While I was away, the Boston Globe had a story on Obama and some Chicago affordable housing projects that sound pretty bad. If you read the article carefully, the actual story seems to come down to this:
"As a state senator, the presumptive Democratic presidential nominee coauthored an Illinois law creating a new pool of tax credits for developers. As a US senator, he pressed for increased federal subsidies. And as a presidential candidate, he has campaigned on a promise to create an Affordable Housing Trust Fund that could give developers an estimated $500 million a year.
But a Globe review found that thousands of apartments across Chicago that had been built with local, state, and federal subsidies - including several hundred in Obama's former district - deteriorated so completely that they were no longer habitable."
Second, some of these failed projects were developed by Obama associates, supporters, and contributors. Third, some of them are in Obama's old State Senate district, and he doesn't seem to have done much about them.
I have no interest in defending Obama on the second and third points. I don't know much about them. Some blog coverage of this story is wrong: contrary to some summaries of this article, Obama did not "run" these projects, and Grove Parc, the development the Globe story focusses on, was redeveloped by a public-private partnership in 1990, while Obama was still in law school. After citing a description of this project, Rick Moran writes: " Obama pushed hard to finance these projects back in the 1990's." Projects with this legal structure, yes. This project, no.
The story here, to my mind, is not: Obama got support for the projects the article describes. It's: Valerie Jarrett, one of his close advisors, let this continue after her group took over management of the project in 2001. It's worth noting, though, that Jarrett and the company she now heads, Habitat, did not need Obama's help to get into this business: when the Chicago Housing Authority was put into receivership in 1987 (before Obama went to law school), they were appointed its receivers. When Jarrett met Obama, and for quite a while afterwards, he would have been the one needing her help, not the other way around. That in no way excuses her allowing this property to deteriorate, or Obama's not doing anything about it. I mention it only because when I read the blog coverage, a lot of people seemed to think that this story was about Obama getting contracts for his buddies. And I really don't think that's accurate. When a lot of the contracts mentioned in the story were given out, Obama was not in a position to do any such thing, nor were some of the buddies in question in need of his help.
But I do know a little about housing stuff, enough to find the idea that there's something suspect about supporting public/private partnerships for low-income housing development a little odd. To get a hint of what bugged me about the Globe story's presentation of this point, consider this quote:
"Under Mayor Richard M. Daley, who was elected in 1989, the city launched a massive plan to let private companies tear down the projects and build mixed-income communities on the same land.
The city also hired private companies to manage the remaining public housing. And it subsidized private companies to create and manage new affordable housing, some of which was used to accommodate tenants displaced from public housing.
Chicago's plans drew critics from the start. They asked why the government should pay developers to perform a basic public service - one successfully performed by governments in other cities. And they noted that privately managed projects had a history of deteriorating because guaranteed government rent subsidies left companies with little incentive to spend money on maintenance."
Chicago's public housing had been, for decades, a symbol of nightmarish dysfunction:
"Planned for 11,000 inhabitants, the Robert Taylor Homes housed up to a peak of 27,000 people. Six of the poorest US census areas with populations above three people were found there. Including children who are not of working age, at one point 95 percent of the housing development's 27,000 residents were unemployed and listed public assistance as their only income source, and 40 percent of the households were single-parent, female-headed households earning less than $5,000 per year. About 99.9 percent were African-American. The 28 drab, 16-story concrete high-rises, many blackened with the scars of arson fire, sat in a narrow two-block by 2.5-mile (300 m by 3 km) stretch of slum. The city's neglect was evident in littered streets, poorly enforced building codes, and scant commercial or civic amenities.
Police intelligence sources say that elevated number of homicides was the result of gang "turf wars," as gang members and drug dealers fought over control of given Chicago neighborhoods. Its landlord, the Chicago Housing Authority (CHA), has estimated that $45,000 in drug deals took place daily. Former residents of the Robert Taylor Homes have said that the drug dealers fought for control of the buildings. In one weekend, more than 300 separate shooting incidents were reported in the vicinity of the Robert Taylor Homes. Twenty-eight people were killed during the same weekend, with 26 of the 28 incidents believed to be gang-related."
I do not know much about the Chicago Housing Authority. For all I know, every single person who ever worked for it was as wise as Solon and a saint to boot, and all its problems were the result of disastrous coincidences that were utterly beyond its control. But given the actual history of government-run housing in Chicago, when I read the Globe article citing "critics" who "asked why the government should pay developers to perform a basic public service - one successfully performed by governments in other cities", I thought: who are these critics? And why isn't the answer to their question obvious? Namely: whatever works or doesn't work in other cities, letting the CHA manage public housing in Chicago seems like a really, really bad idea. Maybe it would be less bad now -- for all I know, the CHA might have improved a lot. But back in 1990 or so, the question "why not let the government run public housing in Chicago?" would have been like asking "why not let Michael Brown run FEMA?" right after Hurricane Katrina. Maybe Brownie was a great guy, but the appearances were certainly against him.
So if straight public housing was out, what were the alternatives to public-private partnerships?
One, I suppose, would have been to do nothing at all: leave Chicago's existing public housing intact, and don't build any more. This would have been a horrible solution: the existing projects were horrific, and something needed to be done about them. Moreover, the CHA was at the time under a court order to find housing for people in areas that were not mostly African-American, so there were legal problems with inaction. I will also assume that dynamiting the projects and leaving their tens of thousands of ex-residents to fend for themselves was not a serious option.
Another alternative would have been to rely entirely on Section 8 (or other) vouchers rather than building or redeveloping affordable housing units, whether publicly or privately managed. The voucher recipient pays some set percentage of his or her income; the government pays the rest; the people who hold the vouchers find their own housing. Chicago did, of course, use Section 8 vouchers, and I believe that most people involved in affordable housing issues at the time supported them, as part of a mix of solutions. The question isn't, should there be vouchers?, but: should there be anything else? Should we rely on vouchers for 100% of our low-income housing policy?
Again, I don't know enough about Chicago in particular to know how it would make sense to answer that question there. But there are various reasons why relying exclusively on vouchers doesn't always make sense. Namely:
(a) In some cities, the housing market is tight enough that even if you give people vouchers, they may not be able to find housing. (Think San Francisco.) Vouchers always work best where there is a decent supply of affordable housing to start with.
(b) Vouchers risk altering the pricing of affordable housing in ways that might not be desirable. If vouchers are too far below standard rents for affordable housing in a given market, people with vouchers will not be able to find housing that will accept them. The obvious way to avoid this is to set the amount that vouchers will pay somewhere around the median rent for the low end of the housing market. But if you do that, and if there are a sufficient number of vouchers, then you risk making that median into a sort of de facto floor on rents: everyone can get that amount, so no one will charge less. (This is, of course, only true where you have a considerable number of vouchers in circulation, but that would have been true had vouchers replaced public housing in Chicago.)
(c) If you want people to have access to low-income housing, then there's an advantage to building units, rather than relying entirely on vouchers. It's relatively easy to simply retire vouchers when someone turns one in, or dies, or whatever. And this isn't particularly visible, and thus would be less likely to provoke a political brouhaha. In this way, actual support for affordable housing could be cut stealthily, without people noticing -- in the same way in which turning a guaranteed benefit of X dollars per person into a block grant for the whole program makes it easier to cut support for that program stealthily and without political repercussions. If you lock in a housing unit, by contrast, this is much harder to do. So people who care about ensuring access to low-income housing have a reason to support having actual buildings as part of the mix, while people who support eliminating any government role in ensuring access to affordable housing have a reason to favor a purely voucher-based solution. (Note: I am not arguing that anyone who favors either policy must do it for these reasons; just that it's one reason for favoring one policy or the other.)
(d) Finally, the kinds of incentives you can offer to developers differ from the kinds of incentives you can offer to owners of rental properties. If you think, in general, that having a lot of different incentives in your policy arsenal is a good thing, since some work best in some circumstances and others work best in others, then it makes sense to have a multi-pronged approach. Likewise, if you worry about unanticipated consequences of one policy or another, it makes sense to try a mixed approach, on the grounds that if one program turns out to be a disaster, it won't affect your entire approach to affordable housing.
In the case of Chicago in particular, there's another wrinkle. As I noted above, the Chicago Housing Authority was under court order to move public housing out of exclusively black neighborhoods. You can read an account of some of the difficulties involved here. But it's not clear that the CHA could have complied with the court order without building new housing, or that the court would have accepted a purely voucher-based solution. (I don't know that the CHA couldn't have complied using vouchers alone, or that the court wouldn't have accepted a 100% voucher-based solution; just that the fact that the CHA, and later Habitat, which was its receiver, was operating under court order is relevant to what it might and might not have done.)
One more thing. Chicago's efforts to do something about its public housing nightmare are a very, very big deal, involving 25,000 units of housing, huge numbers of public housing residents, enormous sums of money, and vast tracts of land, some of it quite desirable. Any project of this magnitude is going to have a whole lot of moving parts, and it will operate under a lot of constraints: political, financial, and so on. Especially in a city with a reputation for, um, interesting approaches to public management, I would be astonished to find that absolutely everything had gone swimmingly. What I would really like to know, therefore, is: how many of the projects went bad? Whose projects were they? Is the number better or worse than one would expect? And why, exactly, didn't they work out?
Moreover, one way to look at the results is to notice that no solution to this problem looks particularly enticing. As I noted above, the government didn't do a good job of running public housing. If the cases cited in the Globe article are representative, public-private partnerships weren't all that great either, though they'd have to get a lot worse before they rivaled some of Chicago's old projects. But vouchers also have problems -- see this Atlantic article, which argues that when public housing residents are dispersed using Section 8 vouchers, crime often follows.
Before I'd be prepared to criticize someone for supporting public-private partnerships for affordable housing, I'd want to know what alternative the critic has in mind, and what reason there is for thinking that it would be better. It's not enough to say: gee, this didn't work so well, if nothing else works better.
I do not mean this post to be a defense of Obama. I think that with public-private partnerships, as with a lot of things, the devil is in the details. You need to design a program with some real oversight, to ensure that people don't just take the subsidies and let the buildings deteriorate. You also need to provide adequate subsidies for operating expenses: rumor has it that they are routinely low, since developing low-income housing is a lot more politically appealing than providing decent operating subsidies. And you need to get a lot of other details right as well. The Globe article does not provide enough information to let me figure out whether Obama's program was well-designed or not. (The fact that some projects funded by it went bad wouldn't show that the program wasn't well-designed, just that it wasn't good enough to prevent anything from going wrong, which few programs are. You'd need to know how many went bad, and how that stacked up to other alternatives. And the Globe article doesn't cite a single clear case of a project that went bad and was funded by the programs Obama passed, though it does cite one that went bad after he voted to give it a grant, as a member of a foundation board. With one possible exception (New Evergreen/Sedgwick, which got tax credits the same year that Obama's program passed, and therefore might have received them under his program, if that program was funded immediately), the examples are all of projects that went bad using "his approach", meaning public-private partnerships.)
Moreover, as I said at the outset, I haven't dealt at all with questions like: did he know that this was going on? If so, why didn't he do anything about it? If not, why not? Valerie Jarrett is one of his closest advisors: is the deterioration at Grove Parc representative of her firm's work? If so, what does that say about Obama? If not, why did she let this particular site go so bad? Those are, to my mind, completely fair criticisms, and I have neither the knowledge nor the desire to try to defend against them.
I do think, though, that criticizing someone for favoring public-private partnerships for affordable housing takes a lot more thought than the Globe reporters seem to have given it, and that making that criticism stick takes a lot more information than they provided. That was my only real point.