Sunday, September 03, 2006

AFFORDABLE HOUSING AND KELO

Location, location, location – the mantra of the housing market. When I moved to the Washington DC metro area, the general rule of thumb was that the price of the same house would increase about $10,000 for each mile closer it was to the city center. A $100,000 house 60 miles away would be a $500,000 house at 20 miles, and so on.

Affordable housing – a big political football here in DC and its environs - in cities is a physical impossibility without subsidies, and location is the reason. It’s not the cost of the house that makes it unaffordable; it’s the cost of the location.

The solution to problem of creating affordable housing is obvious – Kelo. If, as the Supreme Court affirmed, a government entity can exercise eminent domain and provide the property to a private company in order to increase the local tax base, as the city of New London did in Kelo, then it follows that a government entity can also exercise eminent domain to reduce its tax base.

So all the city need do is to exercise it’s eminent domain rights in a section of the city, declare that area to be a no-development zone, and voila! – instant affordable housing.

It’s not as outlandish an idea as it sounds. The city would condemn the property, buy it at its fair market value, and then resell it to the original owners at a drastically discounted price with the caveat that the property can only be maintained, never improved, and that the essential nature of the neighborhood be maintained. Two bedroom, 1 bath bungalows must remain two bedroom, one bath bungalows; apartment houses must remain apartment houses; commercial buildings with mom-and-pop stores must remain commercial buildings with mom-and-pop stores.

Is it a subsidy? Sure, but a one-time subsidy not to be repeated. Would it work? Ask Susette Kelo. She might still be living in her home.

UPDATE: Matthew J. Parlow, a law professor at Chapman University addresses Kelo - and affordable housing. Worth a read.