Community

Council Doubles Down in War on Economics

By Leslee Kulba

One affordable housing project council will consider, a project of Haywood Street Congregation, would accept an acre of land from the city for $1 and receive a $1 million Housing Trust Fund loan.
One affordable housing project council will consider, a project of Haywood Street Congregation, would accept an acre of land from the city for $1 and receive a $1 million Housing Trust Fund loan.

Asheville – Public policy think tanks embracing the Chicago-Austrian view of economics have always maintained subsidized housing costs more than housing created by the private sector and sold at market prices. This is because government introduces inefficiencies like administration, with salaries, office operations, and oversight to be funded. Furthermore, any basic price theory teaches that the price is always right in a free market: items don’t sell unless the price is high enough to satisfy the buyer and low enough for the buyer. The government mandating prices to be anything else introduces intentional market distortions, which have the unintended consequence of misallocating resources.

The fallacy defending government subsidy and price controls argues numbers set by experts with good intentions will be better than those left to sort out between individuals. The same logic was illustrated in stories out of the former Soviet Union about government-set targets resulting in chandeliers with so much metal, they would bring down ceilings. In the United States, for at least a couple of decades, the government has been fighting an undeclared war on a shortage of affordable housing. And, like other government wars against economic laws, the more it fights – through introducing more distortions across economic sectors – the worse the problem gets. But Asheville City Council disagrees. 

At their second work session on affordable housing in as many years, City Manager Debra Campbell reviewed lessons learned. For example, creating affordable housing is “hard and complicated.” She said the city had incorporated in its toolkit practically everything that is legally available, including offering low-interest loans from a municipal affordable housing trust fund, availing discounted or free city land for residential development, and offering incentives by way of waived taxes and fees. “It takes a village,” she said, adding, “The planets have to align. Seriously.”

The current local and national shortage of affordable housing can be traced back to government efforts to stigmatize starter homes and rentals and sell the American dream by pushing subprime lending to families with finances traditionally considered to be high-risk for default. Community Development Program Director Paul D’Angelo shared some statistics and trends that, again, free-marketeers would attribute to government interventions aimed at the aftermath of the burst housing bubble behind what textbooks now call the Great Recession. He spoke of a shortage of rental and mortgageable housing available to low-income earners and how houses put on the market were now being swept up in cash sales to out-of-town buyers.

Blaringly absent in the discussion was the traditional concept of the housing ladder. One or two generations ago, it was expected that young couples would rent an apartment or starter home. Then, as income increased with family size, they’d move into bigger and better spaces. In contrast, D’Angelo’s presentation was about building new affordable housing. Government’s attitude toward constructing new-affordable housing with granite countertops – or whatever the latest television home improvement program dictates – only reinforces false, commercial narratives teaching that families with other priorities should automatically be stigmatized as have-nots, instead of promoting a more inclusive dialogue. Then, this is all compounded by cautions repeated and repeated decades ago by conservatives on the council, like Dr. Carl Mumpower, about how, with zoning and regulation, they were creating “elitist communities,” by driving up construction costs and pricing low-wage earners out into the county.

Housing prices rising

COVID aside, the number of people in Asheville’s service economy who are now unable to afford a home, let alone pay rent and utilities with less than 30% of their gross income, is only getting higher. D’Angelo said one acre of land in or near downtown costs $1-$2 million. In a point-in-time survey last fall, staff found the average selling price for the 275 houses listed in the city was $660,000. Only 38 sold for less than $275,000, and only 25-30 of those were habitable. The average monthly rent is $1,200 overall or $1,400 in locationally-efficient neighborhoods. D’Angelo explained that to create enough housing for persons earning below the area median wage, somebody was going to have to come up with subsidies of somewhere between $80,000 and $120,000 per unit. So, the city was using the tools in its kit to incentivize projects that promise to rent-control, for at least 20 years, no fewer than 20% of their units so they will be affordable to persons earning no more than 80% AMI and preferably less than 60% AMI.

D’Angelo reviewed half a dozen projects already under subsidy, and the city’s Real Estate Program Director Nikki Reid shared a similar number that will be coming before council in a few months. All told, the city had invested $13.02 million in the creation of 373 units of affordable housing already, and the current goal for this year was to invest another $23 million in the creation of at least 500 more.

Councilor Antanette Mosley asked if the city could require developers to accept housing choice vouchers, and City Attorney Brad Branham replied the city could incentivize those who accept them, but it did not have the legal authority to codify the practice as a general requirement. D’Angelo added there were some cities in Virginia where mandatory rent controls were actually working. Developers were staying and not building elsewhere. Councilor Kim Roney asked if there was a way to force hotel developers to pay for affordable housing, Councilor Sage Turner suggested revising the UDO and expedite the design review process, and Campbell said staff would return in a month with policy proposals for council review.

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