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Spring 1997
 
City Journal Spring 1997.
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Housing That Works?

To the editor:
In "We Don't Need Subsidized Housing" (Winter 1997), Howard Husock invokes a 1994 study by the New School for Social Research to charge that low-income housing managed by nonprofit community groups suffers from serious maintenance problems and from tenants who don't pay their rent.

According to that study, Mr. Husock writes, 6 percent of the tenants of nonprofit housing in New York City were in arrears on their rent, yet none was evicted. He seems to have confused the percentage of tenants in arrears (a figure the study does not cite) with arrears as a percentage of gross potential rent. The actual percentage of tenants in arrears may be quite small, but because New York City law makes it costly and time-consuming to evict them, they may have been in arrears for a long while. He neglects to mention that the report found that rent collection and eviction were not major problems for nonprofit housing in the five other cities it considered.

Mr. Husock claims that "more than 60 percent of the projects" in the New School study "already had trouble maintaining their paint and plaster, elevators, hall lighting, and roofs." Again, he appears to have misunderstood a statistic: 62 percent of the projects had problems in "at least one area," and often the problem was trivial, like untidy dumpsters or garbage cans. And the study said it was "not possible to judge whether the observed problems are serious." Far from condemning nonprofit housing, the study concluded there is "reason to be optimistic about the growing proficiency and robustness of the nonprofit housing system."

Mr. Husock's invidious comparisons between private-sector housing and housing managed by nonprofit community development corporations (CDCs) are inaccurate. Recent studies sponsored by the Local Initiatives Support Corporation show that CDC-managed projects funded by the Low-Income Housing Tax Credit are incurring expenses within 10 percent of the median levels for similar projects, including those owned and managed by the for-profit sector, and that in both Boston and Philadelphia, they are actually cheaper.

Finally, however, such comparisons are irrelevant, because CDCs manage properties, house tenants, and revive neighborhoods that the private sector has for the most part abandoned. By holding their nonprofit operations accountable not only to their communities but to the high business standards of the private sector, CDCs are bringing new life to the inner cities of America.

Paul S. Grogan
President and CEO
Local Initiatives Support Corporation
New York, N.Y.

To the editor:
Howard Husock urges that we reduce the cost of low-income housing by eliminating luxuries. His sole specific dispensable luxury is metal plumbing, which, he argues, should be replaced by plastic. This suggestion would hardly cut the cost of new housing construction by more than a few cents per room per month. Is Mr. Husock prepared to follow up by eliminating such luxuries as non-flammable exterior walls, a full bathroom in each apartment, a stove in the kitchen, a window in each room, central heating, and doors on closets? Does he wish to reduce the minimum size of a two-person room from 110 square feet or a one-person room from 70 square feet?

It is painfully true that innovations in housing quality enacted into law in New York almost a century ago have not cured the alcoholism, intra-family violence, child neglect, or crime that exist among a significant fraction of low-income families. Such living patterns grossly increase maintenance costs today. It seems likely that the main result of eliminating existing subsidies across the board, as Mr. Husock recommends, would be to speed the dilapidation and destruction of housing, and that the ensuing homelessness and health and delinquency problems would inspire a new generation of reformers to argue successfully for a return to subsidization for the poor.

Roger Starr
The Manhattan Institute
New York, N.Y.

To the editor:
What is truly remarkable about Howard Husock's analysis is that he left out the biggest housing subsidy of them all—the mortgage interest deduction, which stimulated a tremendous amount of residential development in the postwar years. The deduction, along with the government's reorganization of the banking industry after the Great Depression, brought down the high cost of borrowing and made housing of good quality affordable to any American who could get a mortgage. The explosion of home ownership in this nation is part of the American Dream—and it is very much subsidized and regulated.

Thomas Sanzillo
Woodstock, N.Y.

Howard Husock responds:
The New School report that Paul S. Grogan cites is quite clear that non-paying tenants are a real source of distress for New York's nonprofit housing developments. In the executive summary, it observes that, of the six cities studied, "New York was the only one where evictions were a major problem," partly because of the difficulty of getting Housing Court judges to authorize them. This is particularly worrisome because New York City dominates the field, having more nonprofit housing than any other city—124,000 units built between 1987 and 1993.

Mr. Grogan is right in saying that the maintenance problems experienced by 62 percent of the projects did include some relatively minor complaints. But the New School also found that 29 percent of these fairly new projects already had problems in two or more areas. The authors observed that 'beyond an initial snapshot of wellbeing loom some major problems which, if unaddressed, will threaten the stock of affordable housing included in this study. We have found indicators that signal concern and warrant attention." The fact that the study is sympathetic to the goals and premises of the nonprofit housing movement gives such conclusions great credibility.

Mr. Grogan's LISC is a wellrun and reputable organization that seeks to encourage financial discipline in the community groups it supports. But this does not mean that nonprofit housing meets "high business standards." There is reason to doubt that it can maintain its high initial standards over time without public monies that go beyond the federal tax credits and rent subsidies that it already receives. As the New York City Housing Partnership concluded in a 1994 report, "When a nonprofit serves as developer /builder, government typically has to provide the 'deep pockets' to assume financial, construction, and market risk.... [N]onprofits have no magic formula that allows them to manage property at less than cost."

Roger Starr focuses too narrowly on the specifics of our aging housing regulations. The time has come to allow the building industry to use new technologies to create a new generation of inexpensive housing for people with low incomes. We can do better without many of these old rules, lowering costs while maintaining health and safety.

As for the mortgage interest deduction, it can be considered a subsidy only if one believes, as Thomas Sanzillo apparently does, that the federal government has first claim on our incomes and that every exemption from a tax is a subsidy. Moreover, there is nothing in the "housing ladder" model that I propose that precludes people of modest means from taking advantage of this tax break.


Radical Robber Barons

To the editor:
In "The Billions of Dollars That Made Things Worse" (Autumn 1996), Heather Mac Donald writes, "If the practical visionaries who established America's great philanthropic foundations could see their legacy today, they might regret their generosity. Once an agent of social good, those powerful institutions have become a political battering ram targeted at American society."

The elevation of these historical "greats"—John D. Rockefeller, Andrew Carnegie, and Julius Rosenwald—to a kind of benign, uncontroversial sainthood, in supposed contrast to the ideological, intrusive, and socially subversive efforts of the large "liberal" foundations today, is either a case of historical amnesia or revisionism of the most exaggerated kind. At the time, the philanthropy of all three was extremely controversial, and controversial for the very reasons the large "liberal" foundations are being attacked today.

Rockefeller, Carnegie, and Rosenwald boldly and generously supported projects that addressed fundamental issues of equity, access, and opportunity in American society in their time. In 1902, for instance, Rockefeller and his son set up the General Education Board to improve public schooling throughout the United States.

From its creation until the outbreak of World War L the GEB was the largest single source of philanthropic funds for the development of educational opportunities for black children (though it was equally concerned with the education of white children). In the eyes of history, the GEB was heroic, but in the view of a great many Southerners, it was hellish.

In the same period, Carnegie made substantial personal gifts to a number of black schools and colleges, particularly to Hampton and Tuskegee. And it was a condition of his gifts for the construction of public libraries throughout the country that they give equal access to all users. In 1910 Rosenwald began his long 'involvement with education for blacks in the South. By the time he was done in 1932, he had built some 5,300 schools in 13 Southern states.

If one accepts the values and reasoning reflected in the current conservative ideological assaults on American philanthropy, generous and courageous donors like Rockefeller, Carnegie, and Rosenwald were, in fact, despicable underminers of American values. I deeply believe that they helped make our country a better one in the most profound democratic and moral sense and that many of our foundations today are showing, some of that same wisdom and courage.

Waldemar A. Nielsen
Director
The Aspen Institute
New York, N.Y.

Heather Mac Donald responds:
While it might seem the height of folly to challenge the authority of Waldemar Nielsen on the history of American foundations, my understanding of that history differs from his. The philanthropic efforts of Rockefeller and Carnegie were indeed controversial in their day, but largely because of how the money had been made, far less from how it was ultimately spent.

It is also misleading, I believe, to equate Carnegie and Rockefeller's support for black educational opportunity with today's social-change philanthropy. Grants for black education represented a small portion of their total giving. Overall, the philanthropies steered clear of potentially contentious issues in favor of universally valued goods like public health, universities, and libraries. Rockefeller's General Education Board worked to improve education for blacks and whites; it was not explicitly a black charity. Carnegie's personal support for black schools strengthened institutions that had existed from the days of Lincoln. Julius Rosenwald is a special case: his foundation did concentrate to an unmatched degree on black education, but his goal was black assimilation into American society, not race-based self-esteem or separatism.

That such efforts to improve blacks' opportunities inspired the hostility of Southern racists is not surprising. That fact alone, however, does not signify that the grants were at odds with wider American values. Unlike welfare rights, radical multiculturalism, racial quotas, and a host of other "progressive" causes recently embraced by foundations, equal opportunity has been a core premise of this country since its founding.


Forgotten Parks?

To the editor:
Richard Gilder, Central Park's generous benefactor, has made a bold proposal that the Central Park Conservancy "become a model for renewing the whole park system" ("Set the Parks Free," Winter 1997). He also calls for "adequate funds in the Parks Department's coffers" to pay private groups to manage the parks, especially the smaller ones. But drastic and continuing cuts in the Parks budget are seriously limiting public funds.

This presents a number of critical questions. How would the residents of low-income neighborhoods raise enough money to care for their parks? Without public funds, would private groups be able to resist the temptation to commercialize the parks? If the Parks Department lost its prime responsibility for funding and managing city parks, would it still be able to exercise strong oversight and control?

Private groups are playing a critical role in helping to improve and sustain parks, but we still need to give the Parks Department the funds it needs to fulfill its responsibilities.

Ann L. Buttenwieser
President
The Parks Council
New York, N.Y.

To the editor:
Richard Gilder lays out all the strong arguments for privatization we made in taking over the management and financing of Bryant Park in 1992. If history repeats itself, his proposal will be attacked on the grounds that it won't help neighborhood parks, which supposedly lack the resources to privatize. This argument doesn't hold up for several reasons.

In the first place, private financing of Bryant and Central Parks has permitted the city to reallocate scarce funds to parks that haven't raised money on their own. Second, foundations prefer supporting poorer applicants. Several top foundations turned down Bryant Park because "rich people" were backing its turnaround. These same foundations would want to support parks in less visible locations. Finally, neighborhood parks would be able to take advantage of the top-flight management of parks that have privatized. We have given pro bono advice to several community groups on how to tend to their small parks. I'm sure other private park managers would do the same.

Daniel A. Biederman
Executive Director
Bryant Park Restoration Corp.
New York, N.Y.
 

Policies That Never Die

To the editor:
Apropos of Peter Salins's "Rent Control's Last Gasp" (Winter 1997), 1 well remember my father's telling me about his 1942 service on some government committee deciding whether New York should have rent control. Then a prominent member of the real estate department at Bankers Trust, he was the only member of the committee who voted no. His reasoning: he didn't think that the controls would be taken off after the war ended.

At about the same time, Professor Milton Friedman, then working in the United States Treasury Department, was one of a small group designing the withholding tax. While they had to get cash to wage the war from somewhere, he now regards this as the single biggest error of his illustrious and productive career. He says, "There wasn't a single discussion within the Treasury Department of the postwar consequences. Your father was much more prescient than our group."

Charles H. Brunie
Chairman
Emeritus Oppenheimer Capital
New York, N.Y.

 

 


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