Tuesday, August 25, 2009

Is $50,000 the Price to Approve Affordable Housing?

According to a recent blog (http://texashousers.net/2009/07/29/50000-was-the-price-for-community-support-for-affordable-housing-in-dallas/) $55,000 is the price to get an affordable housing project approved in Dallas. Last weekend, I read an article in the Dallas Morning News that put the cost at $50,000. The numbers are close enough so that I’m just going to round them off at $50,000 for today and make my math easy.

Of course that number is based on illegal payments, the kind that has led to the federal trial that’s going on right now, including charges against the former Mayor Pro Tem, a former member of the planning commission, a very well-known developer of affordable housing (and his wife) and a whole host of other people. I have no idea whether the charges are true or not, but what I do know is if that if you could assure approval of your project legally for just $50,000, then every developer of affordable housing in the City of Dallas would gladly make that payment..

The real costs of putting together a tax credit project—and remember, all you get is a chance, the equivalent of a lottery ticket—is well in excess of $200,000. Your chance of getting an award of tax credits is about one in three. Let’s do the math:

Current system: $200,000 x 3 tries to get approved = $600,000
Approval for $50,000 $200,000 + $50,000 = $250,000

In short, paying $50,000 to get your project approved yields an average profit of at least $350,000 per project.

The profit disappears when you figure in federal jail time, but as the current trial testimony has shown, there are also more or less legal ways to make that payment. A developer can hire one of the insiders at City Hall to lobby for him or her. A developer can just make a sizeable campaign contribution to a city council member and probably get the same result. So long as you just make the contribution and don’t demand a direct quid pro quo, then it is legal (of course that requires trusting a politician, always a risky proposition). That’s just as true for the City of Dallas, where the money is small, as it is for the state and federal governments, where the money can get pretty impressive.

I don’t know about you, but I have a hard time believing Senator Max Baucus, chair of the key Senate subcommittee for health care reform, gets enormous contributions from the insurance and medical industry just because they all plan on retiring and moving to Montana. Money always influences the system, and usually not for the good.

The trial of former Mayor Pro Tem Don Hill is a bad deal for the city, whether or not he’s convicted. But I can’t help feeling that if Don Hill is guilty of a crime that it may only be because he wasn’t sophisticated enough to know how to be bribed “legally”.

Council members in Dallas have, by long-existing custom, the right to decide on their own whether affordable housing projects in their district go forward or not. Any system that includes both a decision made by only one fallible (as all we are) person and a large financial incentive for wrongdoing is eventually going to produce wrongdoing. Dallas needs a new system. To begin with, I would suggest that the whole City Council should actively participate in each decision to approve or disapprove a project, not just the member in whose district the project is located.

Let’s do the math on that idea:

Current system: $200,000 x 3 tries to get approved = $600,000
Approval for $50,000 per council member $200,000 + ($50,000 * 15) = $950,000

Now honesty actually makes economic sense. It’s $350,000 cheaper just to apply and take your chances rather than to try to pay off the entire City Council.

We can hope for honesty in our public servants, but we ought not put temptation in front of them. After all, the Lord’s Prayer doesn’t say “help me resist temptation” it says “lead me not into temptation”. In other words, trust everybody but always cut the cards.

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