The Entitlement State: Santa Claus is coming to town

Some people think that the world — or more specifically the United States Government — owes them a living. These people believe that the society owes them a house, a job, health insurance, food, a car, a pension, a vacation, and much more. But what are Americans really entitled to have? They are entitled to Constitutional protections such the right to life, liberty, and property. That’s all.

Recently, at a meeting of the Orinda City Council, a retired nurse said that because she worked overseas at low pay for many years, she is now entitled to live in a low-cost apartment in Orinda. It was her decision to work overseas. Why is she entitled to live in Orinda? Maybe she is also entitled to live in Beverly Hills or Carmel. Maybe society also owes her a private jet plane.

Society owes people nothing. But the State of California is mandating that housing for low-income people must be built in Danville, Lafayette, Orinda, and other Bay Area communities.

What are the consequences of building, for low-income people, a huge government-funded apartment complex in Contra Costa County that no one wants to inhabit? One consequence would be that taxpayers’ money was wasted.

These government-inspired housing projects are wrong. Truly needy people should be helped by charity. However, there is justification for some government assistance if charities are unable or unwilling to help.

The best way to build housing for the needy is to give these people enough money to permit them to live where they want.

And there is another way to build such housing. Give real estate developers a special tax break for building housing for the needy. For example, the government could tell a developer that he would not have to pay income tax for a certain number of years if he built homes for the needy.

Overall, the world does not owe people a living. But, for basic needs like housing and food, some charitable or governmental relief might be appropriate.

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Comments

  1. JSebastian says

    Agree. Consider that these government subsidies do immense economic and other harm to existing residents and even to future residents by distorting the costs of housing.

    When you force a builder to sell certain units at below market rate prices then the costs simply shift to the units that are sold at market rates – except now those units are much more expensive. You’ve just cost the buyer of that unit many tens of thousands, possibly hundreds of thousands of extra dollars.

    As you point out, it would be far better to simply GIVE the money needed to buy housing to the lucky recipient rather than to distort the market through the subsidies of BMR housing schemes.

    The other insidious effect of low-income housing programs is that the cost increases passed onto to other buyers persists indefinitely into the future. Consider this simple example:

    You want to develop 10 units. The city insists that 30% of the units be available to low income buyers. If your per unit market rate averaged say 700K, but the BMW rate is only 400K, then you have to shift 400*3 or $1.2M to the other seven units, making the new cost per unit of those, $871K. Not only will the hapless purchasers of the homes that would have been sold at 700K now faced with an extra expense of 171K, enough to buy college education for two children, but they might no longer even qualify for the home purchase at all – what was affordable at 700 might be completely out of reach at 871K. Further, that additional 171K will cost the new buyers an extra $2K+ per year in property taxes – for as long as they own their home.

    Even worse, the “comps” in this area have now been driven up by 171K per unit, on houses that already existed! Thus making it impossible for even more potential buyers to afford to move into the neighborhood.