Category Archives: Housing

A Crime-Fighting Experiment at Gilpin Court

Police patrol at Gilpin Court. Photo credit: Richmond Times-Dispatch

The Attorney General’s office is funding an interesting social experiment. On the theory that fighting crime requires addressing root causes over and above actually, uh, fighting crime, the AG is providing $1 million to fund programs designed to improve health, education and economic outcomes and strengthen neighborhood ties at the City of Richmond’s largest housing project, Gilpin Court.

“Instead of a top-down approach that tries to tell Gilpin what it needs, we’re going to bring together everyone who cares about this community and who has good ideas to reduce crime, strengthen the neighborhood, and improve quality of life for Gilpin residents, especially young people, said Attorney General Mark Herring, as quoted by the Richmond Times-Dispatch. “Greater Gilpin is going to reduce crime and make Gilpin Court safer by taking a more holistic approach and attacking the factors we know contribute to higher rates of crime, like poverty, drug use, limited educational or job opportunities, and poor health.”

The grant will allocate $187,000 to pay for additional police patrols in Gilpin Court, a project of 781 housing units occupied by about 2,700 residents. But the rest will go to hiring a full-time program coordinator and underwrite for programs identified through community meetings.

“Building stronger, safer communities means addressing the underlying factors that can contribute to violence and violent crime,” Mayor Levar Stoney said in a statement. “This initiative will build on the strengths of the community and empower Gilpin residents to have a say and a stake in the future of the neighborhood.”

The program encapsulates every liberal piety about the relationship between poverty and crime…. which, in my estimation, means that it is doomed to failure because liberal pieties about poverty and crime are misguided. While it is true that violent crime is more prevalent in poor neighborhoods, there has been very little correlation between changes in the rates of poverty and violent crime over the decades. The relationship between the two is tenuous and complex with many intervening variables.

One critical variable is the prevalence of families dominated by unwed mothers and the lack of consistent daily discipline provided by fathers, which results in a failure to enculturate young people with non-violent norms. Teenage boys roam free in Gilpin Court with few parental restrictions. They develop their own young, male, Lord-of-the-Flies subculture, which skews towards partying, substance abuse, petty criminality, an obsession with status among peers, and, often, violence.

To the extent that crime among male teens and young men is the outcome of rational calculation — weighing potential gains from crime versus the prospect of getting caught and punished — increased neighborhood patrols undoubtedly will be useful. Richmond police doctrine emphasizes the building of community bonds that engender trust with residences, so a heightened the police presence should have a positive impact. Conversely, while the funding of “community programs” may provide benefits to Gilpin residents, unless they interrupt the dynamic of fatherless boys, I am dubious that they will have any impact on crime.

I might be wrong, however. I’m not omniscient. Perhaps liberals have it right. Perhaps the program will be a smashing success. The fact is, nobody knows. That’s the point of conducting an experiment.

I’d be all in favor of conducting this particular experiment if it were set up so we might learn something from it. Ideally, the experiment would confirm or disprove the notion that addressing certain “underlying factors” by means of programs chosen through community input will reduce crime. Unfortunately by doing two things at once, both boosting policing and attacking root causes, the factors contributing to positive or negative outcomes will be hard to disentangle. If the program does prove to be beneficial, we are unlikely to learn anything from it because we won’t know whether the police or the community programs deserve the credit. In the absence of unambiguous data, liberals will continuing embracing their pieties, and conservatives theirs, everyone will continue believing what they always believed, and we will flounder about as always.

Dissecting Virginia’s Amazon Deal

Source: PROJECT COOPER: BRIEFING FOR THE
HOUSE APPROPRIATIONS COMMITTEE

Virginia has committed to investing a sum unprecedented for an economic development deal in the Commonwealth — roughly $2.5 billion in state and local dollars to bring Amazon, Inc. to Northern Virginia. In a presentation to the House Appropriations Committee yesterday, Stephen Moret, CEO of the Virginia Economic Development Partnership (VEDP) provided a detailed account of the incentives. Now that the numbers are out, the public has an opportunity to review the deal. At Bacon’s Rebellion, we love critiquing things, so here goes…

Cash flow positive for the state. The first point to note is that, while Virginia is making a massive public investment to the project, it will be cash-flow positive for the Commonwealth from Year One. If Amazon pays its projected 2,500 employees an average of $150,000 a year — the target number to qualify for state subsidies — the company’s Virginia workforce will generate a lot of new income taxes and sales tax revenue. By Year Ten, added state revenue from direct, indirect and induced employment will amount to $209 million. The sum could grow to $364 million within 30 years. That compares to a General Fund revenue forecast of about $20 billion in Fiscal Year 2019.

As Steve Haner explained in the previous post, the deal will have a minimal impact on the current budget cycle, and future expenditures on higher education, transportation and direct subsidies to Amazon will be phased in over time. The project is designed to ensure that new General Fund revenues will exceed project-related outlays. In other words, according to Moret’s numbers, the state will make a “profit” on the deal from which the entire state benefits.

Investing in competitiveness. A second key point is that 60% of the incentives will be invested in infrastructure and educational programs that don’t go into Amazon’s pocket. I have a huge philosophical problem with the state giving $550 million in Phase One (and another $200 million in a potential Phase Two) to one of the world’s richest companies. Talk about welfare capitalism! But Amazon could have located in Dallas, Texas, or a handful of other cities, so it has the power to play off one location against another. I don’t like it, but that’s the way the world works. The question for Virginians is whether or not the state comes out ahead.

Critical to the deal, Virginia will invest heavily in building its tech talent pipeline. According to Moret’s presentation, the state envisions producing approximately 25,000-35,000 new degrees (over and above baseline levels) in computer science and related programs over the next 20 years. That’s more than Amazon will require. So, labor-starved tech companies other than Amazon will benefit from the investment.

In an earlier post, I had expressed concern that the state would be subsidizing Amazon’s employee recruitment efforts to the tune of $22,000 per employee, giving the company an immense advantage over other Northern Virginia companies competing for talent. In his presentation, Moret acknowledged that there would be “short-term pressure” on Northern Virginia job markets, but that NoVa executives were mostly positive about the deal. His presentation includes a sampling of reactions back in February:

“The economic lift that we get in Virginia, the branding part of it, would be a strong positive for our recruiting efforts. Clearly we will be competing for talent, but that’s fine,” said a Fortune 500 CEO. “I think it’s important for regions to have a diversity of employment options. The economic lift and intellectual lift for the region is a strong, strong positive. I would like to see us get selected.”

“It would be a double-edged sword. Great for the economy. Great for the brand,” said the CEO of a successful tech company. “Long-term it would be good, but it’s another competitor to deal with for talent. … It would give cachet to our area.”

Said the C-level exec of a Fortune 500 company: “In the short run, it will entail some competition for talent. But it’s very powerful for the region for the long term. We’ve made Virginia our hub. The fastest growing part of our ecosystem
is tech – we hire thousands of associates [every year]. We want to have an ecosystem where new tech grads stay here and where there is a desire of folks from around the country to move here.”

The workforce worries are real. But the Virginia’s higher-ed investments will expand the local talent pipeline, Moret argues, while the presence of Amazon will help give the Northern Virginia tech sector a more positive brand nationally, aiding recruitment from other labor markets.

Meanwhile, the state, Arlington County, and the City of Alexandria will spend hundreds of millions of dollars building out transportation infrastructure serving the Crystal City/Potomac Yard area. The transportation initiatives, designed to complement walkable urbanism in the region’s urban core, will accommodate business and residential growth for more than just Amazon. The Metro bus and rail system is operating at significantly below capacity, notes Moret. This deal could boost ridership and revenues for the troubled mass transit system.

Projected share of Amazon commuters by transportation mode.

As Arlington and Alexandria re-develop the region as a walkable mixed-use community, Arlington projects that 77% of Amazon’s workers will walk, bike, car-share or take mass transit to work. That number, if accurate, is phenomenal. By creating a new template for Crystal City/Potomac Yard, Amazon could catalyze the development of even more transportation-efficient walkable urbanism that can soak up a lot of future transportation demand. Continue reading

Market-Based Social Justice: Roll Back Zoning Restrictions on Housing Supply

Source: StatChat blog

Unaffordable housing is a problem for more Virginians today than it was during the 2000s housing bubble. Median rent has increased at three times the rate of incomes since the end of the recession, says Hamilton Lombard with the Demographics Research Group at UVa on the StatChat blog.

Among Virginians earning between $35,000 and $75,000 (the second from bottom income quartile), the share of income they spend on rent above the HUD-recommended limit of 30% reached 41% last year, nearly double pre-recession levels. The share of 18- to 34-year-old adults living with parents  surpassed 45% last year.

In Lombard’s analysis, the problem can be traced to an imbalance in supply and demand. To house its growing population, Virginia needs to build more than 40,000 new homes each year. As can be seen in the chart below, home builders have been erecting around 30,000 a year.

When new homes are built, they tend to be geared to higher-income households because those houses have the highest profit margins. In a properly functioning housing marketplace, however, as housing stock ages, it depreciates in relative value and becomes affordable to households lower in the income spectrum. In a process that economists refer to as “filtering,” aging houses continually replenish the supply of lower-cost dwellings. A higher rate of new home construction accelerates the filtering process. However, writes Lombard:

In Virginia, where fewer new homes are being built, census data shows that many of Virginia’s older homes are not depreciating in relative value as quickly as in past decades (particularly in Northern Virginia), indicating that the filtering process has slowed. This lines up with [the] analysis that found filtering is typically slower in regions with rapid home price increases and low rates of new home construction. Rising home prices and a limited supply of new homes often encourages investors and home buyers to demolish or renovate older homes that might otherwise have become low income housing.

The slowdown in new construction is at the root of Virginia’s affordable housing crisis, which contributes to ancillary problems such as the rise in homelessness and the increase in the number of evictions. If we want to solve these “downstream” problems, we need to address the source. Why has home building slowed down? I would argue that home builders would eagerly meet the demand for new housing if only they could get the required zoning permissions.

For decades it was relatively easy to get permission to build low-density cul-de-sac subdivisions on the urban fringe, but housing preferences have shifted decisively toward walkable urbanism closer to the urban core. Re-developing real estate at higher density in established areas runs into intense neighborhood resistance, which throttles the supply of new housing projects. Meanwhile, zoning policy has all but exterminated affordable-housing options such as boarding houses, single-room-occupancy housing, granny flats, garage apartments, and construction of new trailer parks.

Bacon’s bottom line: Parents, if you want to get your 24-year-old kid out of the house, support the rollback of zoning restrictions! Even if developers want to build luxury condos, they’re still contributing to affordable housing simply by increasing the housing supply. Market-driven development will even advance social justice by easing evictions and homelessness!

“Government Failure” in the Housing Market

Something is seriously out of whack here. The Richmond Redevelopment and Housing Authority (RRHA) has a vision — a commendable one, I might add — of demolishing the city’s six public housing projects to end concentrated pockets of poverty, crime, substance abuse and social dysfunction. But it turns out that the price of developing new mixed-income apartments runs around $250,000 per unit.

The RHHA has concluded that it would be significantly cheaper to renovate the existing public housing stock at the cost of roughly $50,000 to $60,000 per unit, reports the Richmond Free Press. New construction would take about 30 years to replace the 3,300 public housing units. Renovations would cut the time to 10 to 15 years. De-concentrating poverty, it appears, is no easy task.

But how can it cost $250,000 to build a new public housing apartment unit? At right is a townhouse on the market for $250,000. It has 2,349 square feet with the following features: two and a half bathrooms; a one-car garage, and a master suite with huge walk-in closet and en-suite bath with jetted tub, shower and double vanity. It is located within 10 minutes of downtown, Carytown, VCU, and James River trails and parks.

If townhouse living isn’t your style, then there are numerous single-family dwellings in suburban neighborhoods. For example, the house at left is also on the market for $250,000. It has 1,900 square feet, two-and-a-half baths, a fenced backyard, a two-car garage, and “a glamour bath with Whirlpool” tub.

How big are the RRHA’s new public housing units? What amenities do they have? Was RRHA proposing to place poor people into units normally affordable by the middle-class as part of its proposed “mixed-income” projects — in effect vaulting low-income public-housing residents into vastly improved housing conditions? Did it run up costs by ensnaring the projects in bureaucratic red tape? Or is there some other explanation?

The justification for “public” housing is that government can address “market failure” in the housing market by providing shelter for lower-income Americans at a lower cost than private industry can. Clearly, there is no market failure in Richmond’s middle-class housing market. The failure more likely is a regulatory one in which local governments have zoned affordable housing categories — boarding houses, Single Room Occupancy rooms with shared amenities, garage apartments, granny flats, trailers, and converted cargo containers — out of existence.

Still, it astonishes me that the best RRHA can do is $250,000 in new construction or $50,000 for renovated units. What’s the opposite of “market failure”? Government failure? That, it appears, is what we’re dealing with here. Pity the poor who find themselves wards of the state.

Would an Eviction-Diversion Program Help or Hurt?

Renters-rights defenders and landlord advocates may be reaching common ground on how to reduce the rate of evictions in Richmond: Create an eviction diversion program. Reports Ned Oliver in the inaugural edition of the Virginia Mercury:

Planning is still in its early stages, said [Martin Wegbreit, director of litigation at the Central Virginia Legal Aid Society], but it would likely be modeled on similar efforts in other states, like Michigan, where Kalamazoo County established a program in 2007 as part of an initiative to reduce homelessness. In the Richmond area, more than 30 percent of homeless residents surveyed last year said they had been served with an eviction lawsuit, according to a recent survey by Homeward, a nonprofit that coordinates services for homeless people. …

The one-time program is geared toward low-income families and individuals who can afford their rent but fell behind after an unexpected financial emergency such as a car crash or medical problem. To qualify, they must demonstrate that they are no more than three months behind in rent and show that they will be able to afford their rent once the assistance ends.

Renters-rights proponents like the idea because it reduces the number of renters evicted from their apartments. The program in Kalamazoo assisted 412 households last year, providing $138,000 in rental assistance, an average of $300 to $350 per family.

Landlords like the idea because it provides funding to ensure that they get paid rent on time.

A big question, unaddressed in the article, is where money would come from for an eviction diversion program. NAlso, n one pretends that such a program would settle all the issues between renters and landlords.

Bacon’s bottom line: The eviction-reduction movement is no more than a palliative for underlying social and economic problems: (1) the tightening shortage of affordable housing in the Richmond region, (2) the inability of poor people to find and sustain living-wage employment, and (3) the inability of some people to manage their personal finances responsibly. Until we address the underlying issues, the problem of evictions will always be with us.

Still, I’m a big believer in conducting small-scale experiments, which, if successful, can be replicated and scaled, and, if unsuccessful, can be shut down. The key in an eviction-diversion program is not to measure the number of families assisted but to measure the number of evictions. If a program creates a moral hazard in which renters, knowing that assistance is available, become more lax about husbanding their money, it would be counterproductive. If experience shows that moral hazard turns out not to be an issue, and if the number of evictions demonstrably decline, then the program could prove its worth.

Use the Tenant’s Money to Cure the Tenant’s Rent Shortfall

by Martin Wegbreit

Recently, Virginia drew national attention for reportedly high eviction rates, especially in central Virginia and Hampton Roads. This has inspired many efforts to address the issue. These include a Campaign to Reduce Evictions, an evictions workgroup at the Virginia Housing Commission, and a possible Eviction Diversion Program in Richmond and elsewhere. These initiatives may result in changes that decrease the number of evictions and benefit both tenants and landlords.

One partial solution requires no change at all: Use the tenant’s money to cure the tenant’s rent shortfall. The Sunday April 8, 2018, New York Times article about evictions reported that the median amount owed in a non-payment of rent eviction in Richmond was $686. By contrast, a Virginia landlord may hold a security deposit of up to two months’ rent. With an average monthly rent in Richmond of $1,269, a typical landlord may hold around $2,000 of the tenant’s money.

And the security deposit is the tenant’s money. It is not the landlord’s money. The landlord is a fiduciary, or a trustee, holding the tenant’s money and using it only for a permissible purpose.

In most cases, the tenant’s security deposit is not an issue until the tenant has moved and been gone for 45 days. During that time, the landlord either must refund the security deposit or provide a written accounting for how the funds were used, or some combination of the two.

A Virginia landlord also may use the security deposit during the tenancy for any permissible purpose. This includes payment of rent owed. The law, part of Code of Virginia §55-248.15:1, is clear: “The landlord shall notify the tenant in writing of any deductions provided by this subsection to be made from the tenant’s security deposit during the course of the tenancy. Such notification shall be made within 30 days of the date of the determination of the deduction and shall itemize the reasons.”

In 38 years of legal aid practice in Virginia, I never have seen or heard of a landlord deducting a rent shortfall from the security deposit, and seeking a repayment plan to replenish the funds, rather than undergo the time and expense of filing a non-payment of rent eviction. Unquestionably, tenants who intentionally or habitually fail to pay their rent deserve an eviction lawsuit, a judgment of possession, and eviction by the sheriff. But true hardship cases ought to be treated more humanely. Use the tenant’s money to cure the tenant’s rent shortfall.

A tenant’s non-payment of rent should not be subject to a “one size fits all” solution of an eviction lawsuit. Landlords have in their own hands a partial solution to lower eviction rates. Treat tenants like customers, not like a commodity to be disposed of whenever a problem arises.

Martin Wegbreit is director of litigation for the Virginia Legal Aid Society.

A Partial Defense of RRHA Eviction Policies

Creighton Court, a public housing project run by the Richmond Redevelopment and Housing Authority. Photo credit: Richmond Magazine.

I never thought I’d find myself defending the Richmond Redevelopment and Housing Authority (RRHA), which I criticized last year for running up a $150 million maintenance backlog on its 4,000 public housing units. But the wheel of public policy debate turns in unexpected ways. Now, RRHA is being dinged for its high eviction rates.

Here’s the background courtesy of the Richmond Times-Dispatch:

Evictions in Virginia drew national attention earlier this year after a New York Times report on a nationwide study done by Princeton University’s Eviction Lab showing Richmond as having the second-highest eviction rate in the country, with Hampton, Newport News, Norfolk and Chesapeake also in the top 10.

How the agency chooses to pursue those who do not pay rent on time was the subject of a Richmond Times-Dispatch analysis, which determined no landlord in Virginia threatened to kick out more of their tenants last year than RRHA.

Needless to say, many if not most residents of Richmond’s public housing projects are living on the edge. They’re the poorest of the poor, subsisting on minimum wage jobs if they work at all. Sure, some may qualify for food stamps, earned income tax credits, Medicaid, the Children’s Health Insurance Program, Temporary Assistance for Needy Families, energy assistance, free cell phones, housing subsidies, legal aid, and other government-welfare benefits, not to mention soup kitchens, toys for tots, private-school scholarships, and a panoply of charitable programs, but their lives tend to be chaotic and they live paycheck to paycheck. All it takes is one financial setback, and they can’t find money for rent.

As the housing provider of last resort, RRHA arguably has the least credit-worthy customer base of any landlord in Virginia. I’m not the least bit surprised that it has the highest eviction rate.

Let’s ask ourselves, what would happen if RRHA adopted practices, either voluntarily or under compulsion of state law, to curtail evictions by means advocated by tenant-rights groups? What if RRHA extended the length of time for tenants to come up with the cash?

First, would late payments and eviction rates noticeably decline, or would tenants just adjust expectations push up against the new limits like they pushed up against the old?

Second, would RRHA suffer a diminution of cash flow?

And, third, if it did, what would be the consequences? Would RRHA have less money to pay for desperately-needed repairs? Put another way, to what extent would showing clemency to those who fail to pay their rent on time impact negatively those who do?

My problem with social justice warriors is not that they have compassion for poor people (some of whom deserve compassion and some of whom don’t), but that they propose remedies without taking into account the unintended consequences. No one knows the answers to the questions raised here. Some unintended consequences are entirely foreseeable, but no one seems to care.

Tenant-Rights Activists, Meet the Housing Shortage

Source: Joint Center for Housing Studies

The debate over tenant evictions is gaining traction now that the Virginia Housing Commission has taken up the issue. Two concrete proposals were put before the Commission during a Tuesday hearing. One would extend the time from five days to two weeks before rent is declared to be late. A second would give tenants more time to pay late rent before they are evicted.

Advocates for tenants rights and landlords differed over the wisdom of these proposals, and discussion bogged down when it became evident that there was insufficient data to determine what impact the proposals would have, reports the Daily Press.

Apparently, a critical question was never asked — why are rents rising and making housing so unaffordable for the poor and near poor?

Hopefully, members of the Virginia Housing Commission will pay heed to a new report issued by the Joint Center for Housing Studies at Harvard University, which illuminates how supply and demand are driving up housing prices and making rent increasingly unaffordable for lower-income Americans across the country. While the housing crisis is most acute on the West Coast and in the Northeast, the problem is getting worse almost everywhere, including Virginia.

As can be seen (if you squint) in the map above, the ratio of housing prices to incomes in the Hampton Roads, Richmond, Lynchburg, Roanoke, Blacksburg and Bristol metropolitan areas is between 3.0 and 3.9 — less oppressive than in many other metros. But in the Washington (Northern Virginia), Winchester, Charlottesville, and Staunton MSAs, the ratio is between 4.0 and 4.9 — on the high side.

Digging deeper, the Harvard study shows that the percentage of renting households experience a significant “cost burden.” Virginia metros aren’t the worst in the country by this measure, but they’re far from the best, as can be eyeballed below.


The root cause of unaffordability is that home building is not keeping up with population growth. Given widespread zoning barriers to new construction, developers focus their efforts on projects with the highest profit margins — housing that can be sold for higher prices to higher-income households. But the problem runs even deeper. Most localities have zoned entire categories of affordable housing out of existence. Single Room Occupancy buildings are outlawed almost everywhere. Boarding houses are illegal. Granny flats and garage apartments are discouraged in many localities. It is exceedingly difficult to get permission to build new trailer parks. Middle-class voters don’t want poor people living near them, and they wield the power of the state to protect their property values.

Tenant-rights activists are targeting the wrong problem. If they make it more difficult for landlords to collect their rent, landlords will convert their rental properties to more profitable uses — thus aggravating the housing shortage for the poor. Activists moved by the plight of the poor need to stop attacking symptoms and address the root problem: zoning restrictions that cause the housing shortage. Otherwise, they’re really helping no one.

Proceed Cautiously with Eviction Reforms

Carlos Lopez, a Los Angeles landscaper, inherited a house and let it out to rent. When the original tenant went to jail, a woman Lopez had never seen before was occupying the premises and refusing to pay any rent. He engaged an attorney to evict her. The squatter lawyered up, too, obtaining free legal services from a state-funded nonprofit whose mission is to reduce evictions. Lopez soon discovered that he couldn’t afford to push the lawsuit, which would cost anywhere between $8,000 and $20,000 to win.

“He was dealing from a nearly powerless position,” writes his attorney, Rikka Fountain, in the Wall Street Journal. “Tenants with attorneys always demand discovery, depositions and a jury. This drives landlords’ legal costs up from the typical flat fee of several hundred dollars to tens of thousands.”

Renting wasn’t worth the headaches, Lopez concluded. He hopes to sell the house.

California defendants represented by attorneys routinely seek several months of free residence, a waiver of unpaid rent, a sealed judgment, and a reference letter from the landlord so future landlords won’t know the tenant’s history. (The defendant in the Lopez case had been evicted from three other houses previously.) As if that weren’t enough, San Franciscans will vote next week on a proposition that will give all eviction defendants the right to a city-funded attorney regardless of income or reason for eviction.

As the social justice movement mobilizes to combat a purported eviction “crisis” here in Virginia, it’s worth bearing in mind what can happen when tenant rights take excessive precedence over landlord rights. Citing a recent study that showed that five Virginia cities ranking among the Top 10 nationally for eviction rates, the Virginia Poverty Law Center has launched a Campaign to Reduce Evictions (CARE). It is not yet clear what kind of remedies CARE will seek but, as a leader in tenant rights, California could serve as a role model.

As it happens, California couples the nation’s strongest anti-eviction protections with the nation’s highest rates of homelessness. Social justice warriors cite the ever-growing ranks of homeless people as justification for laws protecting the poor from being tossed from their homes. At the same time, punishing landlords reduces the supply of rental housing. There will be no lack of would-be homeowners in Los Angeles willing to purchase Carlos Lopez’s house — like most California cities, Los Angeles suffers from a dearth of new housing construction. When the squatter is eventually bought off and evicted, the house most likely will be taken off the rental market. As Lopez’s experience is replicated thousands of times, landlord-hostile laws reduce the supply of rental housing and push homelessness even higher.

Anti-eviction laws are one more example of the unintended consequences of the social justice movement. SJWs seize upon genuine misfortunes — let’s face it, many people live paycheck to paycheck, and a single financial setback can make them miss their rent payment — to justify laws and practices that apply to everyone. Trouble is, just as there are bad landlords, there are bad tenants who game the system.

Virginia law strikes a balance between tenant rights and landlord rights. RentCafe rated the 50 states for renter-friendly versus landlord-friendly policies based on “10 common aspects of the landlord-tenant relationship, which include security deposits, rent increases, the warranty of habitability and eviction notices.” Far from ranking as one of the most landlord friendly states in the U.S., as one might expect from its pro-business climate, Virginia is in the middle. On a 1 to 100 scale, with 1 being landlord friendly and 100 being tenant friendly, Virginia is rated 45.

By all means, let’s review the laws on the books to make sure they still make sense. But let’s avoid the temptation to drive policy by cherry picking a few of heart-rending episodes of families tossed onto the sidewalk. Stacking the deck against landlords can lead to fewer rental units on the market and even higher rental prices, which boomerangs on conscientious tenants who do manage to pay their rent on time. If Virginia SJWs want to help the truly unfortunate as opposed to the free riders, they would be well advised to urge solutions geared to households’ specific circumstances, not one-size-fits-all remedies as in California. Better yet, SJWs should try their hand at renting out apartments themselves to see what landlords deal with. It might prove to be an enlightening experience.

Virginia Eviction Laws Stacked Against the Poor

by Marc Lockhart

Last Tuesday I joined more than 100 people for the inaugural meeting of the Campaign to Reduce Evictions (CARE), sponsored by the Virginia Poverty Law Center, at First Baptist Church in Richmond. We assembled for two hours to investigate why Richmond has the second highest eviction rate in the country among large cities and what can be done about it. The goal of the campaign is to produce recommendations by 2019 that state and local policy makers can use to craft solutions to the crisis.

Why are we talking about this — how bad is it?

Richmond ranks #2 in the nation with an eviction rate of 11.44% with 6,345 evictions in 2016, according to data from the Eviction Lab. Roughly one out of every nine renters was evicted, or 17.38 households evicted every day. Comparing it to the rest of the country, Richmond is approximately five times the national average of 2.34%.

Moreover, Virginia has half the large cities with the country’s Top 10 highest eviction rates. Part of the reason is that Virginia, unlike many other states, has a legal process that favors landlords. (See eviction data for details.)

As Omari al-Qadaffi, a housing advocate from Leaders of the New South, points out, “An unlawful detainer is the only civil action in Virginia where an indigent person is compelled to pay the appeal bond. Any other civil action, you can be excused from it if you’re poor, but Virginia is such a real estate-friendly state that you cannot be excused from that. Also, something unique about Virginia is that a general district court is not a court of record, so there is no transcript that’s kept. So …in civil court, defendants just get run over top of in general district court, and cannot go back to a record to say ‘hey, my rights were deprived of me.’”

How is CARE approaching this?

CARE is conducting a series of meetings and workshops to create recommendations. The inaugural meeting was well organized and drew a cross-section of people and stakeholders involved in or affected by evictions. The breadth of stakeholder groups assembled was impressive — tenants who are in the process of being evicted and those who have been previously evicted, landlords, property managers, housing advocates and aid societies, housing authorities like Richmond Redevelopment and Housing Authority interim CEO Orlando Artze, attorneys, court personnel, and academicians.

The meeting started with a moving, personal story by Tonya Kernodle who recounted her experience being evicted as “emotionally devastating.” She admonished the audience to widen its perspective about who is evicted. “Don’t think it’s some type of person; it can be anyone.”

Martin Wegbreit, Director of Litigation for the Central Virginia Legal Aid Society, described the typical five-step eviction process, but noted that the duration can vary based on the court’s schedule and local practices. Nationally, 77% of evictions occur because of non-payment of rent and 23% for other reasons, like causing a public nuisance, poor building conditions, or calling the police too many times. Typically the process goes as follows:

Attorney Wegbreit noted how quick the eviction process is in Virginia and it favors the property owner, “the landlord [has many options] and has been made whole.  The landlord has gotten all of the rent, all of the late fees, all of the court fees, and all of the attorneys fees and is out nothing, and yet the tenant can be out everything, if the landlord so chooses.” Continue reading

Golden Goose to Emerald City: Drop Dead

Seattle homeless person. Photo credit: Crosscut

By Stephen D. Haner

The brief snippet on the telly that caught my attention showed a massive Seattle office building being developed by Amazon, and the report was that construction is slowing because the company might start reducing its footprint and headcount in the Emerald City of Oz due to yet another Occupy Wall Street-inspired tax plan. It is actually called A Progressive Tax on Business, and a Progressive Revenue Task Force created it.

It didn’t take long to confirm the story about the construction project halt, or to gather details about the City Council proposal itself and the national firestorm it has started. The legislation is worth a read for the truly wonky because of the long list of whereas clauses used to justify taxing the gross payrolls of any company with annual revenue above $20 million. In Seattle, gross revenue of only $20 million qualifies you as a little company, apparently, worthy of nurture. One more buck and bam.

The tax amounts to 26 cents per employee-hour, with a goal of extracting $75 million which is supposed to alleviate homelessness with the construction of new affordable housing units. In 2021 it becomes a straight 0.7 percent of payroll.  Moving out of town won’t totally save local businesses from tax. “C. The tax applies to businesses with employee hours worked inside the City regardless of whether the place of business is located within or outside the City.”

My favorite line in the Council’s own advocacy piece for the proposal is: “Why does homelessness seem to be getting worse as the city spends more to address it?” You can’t make this stuff up, folks.

City and county personal income taxes are imposed in several areas of the United States, but I could not find anything comparable to this – an excise tax per hour on every single hour worked by a company employee, janitor or white shoe lawyer.

The tax policy discussion on this writes itself. Of course the 26 cents comes out of the next raise or benefit adjustment the company was planning – it has to.   With so many competitors exempt, it will be hard to raise prices. And as my students can all recite now, businesses do not pay taxes, they get the money from ________ (multiple choice:  employees, customers, stockholders or all of them). Tax employee hours and you get fewer _______ (correct answer:  employee hours.)

But what also caught my eye was the gutsy power-play threat from Amazon. I know many of you will say: This is another message to Amazon to move to a lower tax, business-loving environment such as Virginia. But if Amazon comes, and brings the jobs and investment reportedly attached to HQ2, will anybody be surprised when it starts to throw its weight here, too?

Henrico’s Housing Whack-a-Mole

Delmont Street property to be demolished

Henrico County, following the priorities of its new Democratic Party majority on the Board of Supervisors, has created a $2 million fund to head off neighborhood blight by financing renovations and redevelopment of the county’s aging housing stock, reports the Richmond Times-Dispatch.

As an example of what the fund can do, county officials pointed to a boarded-up property on Delmont Street near the Richmond Raceway that has been the site of nine fights, 26 firearm violations, and 13 vice incidents over the past five years. Three murders have happened nearby. County administrators will ask the board Tuesday to buy the property for $50,000 and demolish it.

Let us concede up front that such a development surely will be welcome to law-abiding residents of the neighborhood. In my younger days I lived in a neighborhood with dilapidated crack houses on the block where murders occurred, and I welcomed any action by Richmond city authorities to clean them up. I can sympathize with the Delmont Street neighbors.

But let us not delude ourselves that we’re doing anything more than playing whack-a-mole. Henrico can demolish the building on Delmont Street, but that does nothing to reform the behavior of the derelicts who caused the problems in the first place. The drug addicts, prostitutes, and criminals who turned the building into a hell-hole will just move to another location — perhaps an abandoned building, or if none is readily available, into a neglected property charging the cheapest rent.

At heart is the question: Do run-down buildings create poverty and the anti-social behaviors associated with poverty, or do people displaying anti-social behaviors gravitate toward run-down buildings and hasten their ruin?

The conventional wisdom among the professional caring class suggests that improving the housing stock will not only ameliorate the material conditions of poverty but address poverty directly. But that ignores why housing conditions deteriorate in the first place. Broadly speaking, the housing stock degrades for two reasons. First, because poor property owners lack the financial resources to keep up with the maintenance. Second, because certain classes of tenants, especially those inclined toward criminality, subject their houses to greater abuse.

Unless public policy addresses those realities (1) by fostering higher employment rates, incomes and spending power for poor people, and (2) by discouraging criminal and anti-social behavior, spending public funds to combat blight is as futile as a dog expecting to catch its own tail. This should be obvious by now. As a society, we have spent untold billions of public and charitable dollars combating urban blight by tearing down or renovating run-down buildings, and we have been doing this for decades. Yet the blight never disappears. It just moves from one location to another.

This is an iron law of economics: As long as poor people and the criminally inclined are with us, they will gravitate to the lowest-cost neighborhoods because that’s all they can afford. When they take over a neighborhood, the criminally inclined will run the buildings into the ground, those with financial means will flee, and the law-abiding but poor will lack the resources or incentive to maintain their properties.

Sadly for Henrico, it is on the receiving end of this migration pattern. Older neighborhoods in Richmond, being closer to the vibrant city center and benefiting from walkable streets, are being gentrified. Poor people are being displaced. And they’re moving to the old, non-walkable subdivisions of cheap, ugly, 50s- and 60s-era ranches where nobody else wants to live, mainly in Henrico and Chesterfield.

Henrico will need a lot more than a $2 million fund to cope with that reality.

Meanwhile, if we want to truly do something to improve the quality of the housing stock, we should stop throwing away money on futile efforts to eliminate blight and start investing in programs that address incomes and criminality.

Virginia’s Housing Shortfall

Underproduction as a % of 2015 housing stock.

Between 2000 and 2015, 23 states fell 7.3 million units short of meeting the housing needs of their growing populations — equivalent to about 7.3% of the housing stock of the United States, according to a new study, “Housing Underproduction in the U.S.,” published by the Up for Growth Coalition.

Although not the worst offender, Virginia was one of the states notable for housing underproduction, falling short of demand by 131,000 units over the 15-year period.

Restrictive zoning and development policies in Virginia and elsewhere have created an imbalance in supply and demand imbalance that has dire economic consequences. States the report:

As people migrate toward cities in search of jobs, education and economic opportunities, the demand for housing in our most populous and economically productive regions has far outstripped the production of new housing units. Due to dramatic shifts in generational preferences and household demographic trends, migration to cities over the past decade are at the highest level since World War II, while housing production has fallen to historic lows. This imbalance has led to rapidly rising housing prices, economic displacement of lower income families and communities of color, and increases in homelessness.

Long-term Bacon’s Rebellion readers familiar our Smart-Growth-for-Conservatives critique of Virginia land use and development policies will be right at home with this study. The report blames “restrictive local development and land use policies that reflect opposition to high-density, multi-family urban growth in favor of low-density, single-family, suburban sprawl.” Offending policies include:

  • Zoning restrictions, which create a shortage of zoned, high-density sites;
  • Escalating and misaligned fee structures, such as impact and linkage fees;
  • Poorly calibrated inclusionary housing requirements; and
  • Lengthy review processes that invite gaming and abuse by growth opponents that can delay projects, create unpredictability, reduce incentives to invest and increase the per-unit cost of development.

Not only do dysfunctional housing markets produce fewer units than would be supported by demand, according to the report, they produce units in the wrong locations. The market for housing in walkable, high-density, high-value urban areas is significantly under-served, while housing continues to be built in lower-density suburban communities with a backlog of land zoned for residential.

Average change in home prices by county, 2000-2016.

The study advocates a loosening of anti-development restrictions to encourage  a “smart growth” model of growth that promotes high-density residential development in major transportation corridors. Benefits will include increasing the housing supply, exploiting existing infrastructure, and increasing tax yields to local governments. Four broad tools would achieve these aims:

  • By-right approval. Establish “by right” high-density residential development in a half-mile radius around a transit station (roughly 5 percent of a metropolitan region’s land area).
  • Impact fee recalibration. Recalibrate impact fees to reflect actual costs of infrastructure service for high-density development.
  • Property tax abatement. Use property tax abatement as a gap financing tool to enable denser and more affordable housing production.
  • Value capture. Establish mechanisms to capture value created through up-zones and tax abatement investments to be used as dedicated funding for a range of housing programs.

Clearly, Virginia has a lot of work to do. We’re not as bad as the West Coast, the Northeast, or even our neighbor to the north, Maryland, but we’re the worst state in the Southeast (excepting Florida). The cost of housing is harming our economic competitiveness and hindering our ability to adapt to economic circumstances.

One of the ways to address rural poverty in Virginia, for instance, would be to encourage unemployed or under-employed workers in small towns and countryside to migrate to metropolitan areas offering better employment opportunities. When local governments in metro areas restrict housing development, they block this migration. Lower-income Americans literally can’t afford to make the move. The result is the worst of both worlds: sub-par employment opportunities in rural areas combined with job shortages in the major metros.

The higher cost of housing also helps explain another phenomenon — the shift of Virginia in recent years from a state from a people-importing state into a people-exporting state.

Finally, as the report alludes to, high housing costs disproportionately impact the poor and minorities. High housing costs, not racism, keep minorities trapped in public housing projects and slums. High housing costs block them from becoming homeowners, building home equity, and accumulating wealth, thus perpetuating income inequality.

Where is the General Assembly on the housing issue? Where was the McAuliffe administration? Where is the Northam administration? AWOL, all of them.

Spend Less, Invest More, Improve Credit Scores

U.S. Personal Saving Rate since 1960. Too low for all Americans.

The editorial board of the Virginian-Pilot finds it a matter for “concern” that African-Americans are denied mortgage loan applications in the Hampton Roads region at a higher rate than whites. “In Hampton Roads,” writes the Pilot, black applicants during the study’s period — 2015 and 2016 — were 2.4 times more likely to be denied mortgages than white applicants.

As I began reading this editorial, I braced myself for the usual insinuations that the disparity is due to discrimination, white privilege, institutional racism, or whatever. But I was pleasantly surprised. The editorial writers acknowledged that the study by the Center for Investigative Reporting from which they drew their data did not account for the credit scores of borrowers (or loan-to-asset ratios, for that matter). Indeed, they went so far as to aver, “There is no evidence that the gap is a direct result of discrimination.”

Still, they find the disparity troubling, and they suggest that “something more than economic trends might be a factor.” The report should prompt a “serious review” of lending practices to ensure that there’s “no subtle discrimination at play, no policies or actions that could — even unintentionally — lead to racial discrimination.”

I applaud the Pilot editorial writers for breaking free of the simple-minded institutional-racism narrative. But they don’t go nearly far enough. They remain so ensnared by progressive assumptions that they can’t imagine any other explanation for the disparity than a subtle, as-yet-undetected bias — even though, as they acknowledge, mortgage lenders say it wouldn’t make financial sense to deny a loan to any qualified candidate.

I would refer the editorialists to a December 2017 commentary by Alfred Edmond Jr. in Black Enterprise. Edmond addresses a fact, celebrated in other contexts, that African-Americans were estimated in 2016 to wield some $1.2 trillion in consumer buying power. Buying power is not the same as wealth, he cautions.

Addressing other blacks, Edmond writes:

The ability to build wealth depends on the degree we control our spending, so that after we pay income and other taxes, and for necessities such as housing, food, and transportation, we have something left over to not just spend, but to earmark for emergency savings, retirement savings, an investment portfolio, buying real estate (beginning with our own homes), financing businesses, and acquiring other assets.

Right now, while black income has grown rapidly over the past 70 years, our spending has grown even faster, which means we are spending every penny we make and then some (which is the case for most Americans). And what allows us to spend more than we make? Easy access to credit, of course. …

The truth is that money is in our garage, in our homes, and on our bodies, in the form of consumer goods, such as cars, clothes, electronics, and experiences (such as that daily, gourmet coffee-dessert) that we’re convinced we deserve and can’t live without, or even defer long enough to save, rather than borrow at interest, to have. And far too much of our money is going toward interest payments on the debt we took on (much of it via credit cards) to make these purchases.

Blacks can pursue one of two paths, he says:

A poverty-creation lifestyle. Spend more than you make, regardless of income, and borrow, paying interest and fees, to cover the difference. After providing for basic necessities (and often instead of doing so) you spend all of your income on high-priced, low-value, depreciating assets, such as clothes, cars, jewelry, etc.

A wealth-creation lifestyle. Spend less than you make, regardless of income, and save and invest the difference, earning interest, dividends and capital gains. Invest as much as possible in sensibly priced, appreciating assets, such as stocks, bonds, mutual funds, real estate, etc.

What Edmond writes, of course, is true for everyone, not just African-Americans. Personal thrift and saving were long considered virtues in the United States. But with the general disparagement of “bourgeois virtues” and the rise of hyper-consumerism, the willingness to defer gratification has gone out of style. Savings rates in the U.S. are half of what they were in the 1960s, 70s, and 80s. (See the chart atop this post.) For whatever historical or cultural reason — perhaps attributable to past discrimination and a desire to enjoy the material blessings that other Americans take for granted — African-Americans spend more (thus accounting for their punching above their weight in consumer spending), save less, accumulate more debt, and have worse credit scores. Which means they get turned down more frequently when they apply for mortgages.

Rather than engaging in wild goose chases, seeking auras and penumbras of discrimination in the banking industry, society should be encouraging African-Americans to embrace the virtue of thrift. Resources devoted to underwriting deeply flawed and deceptive “investigative” reporting such as the Center for Investigative Reporting study (see my take-down here) would be far better deployed to teaching financial literacy to African-Americans — indeed, to all Americans, for financial illiteracy and irresponsible spending know no ethnic or racial bounds. Meanwhile, the editorial writers of the Virginian-Pilot would be well advised to broaden their reading list. Black Enterprise might be a good place to start.

Racism, Racism Everywhere You Look

Pseudo-data alleging racial disparities in mortgage lending in Hampton Roads.

The Center for Investigative Reporting has published an in-depth analysis of lending data showing that African-Americans have been denied home loans at a significantly higher rate than whites in 48 out of the 61 metropolitan areas examined. The Virginian-Pilot picked up that research and published an article yesterday stating that African-American homebuyers in Hampton Roads were more than twice as likely than whites to have loans denied.

It just goes to show, if you look for racism hard enough, you’ll find it anywhere and everywhere.

Let’s take two theoretical findings. Let’s say six percent of whites have their loans denied, and 18% of blacks have their loans denied. That means blacks are three times more likely to be denied a mortgage! Now, let’s say that 94% of whites have their loans accepted, and 82% of blacks have their loans accepted. That means whites are only 14% more likely to qualify for a mortgage.

Which one sounds more racist to you? The first statement, right? Of course, the two statements are based on exactly the same data. It’s just that one is framed to make lending patterns look more racist and the other framed to appear the opposite. Which way did the Virginian-Pilot and Center for Investigative Reporting choose to present the data? The way that framed mortgage lending as racist.

Likewise, the investigative report emphasized that racial discrepancies were found in 48 metros, largely overlooking the fact that none were found in 13. Who would be interested in running a headline, “No Sign of Racism in Twenty Percent of American Cities”?

But the problems in the analysis run far deeper. The data is inherently flawed and useless.

The intrepid investigators describe how they adopted a “binary logistic regression” methodology that assesses the relationship between multiple independent variables against a single binary input (whether or not a mortgage was denied). Then it looked at nine different variables:

  • Race/ethnicity
  • Sex
  • Whether or not there was a co-applicant
  • Applicant’s income
  • Loan amount
  • Ratio between loan amount and applicant’s income
  • Ratio between median income of the census tract and median income of the metro area
  • Racial and ethnic breakdown by percentage for each census tract
  • Regulating agency of the lending institution

The authors do concede that they leave out two important variables — credit scores and debt-to-income ratios — because the data is unavailable. However, those are the two of the most important variables of all! If someone has a lousy credit score, regardless of their income or income-to-mortgage ratio, lenders are less likely to finance a mortgage. If someone is loaded up with credit-card debt, student loan debt, or auto loan debt, those other obligations will figure rightly  into a bank’s calculations.

The Center for Investigative Reporting notes in its article that, according to U.S. Census Bureau data, the median net worth of African-American families is $9,000, while the median net worth for whites is $132,000. That’s a real disparity, and it’s based on complex historical reasons arising from the legacy of slavery, Jim Crow, and the Great Society. But racially blind lending algorithms look at credit scores, net worth, and debt obligations — not the historical reasons behind them.

In sum, running a binary logistic regression without including the most critical lending variables is a worthless exercise, and making broad indictments of the mortgage banking industry on the basis of such worthless findings is reckless. Race relations are frayed enough as it is, and the last thing the country needs is another “study” alleging discrimination where it does not exist, and engendering resentment that is unwarranted. It’s bad enough that Russian bots are spreading fake news to intensify racial animosity. We don’t need journalists feeding the fire.

Like the boy who cries wolf, such studies deeply damage the credibility of those who issue the alarms. One is tempted to assume that the methodology of every study showing institutional racism is just as shoddy and the ideological biases of the authors are just as blatant. There is a danger that many people will ignore instances in which claims of racism actually are justified.

If a properly conducted study adjusted for credit scores, net worth and indebtedness, who knows, it might show that residual racism still exists. But after enough studies like this, millions of Americans would slough it off as more noise from social justice warriors passing themselves off as journalists.