GUEST OPINION: Housing for Public, By Public

By on October 13, 2015

Private development is missing the mark

Jackson, WY – In my last piece in this space I wrote about what kind of housing we should be considering. Today I’d like to discuss who would own and operate affordable rentals in the town and county.

The free market is not going to provide affordable rentals in Jackson. We know this. This means that if we, as a community, decide that we value having housing for our residents, we are going to have to chip in and help pay for it for those who can’t.

No one wants to pay more taxes. But we also know that people will pay more taxes if they feel they are getting value in return. If you ask people if they’re willing to pay an extra $500 per year in taxes to pay for a public restroom with gold-plated fixtures, they’ll probably tell you to go to hell. But ask them to pay $500 per year for completely free public health care with no deductible and you’ll likely get a very different response.

So if we’re going to raise taxes to help pay for housing, we are going to need to make sure we are doing it in a cost-effective way. And I have concerns that the direction the draft Housing Action Plan is moving in is not the most cost-effective way to solve the problem.

The draft plan seems to be focusing on public-private partnerships. This isn’t necessarily bad, as that covers a lot of possibilities, but we need to be clear about the pros and cons of each. So let’s talk about them.

As noted above, the free market isn’t going to provide affordable rental housing. That means the public (us) is going to have to get involved. Here are some of the ways that might look:

The public buys land and leases it to a private developer to build housing. 

This is the easiest and cheapest way to go about it. Unfortunately, cheap isn’t always good, and especially not in this case. Private developers are going to want to build expensive free-market homes alongside the affordables, and each one of those homes is going to require more workers to build and maintain, which will be a step backwards. If there are rentals, we might be giving up the ability to set the rent level.
At the end of the day, we will be partnering with someone who does not have our best interests in mind. We can expect to fight the developer every step of the way, and as they are more experienced and will have better lawyers, we will often lose. The public will also have given up the opportunity to invest in housing. Instead, we’ll be handing that opportunity to a developer. And we will have given up much of our ability to control the outcome of the project. There is no free lunch here.

This is going to cost more money. But that doesn’t mean we shouldn’t do it. If the public designs and builds the housing, it will get exactly what it wants and reap the benefits. There is a good argument to be made that managing the property is beyond the scope of the county and city. I don’t buy that argument. I believe that with enough properties the economies of scale would be sufficient to allow the public to operate them as well, perhaps through the Housing Authority. Furthermore, any outside property manager will be tempted to cut corners and focus on making profits instead of managing the property. The public will not.

The public buys the land, builds the housing and operates it in the best interests of the community. 

Now we’re making sense.

The thing about public-private partnerships is that the private partner always needs to make a profit. If not, they would be volunteering their services to the Teton County Housing Authority.

This isn’t necessarily bad. Sometimes they are performing a service that the public is just not equipped to do. It would be ludicrous to expect the housing authority to design and personally build housing, for example. They are not equipped to do that.

But what does a developer do? They envision a project, they lobby government to get it approved, they work with engineering firms, architects and construction firms to build it, and they provide funding. Are they better equipped than the public to do those things? Let’s look at them.

Envisioning the project
The public wants affordable rentals. The developer wants to make a profit. Who do you think is going to better envision the kind of project the public wants – the public, or a developer?

Lobbying for approval
Well, the government represents the public, so there should be no need for this.

Working with Contractors to design and build
Here is where a developer’s experience is important. There is a lot of information asymmetry going on when the public negotiates with contractors. The public absolutely needs to hire outside people with the knowledge and experience to negotiate and analyze deals. This will be expensive, but it will be worth it. But we should pay money for that service, not hand over ownership of the project to a developer.

Providing funding
The public has the ability to provide funding through taxes or the issuance of bonds. It does not need a developer to do this for us. The price is far too high. Yes, some people are just morally opposed to taxes. But when we want something, we have to pay for it. Taxes are how we do that.

If we’re really serious about providing housing and doing it in a fiscally responsible way, we need to do what any fiscally responsible person with a long-term outlook would do – buy land, build on it and reap the benefits of home ownership. PJH

About Pete Muldoon

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