Six tips for program design
About halfway through his provocative albeit unstructured book The Anglosphere Challenge, verbally peripatetic author James C. Bennett
James C. Bennett: You need a hard hat to design housing programs
briskly lists (pages 136-137) six terrific, cogent rules of thumb for state intervention, applicable to affordable housing.
Six useful points!
1. Avoid self-deception. Admit that interventions have a price. “We know that this act will carry a price. We accept that price consciously for the sake of a social goal.”
Any time government pokes its finger in the market pie, that not only changes market behavior, it imposes additional costs on the marketplace. Although government can reduce deadweight and torque through use of outcome compliance rather than process compliance, some level of ‘background’ financial entropy is inescapable.
Every housing program suffers some financial energy loss.
2. Admit that the price is unknowable. In a chaotic system such as a human economy, one can never tell what the true price of an intervention will be in advance. Even in hindsight, it is difficult to understand what the price of an intervention has been.
Reality is an irreproducible result, which makes public policy interventions very hard to analyze; we have no control group, and seldom do we even have useful paired comparisons.
3. Don’t disguise the price. It is better to make a visible, quantified subsidy payment out of tax funds than to mandate that, for example, the price of some good or service be lower.
However, of the two products made in the government factory — laws and money — mandating always seems so much cheaper than appropriating, and thus it uses less political capital, making it so very tempting to try.
4. Limit the time span of interventions. Since prices are information, price controls deliver distorted information, and the longer distortion goes on, the more information is lost.
Here there’s a clear tension among three interesting ideas:
1. Permanence improves efficiency. When programs are ‘permanent,’ stakeholders invest more significantly in them. Prices for Low Income Housing Tax Credits rose dramatically when the program was made permanent in 1990.
2. Periodic renewal aerates the fish tank. Nothing teaches how to do like doing; no matter how clever and experienced we are, the game played by the rules we write differs in some measure from how we envisioned it. So periodic renewal and reauthorization is an opportunity to tweak — and that’s beneficial. (Even the First Bank of the United States had a sunset date!) Imagine how different the GSE reform debate would be if the GSEs’ charters were not permanent.
The First Bank of the
3. Permanence means obsolete ideas endure. Dozens of ideas have outlived whatever policy utility they might once have had, starting with rent control, enacted in 1947 as a ‘temporary emergency,’ still plagues New York City and continues taking a political and policy toll.
5. Prefer familiar interventions to novel ones. With familiar interventions, it is more likely that the price will be understood to some degree.
Housing financial ecosystems are complex and ever-changing, but they also derive from first interventions. Former British colonies looking to import housing innovations are sometimes better served by examining English rather than American best practice. Moreover, not only are familiar interventions likely to be better understood by policy makers, they are much more likely to be quickly and successfully taken up by program participants.
Similarly, ecosystems have differing levels of complexity, so whereas investment tax credits can be effectively transplanted into a highly developed nation with an established non-profit sponsor infrastructure (like
6. Try to minimize the opportunities for moral hazards. All interventions have a tendency to undermine civil society, because they offer the opportunity to benefit some people more readily through a government activity supposedly run for the benefit of all. Pleadings for private benefit are disguised as public policy advocacy, temporary programs gain a tendency to become permanent, and specific benefits acquire a tendency to expand the benefited class.
“There is no such thing as a temporary emergency.”
– Robert A. Heinlein, The Man Who Sold the Moon.
Find an active housing program today without its defenders!
“I dare you to!”
