Chicago’s 29 year old white flight reassurance program has paid 5 homeowners

A Chicago program to help protect homeowners on the Northwest side has collected millions of dollars since 1988 and only been used 5 times:

The Northwest Home Equity Assurance Program was enacted via public referendum in 1988 in a bid to prevent white flight in a handful of bungalow belt neighborhoods. A tax-based fund was created to guarantee homeowners within its boundaries they would at least get paid the assessed value of their houses when they sold them.

In the years since, every one of the roughly 48,000 homes within its boundaries has kicked in a few extra dollars each year on its property tax bills to the equity fund. As the Chicago Tribune reported in May, the program has paid just five claims by homeowners who couldn’t sell their houses for the assessed value while amassing $9.57 million in two accounts…

Bucaro, who like other board members receives no salary, cautioned against starting to make home loans. The organization has neither the expertise nor the staff to figure out how much money it’s appropriate to lend people or to assess the risk of such loans…

Bucaro said the Northwest Home Equity Assurance Program has somewhat been a victim of the housing success in the neighborhoods it covers, since most people simply get more than the assessed value of their homes when they sell. Maybe the program has outlived its usefulness as a bulwark against white flight, he said.

I do not know the details of this program but it sounds like the money was simply not necessary. Even as Chicago still feared white flight in the 1980s – and the decades after World War II led to a significant population decrease in the city – the home prices in these neighborhoods did not fall. Even as numerous Chicago neighborhoods changed from white to black after 1950, the Northwest side did not. The neighborhoods in this area are still primarily white (though the Latino population has grown).

One ongoing issue is what will happen to this money but another is when the city of Chicago will officially put an end to a white flight deterrence program.

Politicians should not anger the “prosperous but far-from-rich suburbanites”

According to the Washington Post, one group that may not like the Trump tax cuts includes wealthy – but not too wealthy – suburban residents:

The tax push illustrates the political risks of attacking provisions favored by prosperous but far-from-rich suburbanites, a powerful voting bloc that often faces the financial stress of living in increasingly pricey neighborhoods. Many in the GOP already are worried about losing their grip on this important group after Tuesday’s result in the Virginia governor’s race, where Democrat Ralph Northam crushed Republican Ed Gillespie by running up votes in the dense areas outside cities.

Alpharetta is part of a booming region known as North Fulton, where no one bats an eye at $600,000 homes, Whole Foods and West Elm are eager to locate, and property taxes are relatively high to fund the top-performing public schools that attract striving white-collar professionals. And when it comes to their taxes, residents often have more in common with people living just outside New York City and Washington, D.C., than those in other parts of Georgia…

North Fulton seems like a place that could afford to pay more in taxes, but residents say their low-six-figure incomes obscure the economic challenges of living here…

Other residents say North Fulton is a place where earning $100,000 — nearly twice the national median household income — means a surprising degree of struggle.

I’ll refrain from saying much about whether suburbanites who are in the top 20 percent of American earners are leading difficult lives.

I will note that the true battleground between Republicans and Democrats is in suburbs just like this. Studies in political science and other disciplines from the last ten years or so suggest that cities and inner-ring suburbs vote consistently Democrat, exurbs and rural areas lean Republican, and the middle suburbs – including these sorts of communities outside of Atlanta – are up for grabs depending on the election cycle and the particular issues at stake. There actually may not be that many people who fit the bill of this article but (1) they can be very vocal and (2) they can be swayed in elections.

Home builders pull support of tax cuts over mortgage interest deduction

A group that may be viewed as generally in favor of fewer taxes – the National Association of Home Builders – is not happy that the mortgage interest deduction could disappear in the Trump tax cuts:

That’s because one day before, House Ways and Means Committee Chairman Kevin Brady (R-Tex.) informed NAHB that he would not be including a homeownership tax credit as part of the new tax legislation, which will be released on Wednesday.

NAHB’s chief executive, Jerry Howard, had spent months working on this new tax provision with Brady’s aides, but House leaders wouldn’t allow its inclusion, Howard was told. The next day, Howard and other NAHB officials gathered on a conference call and debated what to do. They agreed unanimously — kill the bill…

The home builders are seen as among the most influential Washington corporate forces, not only because they have members everywhere but are often big fundraisers for politicians and have a close connection to the economy, development, hiring and economic growth.

They are incensed about proposed changes to tax law that, they believe, would eliminate the need for almost all Americans to itemize their tax deductions, an adjustment they think would nullify the need for middle-class Americans to deduct their mortgage interest from their taxes. They are also incensed that the bill would strip away the ability of Americans to deduct their state and local property taxes from their federal taxable income. Both these changes, NAHB argues, would raise the cost of buying and owning a home.

This part of the tax code has been debated in recent years (ranging from fiscal cliff issues to 2010 post-housing bubble discussions). And, more broadly, the United States is the only developed country that subsidizes mortgages in the ways that we do.

It is not a surprise that certain interest groups would oppose changes to the tax code that they perceive could affect their business. At the same time, any perceived effect on housing – not only a major part of the economy but also symbolically important as a marker of the middle-class lifestyle – is going to draw a lot of attention. And this area also involves the interests of fairly wealthy Americans:

But this national wealth-creation policy has several negative side effects. Since tax benefits are most useful for people with taxable income, U.S. wealth-creation policy is predominantly for people who already have wealth. These high-income households don’t consider their tax benefits to be a form of government policy at all. For example, 60 percent of people who claim the MID say they have never used any government program, ever. As a result, rich households can be skeptical of public-housing policies while benefiting from a $71 billion annual tax benefit which is, functionally, a public-housing policy for the rich. As Desmond writes, “a 15-story public housing tower and a mortgaged suburban home are both government-subsidized, but only one looks (and feels) that way.” In short, an asset-building, wealth-creation, or welfare policy that’s run through the tax code can hurt the overall push for more direct forms of welfare—like simply giving money to the poor…

But more generally, people need money to buy houses. The United States still lags almost every advanced economy in the amount of money transferred from the rich to the poor. One major reason is that the tax code has become a vehicle for incentivizing wealth-creation among households who already have the most wealth, even as the government has soured on policies that spend money directly on the poor. It’s hard to find a better exemplar of this sorry fact than the juxtaposition of America’s affordable housing crisis and the untouchable sanctity of the mortgage-interest deduction.

In other words, the interests of the NAHB are not necessarily with the Americans who most need housing but with those who can purchase more expensive new homes. Thus, the mortgage interest deduction is just another piece of evidence regarding a bifurcated American housing market.

Las Vegas willing to pay record public subsidy to have NFL

How much power does the NFL have? Enough to have major cities commit incredible sums of public monies:

Las Vegas appears poised to claim the mantle of World’s Most Expensive Stadium from East Rutherford, New Jersey, where the Jets and Giants play in the $1.6 billion MetLife Stadium. (Los Angeles Stadium, Stan Kroenke’s project that will host the Rams and Chargers, is estimated at $2.6 billion—but that cost includes parts of the surrounding entertainment district.*)

Clark County taxpayers will contribute $750 million to the new arena, a record for a sports facility—about $354 per resident, taken from an increased tax on hotel rooms. That tax currently pays for schools and transportation, in addition to tourism-related expenditures.

Stanford economist Roger Noll said it was the “worst deal for a city” he had ever seen…

The state’s figures to justify that new tax are… ambitious. Its forecasts suggest 450,000 new visitors every year drawn by the 65,000-seat stadium, spending an average of 3.2 nights per visit. About a third of tickets are supposed to be purchased by tourists, although no other city manages 10 percent. Why half a million people would fly across the country to watch a team that no one wants to pay $20 to see in Oakland is not clear.

Even with the studies that show stadiums don’t contribute anything to cities, it seems that someone is always willing to pay. In this case, it wasn’t just Las Vegas: Oakland tried to put together a last-minute deal that they claimed would require even less of the team:

Schaaf told ESPN Friday she believes Oakland’s new stadium plan is viable.

“At the end of the day, this is the decision of the Raiders and the NFL,” Schaaf said. “What I am confident about is, if the Raiders want to stay in Oakland, we have a viable plan to build them a stadium with no upfront money from them, in financial terms that I believe are more favorable to them than the terms in Las Vegas — what we know of them.”

I’m still waiting for a city mayor or other big-name official to publicly bid a major sports franchise good riddance when they ask for a lot of local money. Perhaps that would be bad form – local officials are usually in the business of trying to attract everyone they can – but it could also send a strong signal about how private interests cannot overrule the long-term public interest.

Sociology prof behind San Jose measure to raise business taxes

Sociologist Scott Myers-Lipton has worked to raise business taxes in San Jose:

With little discussion, the council unanimously approved putting a November ballot measure before city residents that would double annual business tax revenue from $12.7 million to $25.4 million. But the business tax voters will decide differs significantly from what Scott Myers-Lipton, the San Jose State University sociology professor who had led a successful 2012 campaign to raise the minimum wage in the city, had proposed last year.

Myers-Lipton was close to gathering enough signatures to qualify his measure for the ballot, but withdrew it to allow for the city compromise measure.

The measure the council approved for the ballot would increase the annual “base rate” businesses pay by $45 and then charge companies with three or more employees $30 to $60 for each worker, depending on the company’s size, capping at $150,000 a year. It would include inflation adjustments. The city’s current tax is $18 per employee for companies with eight or more workers without inflation increases and caps at $25,000.

Myers-Lipton’s proposed measure would have charged large companies based on their gross receipts, either 60 cents, 90 cents or $1.20 for every $1,000 in revenue. The model, he argued, has been successful in other large cities like San Francisco, Oakland and Los Angeles. A city study estimated the change would put an extra $39 million annually into the city’s pocket for services like public safety, roads and libraries.

It sounds like a typical political conversation about taxes. On one side, proponents argue that businesses should pay more, particularly when needed local services are on the line. On the other hand, proponents suggest businesses will leave and/or not locate in San Jose and instead locate in places with cheaper taxes.

Yet, does it make any difference that this tax proposal was brought forward by a sociologist? Conversations about public sociology sometimes suggest that sociologists have limited ability to bring about policy change. This would seem to be a positive example: sociologist who helped bring about a raise in the minimum wage now has a chance to help pass an increased tax on businesses. Both measures could be viewed as moves toward lessening inequality; this is a cause that many sociologists would support. At the same time, do Myers-Lipton’s moves differ much from typical liberal proposals?

Perhaps many businesses in San Jose can afford such an increase with the wealth in the area. Such a tax may not hurt very much in a thriving area compared to a struggling Rust Belt city.

Why would we want to promote more HOAs with a tax break?

A new proposal in Congress would allow members of a HOA to deduct their association fees from their federal taxes:

Upward of 67 million people live in these communities — ranging from sprawling master-planned subdivisions down to individual condominium or cooperative developments. As of 2014, they contained nearly 27 million housing units. Their homeowners associations often provide the functional equivalents of municipal and county services, and residents nationwide pay roughly $70 billion a year in regular assessments to fund road paving and maintenance, snow removal, trash collection, storm water management, maintenance of recreational and park facilities, and much more.

The same residents also pay local property taxes to municipal, county or state governments. But unlike other homeowners, only their local property tax levies are deductible on federal tax filings. Their community association assessments that pay for government-type services are not.

Now a bipartisan group of congressional representatives thinks that’s inequitable and needs to be corrected. Under a new bill known as the HOME Act (H.R. 4696), millions of people who live in communities run by associations would get the right to deduct up to $5,000 a year of assessments on federal tax filings, with some important limitations…

The bill’s primary author is Rep. Anna G. Eshoo, D-Calif. Co-sponsors include Reps. Mike Thompson, D-Calif., and Barbara Comstock, R-Va.. Though the bill has little chance of moving through the House or Senate during this election year, it sends a message to the legislative committees now working on possible tax code changes for next year: Congress needs to acknowledge the role the country’s community associations play in providing municipal-type services. The way to do it is to allow deductions on a capped amount of the money residents are required to pay to support community services.

It will be fascinating to see what sort of formula is used to calculate these deductions as the fees paid to associations do not cover all sorts of municipal services used outside of the association.

At the same time, won’t this promote more HOAs, or at least make them more attractive? And do we really want more? They certainly are popular but they continue a trend that is not necessarily good for society: privatizing municipal goods and helping neighbors guarantee their property values. For the first, instead of paying a municipal government, a new layer of private government is enabled to take care of certain services. Americans tend not to like more and more layers of fees and government. However, this might be outweighed by the second factor: the HOAs help keep the neighbors in line without owners directly having to interact with other neighbors. Instead of possibly having to live next to the neighbor who paints their house purple and starts a garden in the front yard, the HOA polices this. In other words, this tax break might help more and more Americans work out civic life through private associations that they see as a necessary evil.

Given all of the HOAs, is there any analysis that shows they pay off financially in the long run either for the property owners or the municipalities?

Taxing McMansions and other buildings by roof size to cover stormwater costs

Want a McMansion or another building that covers a lot of ground in Mississauga? You will have to pay more for stormwater costs:

In a move that’s a first for the GTA, Canada’s largest suburb and its sixth largest city will soon charge home owners and businesses for storm water costs based on how much of their property is covered. If you have a very small house that causes little run-off water, you will pay nothing. But if your home is in the highest of five size categories, it will cost $170 in 2016 for your share of the city’s storm-water management costs. It’s an approach that Toronto is also looking at ahead of its 2016 budget process, according to a city spokesperson…

Councillor George Carlson, council’s resident environmentalist, has championed the innovative approach since it was first examined in 2011. He recognizes the impact of climate change, but said development trends are also at the root of the problem. “You can’t use pipes the size of Dixie straws when we need massive concrete culverts,” he said after the meeting. “There were streets in Mississauga that looked like Venice in July of 2013 (when a major storm event wreaked havoc across the GTA).”

“But look at all the asphalt and parking lots and McMansions in this city. All of that covered land is sending more and more run-off water into pipes that were probably already too small. I can see the king and queen needing to live in a castle, but does every third person have to?”…

Charges to businesses will be based on a formula that measures the total covered amount of space, but they will be able to save up to 50 per cent of their fee by putting in measures such as catchment basins and permeable material to prevent storm run-off.

It will be interesting to see how this works out. The Councillor quoted above said he thinks this could have an impact on building sizes down the road. Communities with lots of sprawling development often have water problems and solutions range from permeable pavement to green roofs to taxes like these. But, many of these solutions are after the fact which can get quite costly (just see the massive Deep Tunnel project in the Chicago area).

If the real estate pressure is there to build McMansions, I wonder if there are ways around such a fee. (To be honest, $170 a year doesn’t sound like much for the types who buy McMansions.) What if people built underground to get extra space and to minimize the roof size (a la the luxury underground facilities in London)? Presumably there are height restrictions in the community that would limit building up.