Democrats and Affordability Part 2
Previously we talked about how Democrats drive up costs, but what do they do to make things affordable? Simple, they give away your tax dollars.
Obamacare is a classic example. Democrats rammed through a boondoggle of a program that has lived up to none of its promises, a key one of which was to reduce the cost of health insurance. As insurance costs rose and rose, Democrats during the Biden Administration passed a law "temporarily" removing any cap on income levels for subsidies. This meant that people making as much as $600,000 or more could get federal tax dollars to help pay for their Health Insurance purchased through the marketplace.*
The temporary law ended this past December. Democrats are seeking to extend the removal of the cap on subsidies for 10 more years at a cost to taxpayers of billions of dollars over that time.
That doesn't make health insurance more affordable, it just covers up the rising costs with taxpayer dollars. Democrats oppose Republican efforts to modify Obamacare in ways that would reduce the cost of health insurance.
Child care is another example. Laws and regulations are passed adding more requirements on child care providers. Those doing business in Democrat cities and states, as we saw in Part 1 of these articles, face higher State and local taxes. Democrats, like newly elected New York City (NYC) Mayor Zohran Mamdani, who ran on an affordability platform, are looking to make child care free. How? By using tax dollars to pay child care agencies so parents don't have to.
Do Democrats propose looking at why the cost of child care is so high and removing or modifying any of the laws or regulations or high taxes that drive up those costs? No.
It should be noted that significant fraud investigations are underway in Minnesota and other States regarding child care subsidy programs. Funds lost to fraud have been estimated to be in the hundreds of millions of dollars. Democrats in multiple states are resisting efforts by the Trump Administration to dig deeper to uncover all the fraudsters, as well as implementing new measures to reduce future fraud.
Then there is housing affordability, again a campaign issue raised in NYC by Mayor Mamdani. Two methods proposed - freezing rents landlords may charge and, when apartment units become available, assisting non-profits in buying those properties. Again, the solution offered by Democrats is more government intrusion in the private market, because the current amount of government intrusion has not worked so far in NYC.
How do we know rent controls have not worked? Experts estimate 200,000 rent-stabilized apartments in New York City are in buildings that are functionally bankrupt. Rents must cover all the costs of a building. If rental income does not cover costs, then building owners have to choose between paying the mortgage, property taxes, insurance or maintenance. What will happen if further rent controls in the form of a rent freeze are adopted? A report from the Columbia Business School "... found that freezing rents for four years would guarantee the average building in the Bronx would fail.**
Mamdani and his supporters don't seem concerned about the lack of new units, they think that a building going into bankruptcy is an opportunity, because they can help non-profits take over the building, as has been done in the past. A couple of problems with that. First, when a building goes into bankruptcy the sale of that building is controlled by the bankruptcy court. The Mamdani Administration was recently refused by a Federal Judge when they tried to slow the sale of a bankrupt building from one private owner to another.***
The second problem is transferring buildings to Non-profits is not a guarantee of success. In the world of non-profits there is a saying - "no margin, no mission." That means if a non-profit doesn't take in more money than their costs, then they have no money for doing good deeds. Mayor Mamdani recently showcased a non-profit in the Bronx as an example of a non-profit taking over an apartment building. A deeper review found that building had 200 safety and health code violations, including rat and roach infestations and mold. Tenants have complained about lacking heat and hot water, as well as broken doors and windows. That's a building Mayor Mamdani touted as what non-profit owned buildings would be like. Essentially, instead people living under a capitalist slumlord they get to live under a non-profit slumlord.*4
Is there an alternative Democrats could consider to rent controls and non-profit owned buildings? Funny you should ask. For 19 months, rents in and around the city of Austin Texas have been falling. There is a boom of new apartment development. Landlords are competing for tenants.*5
How did this happen? It's that basic economic principle Democrats tend to forget - supply and demand. When supply exceeds demand, prices go down.
In Austin, people were elected to City offices promising affordability and their approach to affordability was not more government intervention into the housing market, it was less. They were willing to work with builders and owners to create more apartments. A post-pandemic building boom occurred and prices are now moving downwards.
Can New York City expect to see an increase in the supply of rental units? To my knowledge, Mayor Mamdani has given no indication of plans to make it easier to build in the City. Furthermore, rent freezes and profitability have never proven to go hand in hand as the statistics about bankrupt apartments in New York demonstrates.
* Obamacares welfare for the wealthy
** NYC apartments facing bankruptcy
*** NYC can't interfere in bankruptcy
Comments