Affordable Housing Institute : US

Even as cities become richer, their need for workforce housing increases, and because this problem is local, they have to use local resources. 

 

 

Most such approaches are supply-side — land owned by the city or taken for taxes, inclusionary zoning, and new-built mixed-income housing — but there is at least one city using demand-side subsidy, as chronicled in this New York Times article (4/19/06):

 

New York City will offer housing subsidies of up to $14,600 to entice new math, science and special education teachers to work in the city’s most challenging schools, in one of the most aggressive housing incentive programs in the nation to address a chronic shortage of qualified educators in these specialties.

 

Many cities — including Chicago, Minneapolis, Cleveland, and Milwaukee — have mandated residency laws whereby public officials such as (say) police must live in the city (although, this being Boston, more than three-quarters evade the law).  They are predicated on the sound principle that living close enhances service:

 

George Washington firmly believed that public employees ought to live in the city they serve. “Every matter, & thing, that relates to the City ought to be transacted therein and the persons to whose care they are committed [should be] Residents,” he wrote in 1796.

 

I suggest you live over in Anacostia.

 

But of course, requiring residency can be ineffective — even counterproductive — since those whom our city wishes to attract may move to another city less expensive.  Enter the second product of the government factory: money, in the form of financial incentives:

 

Under terms of the program, negotiated with the city teachers’ union, the administration of Mayor Michael R. Bloomberg will pay as much as $5,000 up front to the recruits for housing expenses, including the cost of moving to the New York area, a down payment on buying a home, or broker fees and security deposits for renters.

 

The program will also pay a $400 monthly housing stipend for two years. Teachers can live wherever they want within the metropolitan region but must commit to work for three years in one of New York City’s toughest middle schools or high schools. The city’s effort comes as the nation faces a chronic shortage of math, science and special education teachers that has sparked heavy competition to court such educators.

 

 

New York has gone to some trouble to assure that the teachers are serious about the commitment, and to be evenhanded between newcomers and long-time residents:

 

To be eligible for the subsidies, teachers must have at least two years’ experience.  […]  Former New York City teachers who have been out of the system for at least two years will also be eligible for the subsidies. Teachers already living in the New York area who switch to the city schools could simply use the money to pay their existing rent or mortgage.

 

The city could also have simply raised teachers’ salaries. 

 

It always spells M-O-N-E-Y

 

Why didn’t it?  Two reasons come to mind:

 

 

·         A raise would affect everyone regardless of residency, so it would not stimulate the desired behavior (moving to New York).

·         A raise is likely to be permanent, whereas an incentive can always be temporary.

 

How big an incentive is this?

 

Depending on experience, teachers eligible for the subsidies will earn base salaries of $45,600 to $69,840 a year. The city projects that the housing assistance will cost about $15,000 per teacher, including federal payroll taxes and other ancillary charges …

 

Since the subsidy assistance amortizes over two years, it’s equivalent to an 11% to 16% raise.

 

… for a total of perhaps $1.5 million a year until the shortage abates.

 

“Until the shortage abates.”  Obviously the program has been sold as temporary.

 

While that is a relatively minor sum in the context of the system’s annual budget of more than $15 billion, officials said the program had a value that far outstripped its cost.

 

“It has a major impact as far as really sending a signal to those teachers that we want you and will be really creative in attracting you here,” said Deputy Mayor Dennis Walcott, the mayor’s top education aide at City Hall.

 

Add 15% incentives and stir

 

Evidently in the Big Apple, ‘creative’ means 15%.  Would a bigger increase have been more creative?

 

I’ll get back to you on that

 

The deal marked a rare example of cooperation between the union and the Bloomberg administration.

 

Why was the union so cooperative?

 

Randi Weingarten, the president of the teachers’ union, the United Federation of Teachers, said that her union had growing concerns that the state might force the transfer of veteran teachers into struggling schools if steps were not taken to create incentives and get volunteers.

 

“We solved the problem in probably one of the most innovative ways we could,” she said.

 

Ah — ‘innovative’ means ‘without compelling veteran teachers to move.’  That’s cooperative, all right!

 

“Affordable housing is really important to recruit and retain teachers.”

 

Kid, maybe you could be the No Official Subsidy teacher

 

Luring teachers with housing assistance is widespread:

 

Chicago offers up to $7,500 in housing aid to all teachers but requires newly hired teachers to live in the city.

 

In California, a state program offers teachers substantial help with the down payment on a home that depending on the local market can amount to $20,000 or more. But the money must be repaid.  [Favorable hard debt. — Ed.]

 

Some localities mix demand and supply-side: both incentives and accommodations:

 

And some local districts, like Santa Clara and San Jose, in extremely hot housing markets have their own programs that include monthly stipends or subsidized rentals in district-owned housing developments.  When programs are combined, some teachers can get as much as $100,000 in home-buying help, said Ken Giebel, a spokesman for the California Housing Finance Agency.  But much of the money has to be repaid.

 

Going back to the government factory, the great public-policy benefit of using money to attract rather than laws to compel is its transparency.  Money and choice create markets; markets create information.  Information reveals that solving these problems is much more expensive than we wish.  Conversely, compulsion prevents choice, which conceals information, leaving everyone groping in the dark.

 

We can come up with a good policy, never fear!

 

Conversely, when money is involved, we uncover all the stakeholders who benefit, exposing the free riders, and allowing for resources to be stacked atop each other:

 

You see how well they work together!

 

In New York City, teachers who get the housing assistance would likely also be eligible for four years of up to $3,400 in annual tuition reimbursement from New York State under a separate incentive plan promoted by the Pataki administration several years ago to recruit educators into high-needs schools.

 

Moneyed incentives also sharpen the visibility and importance of fulfilling one’s bargains:

 

 

Teachers receiving housing assistance will have to sign a contract requiring them to repay part of the money if they fail to serve three years in a struggling school.

 

Just sign here …

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