my sole source of income is my monthly Social Security check.  I rent an apartment on the South side of town, and I pay probably less than any of the rest of you because I cannot afford to pay much more.  But I do not live in low-income housing, and this is NOT a quibble.  Low-income housing is government subsidized housing.  The reason that I can pay so little to rent my apartment is manifold: I live far from the cultural centers of town, I do not live very close to any big box stores (where I typically shop due to their low prices), I am not close to any hospital, and I have no luxuries.  If some low-income housing was less desirable than my apartment, it would cost less to rent than my apartment without a government subsidy.  So, by definition, low-income housing – housing that is partly paid for by the government – is more desirable than my place but costs its tenants less than what I pay for my place.  Which means, partly, that someone who could afford the rent of a place more desirable than mine is losing out to someone who cannot afford the rent.  And that is a solution that no classical economist would favor.

Not for a New York second do I believe that a person’s value is his financial Net Worth; I believe that Elon Musk should be taken out with the trash and buried deep in landfill.  But I wonder, what is the upside of messing with Supply and Demand pricing for the sake of low-income housing?  Why should a family that cannot afford the rent take preference over a family that can afford the rent?

This is the economic system that I believe in: one can buy ice cream for as little as $1.50 for 48 oz. and as much as $10 for 48 oz.  I’m not even talking about ice cream parlors that charge upwards of $5.00 for 6 oz. of ice cream (or Cellato's Byakuya gelato, at $6,700 for 4.4 oz.!).  If you think it’s worth it – and I do NOT – who should stop you from paying for a luxury experience?  What is the point of having lots of money if you can’t spend it frivolously?  And impress your friends or even yourself?  Or give some of it to a homeless person?

We can say three things about government subsidies: 1) nothing is ever free, subsidies just shift who pays; 2) subsidized housing always ends up costing (renters and taxpayers) more than if there were no government intervention; and 3) there will always be theft (corruption) of these extra monies.  In addition, private housing will always cost society less than government housing.    Government intervention does not repeal the Law of Supply and Demand, it just makes it more difficult to analyze the situation and predict the future.

There is one thing at least that should be done to keep housing prices “fair”: limit the ability of big money to buy more housing than they need to live in personally.

So, what should we do with low-income households?  The most obvious economic answer is that low-income families should relocate to cities that they can afford.  And the homeless, what should we do for them?  What we are doing now, provide shelter housing.  But, again, there is no good economic reason why a homeless person should be able to live in a high-rent city.

Another short-term solution is to tax the billionaire class.

“Huh?”

Elon Musk, Jeff Bezos, Mark Zuckerberg, and a bunch of other tech titans pay no income tax, no federal income tax, no state income tax, no local income tax, no FICA tax, no Medicare tax and who knows what other taxes that they don’t pay.  And quite legally.

“You gotta be kidding!”

Pretend you are a billionaire, and you are not an employee of another’s corporation.  What annual salary or wages would you vote yourself, knowing that it would be TAXED as taxable income?   The answer for a bunch of billionaires is $0 or in some cases $1.00.  A long time ago, you sold $1 billion in stock and paid a hefty capital gains tax (at a lower rate than normal wages) on it.  You think you could live a good 50 years on your no interest bank account?  $20 million/year ($54,795/day, $2,283/hour, even more than your favorite prostitute!), you think you can manage?  Not for the sake of low-income housing but for economic justice, why do we allow these guys to avoid taxation?  Some think that taxing wealth is “punishing success.”  They are Mitch McConnell, a lot of Republican office holders and more than a few people with an agenda that does not bend towards justice.

However, there is one big gotcha to my non-solutions, to anyone’s better solutions.  Our economy, the world’s economy, is being confronted with a sea change of human-machine work.  More and more work is being taken over by computers, automation, AI and robotics.  And there are no happy economic solutions to this fact.  One realistic economic solution is for world population to begin to collapse.  Another (imperfect) solution is a universal basic income.  How hopeful am I that the problem of low-income housing and homelessness – among many other problems of equal weight – will be solved short-term?  Not hopeful.  Humans are not rational creatures.  If we were rational beings, we would have a tiny National Debt because we taxed billionaires, we would have stopped encouraging large families in our tax code and our social welfare programs, and we would have regulations that compel corporations to do the right thing when they all want to except that it would be disastrous to do so alone (e.g., forcing health insurance companies to insure folks with pre-existing conditions).  In the world we live in, Democrats don’t want to cut spending and Republicans don’t want to pay for it; the consequence is out of control annual deficits, an exploding National Debt, inevitable inflation and recessions.  Low-income housing ain’t the problem.  Good luck to us.