March 15, 2009

HUD Secretary Shaun Donovan

The Washington Post exults over the superbitude of the new Housing and Urban Development secretary Shaun Donovan, who did such a brilliant job being in charge of affordable housing for New York City in 2004-2008. (You will all recall how affordable NYC housing became on his watch):
It is hard to find a detractor. Bankers and developers say [Shaun] Donovan has a deep understanding of market forces. Affordable-housing advocates say he is committed to the public good.

Personally, I can't make head nor tail of the newspaper's account of his doings. But, from what I've learned about the bankers, developers, and "advocates" in the housing racket, when they all agree on something or somebody's wonderfulness, you'd better get a good grip on your wallet.

Right now, being the former New York City housing czar sounds like a good credential because there haven't been too many foreclosures in New York. (As of October 2008, only 0.17% of units in the state of New York were in the foreclosure process, compared to 2.57% in California.) But a year from now, when NYC is a foreclosure nightmare, maybe this part of his resume won't sound so hot anymore.

I think I understand this part of the article, though:

Donovan revived an old idea, inclusionary zoning, which grants developers the maximum height for their market-rate residences if they agree to build low-cost housing, too.

"The concept was highly controversial when Shaun came in, but over a year Shaun led the team to understand the economy, and build the incentives, and explain to the City Council that it had to approve the rezoning," Doctoroff said. "He built the policy financially and politically."

In Donovan's view, the program, which has created 1,833 units of affordable housing to date, built neighborhoods with long-term prospects for income diversity.

Wow, 1,833 units built in a city of several million units! He's Superman with red hair.

Obviously, government-sponsored "affordable housing" construction doesn't make any difference to most New Yorkers. But, 1,833 New Yorkers apparently made out like bandits.

Help me out here to see if I understand the process correctly: Developer X announces plans to build an apartment building of the legally maximum height for the neighborhood. Neighbors complain, saying it will block their sunlight, increase congestion, make parking harder to find, etc. and demand that the building be only a fraction of X height.

Shaun Donovan grants the developers' wish for X height, as long as the developer makes some of the units "affordable" -- i.e., charges below-market rates. In other words, because housing development is highly regulated, much of the profit from the development stems from getting permission from the government to build a tall building on a particular piece of land. Because the government can bestow or withhold that permission as it sees fit, it can extract some of the profit from the developers. (Sorry, neighbors, about your new sunshine shortage, but you should have invested more in the right politicians. Maybe next time you'll be wiser.)

By the way, don't feel too sorry for the developers -- if there were no restrictions on height, then the housing business would just be a commodity business, which, trust me, is even less fun than it sounds. As it is now, development is a casino: you can make a fortune if the political gods smile on you, and lose a lot if they don't.

The obvious question, but one that seldom seems to occur to reporters explaining the wonders of the affordable housing racket, is: Who gets these "affordable" units? The right to buy or rent at below market values is hugely valuable so there will be no shortage of applicants. Some allocation method is necessary to choose from all the applicants. If the government doesn't determine who gets in, the developers will just take under-the-table kickbacks to bring the net price up close to the market level. Am I being overly cynical in assuming that politics plays some role in determining who winds up in the "affordable" units?

Let me make a wild guess that some of those 1,833 were in some way affiliated with "affordable housing advocates." A common phenomenon that has emerged in recent decades in America, but remains so off-the-radar that I've never heard a name for it, is the business of setting up leftwing pressure groups that make their living by reaching mutually profitable agreements with regulated businesses so that the business can do what it wants.

This can be more sophisticated than just the old shakedown racket. For example, say Developer X wants to put up a 20 story building, and the neighbors want to limit it to 10 stories so they won't lose as much sunshine. Developer X then agrees with Community Affordable Housing Advocacy Organization Y that it will build a 20 story building, but 10% of the units will be "affordable." (And Group Y gets first dibs on some of the affordable units to allot to its supporters.) A government official like Mr. Donovan then grants permission to put up the 20 story building, citing the agreement as proof that the Left and Right are in accord. Of course, the neighbors who want to keep their sunshine aren't in accord at all, but that little detail gets lost in glowing story about private enterprise and public good advocates coming together.

We saw it a lot of this in the mortgage business: a financial institution wants to lower credit standards in order to make a bigger, riskier bet on mortgages. Some GS-14 at the regulator isn't sure if this is such a hot idea. Will the taxpayers wind up on the hook? Is this just a boiler room operation to badger fools into signing a lot of papers they can't possibly understand and then unload the toxic mortgages fast on Fannie Mae?

Good questions! But then, the financial institution announces that it has reached an agreement with various leftist Community Reinvestment organizations to lend even more money to likely deadbeats -- excuse me, I meant, "lower income and minority neighborhoods." And so the regulators roll over in the face of this humanity-affirming concord between the White Power Structure and the Righteous Demands of the Community.

Move along now, nothing to see here.

In reality, the leftist organizations are in a symbiotic relationship with the big lenders. One way or another, they will get a cut of the action. The intervention of the professional leftists serve to distract attention away from what the lender really wants to do -- take big risks that the public may have to bail out -- and refocus the media on the ever popular story of Fighting Discrimination. The two sides then "compromise" to provide a heart-warming happy ending.

This kind of pre-fab agreement makes for nice newspaper articles, because people like to assume there are two sides to every story. In truth, there are usually more than two sides. There's usually an amorphous, poorly organized third side such as the taxpayers or the general public: the poor saps who will end up footing the bill for the agreement between the professionals on the "two sides."

Anyway, I'm getting off track from Shaun Donovan. I don't really know what he's been up to. The newspaper descriptions are eye-glazing, but a lot of people do very well for themselves mastering the bureaucratic arcana of some seemingly boring topic.

My published articles are archived at iSteve.com -- Steve Sailer

15 comments:

dhulq said...

I was out of work for many months, starting last summer, until last a few weeks ago, when a law firm in Western New York with booming business hired me among others as part of an aggressive expansion.

This firm specializes in assisting banks with foreclosing on properties across New York state. Now I haven't been there long, but I know they don't do work in the sand states, and I know that NYC is where much of the action takes place.

Combining these factors (hiring; sights on NYC) suggests that people who stand to make a profit on this expect things to continue to move south.

There's also this, which has slowed down foreclosures but ultimately won't prevent most, I believe:

http://www.ny.gov/governor/press/press_0805081.html

Banks or their agents in New York have to alert property owners 90 days in advance of commencing foreclosure proceedings is the upshot. This passed in August, but the firm's been hiring for months now, so it doesn't seem like the bill's had much long-term impact on stymieing foreclosures.

jody said...

HUD already existed at a cabinet level, so what was the point of obama creating the office of urban affairs?

OK, we all really know the point was to make government bigger and more intrusive, and to establish yet another avenue to shake down european americans with the power of the federal government.

but won't HUD and UA get into fights over jurisdiction? aren't they headed for conflict over who gets to extort the whites in city locations x, y, and z?

Anonymous said...

the business of setting up leftwing pressure groups that make their living by reaching mutually profitable agreements with regulated businesses so that the business can do what it wants.

This is a very important phenomenon. It is the return of tithing with the modern church being the Progressives rather than the Christians.

The various Progressive denominations (pressure groups) can muster men, press, and moralistic firepower against any servant of "Mammon". Look at how Starbucks talks about how left wing and noble they are. Look at how the auto companies and energy companies are now making noises about green-ness and global warming.

Even though they're darlings of the left, look at how Apple and Google jumped when they were recently attacked by environmentalists (Greenpeace hit Apple a few years ago, and there was that silly article about each search taking a tea kettle's worth of energy).

The bottom line here is that the progressives, the professors, and the press (but I repeat myself) can hold the threat of a powerful negative advertising campaign over the head of any businessman.

goldilocks said...

It's so much easier to think in terms of "Two Opposing Sides," though!

Stop mucking up people's ideological superstructures with squishy, squirmy, lumpy reality!

For serious, though, hardly anybody thinks in terms of multiple competing, colluding interests with various levels of motivation and organization.

Smart people are sometimes worse than anyone else about oversimplifying human affairs like this.

Anonymous said...

The funding of the left is a story that seems suspiciously unremarked upon. Even an average size metropolitan area will have literally dozens, if not hundreds, of left-wing organizations with at least one paid, full-time staff member. They are all, of course, officially "non-partisan," and, I suspect, tax exempt. From whence does this money come?

Take the fight over Prop 8 in California. The left has called for the elimination of the Mormon Church's tax exempt status over it's leadership in the pro-8 fight, even though the Church itself spent less than $200,000 of its own money on the matter.

In contrast, they never call for eliminating that tax exemption of churches who advocate on behalf of, say, amnesty.

The left also gets a huge amount of funding from tax exempt foundations, such as the Evelyn and Walter Haas, Jr. Fund, a $423 million fund (tax exempt, I presume?) which spends large sums of money fighting for immigrant and homosexual causes.

"Over the past five years (2004-08), the Fund has made grants totaling nearly $29 million in the area of gay and lesbian rights."

All taxes fully paid, right?

And the Haas Fund is a bit player compared to the $13.7 billion Ford Foundation, which makes over $530 million in grants each year, often to the left.

Leftists move with ease between openly political organizations and these tax exempt, "non-partisan charities."

Anonymous said...

"The newspaper descriptions are eye-glazing, but a lot of people do very well for themselves mastering the bureaucratic arcana of some seemingly boring topic."

Well said. Funny how that applies to a lot of modern-day "democracies". Liberal Democracy must be one of the poorest forms of government around.

Anonymous said...

The bottom line:

Though he succeeded in saving thousands of state- and federally subsidized apartments, Donovan could not stanch the hemorrhage of low-cost housing. The state Mitchell-Lama subsidy program went from 53,016 apartments in 2004 to 36,961 in 2008, according to the Community Service Society. Federal subsidy programs, including Section 8, covered 48,036 apartments in 2004 and 46,297 by 2008.

At the same time, rent controls had been loosened in the 1990s to bring vacant apartments out of regulation and into the market. As a result, from 2002 to 2008, the number of New York City apartments renting for less than $1,000 per month fell by an estimated 194,000, shrinking from 64 percent of the city's housing to 53 percent, according to Lander, the community development advocate.


Donovan didn't matter.

Anonymous said...

Steve, check your facts!

Shaun does not, nor ever had, red hair.

Clearly. the rest of your commentary is as ill-informed. He is sincerely dedicated to improving our entire communities.

Truth Teller

Anonymous said...

Steve, you call yourself a journalist. Before making accusations, why not get off your duff and investigate whether Donovan gave affordable units to pressure group members? Then you might actually have a real story. It shouldn't be that hard to see who is entering and leaving the buildings.

Svigor said...

Smart people are sometimes worse than anyone else about oversimplifying human affairs like this.

Jesus yes. The urge to have Unified Theories of Everything is strong, overwhelming in many. Maybe smart people just have a weaker opposing "I'm not that bright so maybe I should STFU" instinct.

Anonymous said...

"improving our entire communities."

He could start by implementing some grammar classes first.

Anonymous said...

Steve, check your facts!

Steve, you call yourself a journalist. Before making accusations, why not get off your duff and investigate whether Donovan gave affordable units to pressure group members? Then you might actually have a real story.


Considering how corrupt the O admin is, Steve can just say something remotely pointing in the right direction and be on target more than 2/3 of the time.

Anonymous said...

"Racket" is teh right word for HUD. Check out some of the writings of Catherine Austin Fitts.

I met with a senior staff assistant to the Chairman of one of the appropriations committees for HUD. When I asked what was going on at HUD, the staff assistant said, "HUD is being run as a criminal enterprise."

Anyone who reads her writings about HUD and still thinks that government programs are essentially beneficial and well-intentioned and only require an "honest administration" to straighten them out, needs their head examined.

Ronduck said...

From the link supplied by dhulq:


Governor David A. Paterson today signed into law a critical subprime lending reform bill which directly addresses the mortgage crisis in New York State. The Governor signed the bill in Queens, one of the areas in New York that has been hit hardest by the foreclosure crisis.

Wow, what is so special about Quenns? Well, from wikipedia:

48.3% of the population were foreign born (another 1.9% were born in Puerto Rico, U.S. Island areas, or abroad to American parents), 54.5% spoke a language other than English at home...

It looks like we found another Sand State! There is no way Wall Street can claim to have been ignorant of what immigration does to an area and its mortgages when they live right by a county with such high immigration. In fact, there is so much immigration in the NY metro area that WS has to be willfully blind or evil to have missed this.

Anonymous said...

Seems like pretty much the same old shakedown racket to me.