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Federal assets above and below ground-

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The federal government owns a great deal of valuable assets both above and below ground. The above ground assets include buildings, lands, roads, railroad infrastructure, levees, dams, and hydroelectric generating facilities, to name just a few, many of which are underutilized. Below the ground, the federal government owns the rights to mineral and energy leases, from which they receive royalties, rents, and bonus payments.

Federal real property totals over 900,000 assets with a combined area of over 3 billion square feet and more than 41 million acres of land. Additionally, the federal government owns over 600 million acres of lands and minerals onshore, and owns or manages a total of approximately 755 million acres of onshore subsurface mineral estate.  Offshore, the federal government owns some 1.76 billion acres of lands and mineral estate, extending out 200 nautical miles from our shores.  The federal government’s total mineral estate holdings are therefore about 2.515 billion acres of lands.  Thus, the federal government’s mineral estate land holdings surpass the total surface land area of the nation of Canada.   These holdings, as we will see, are vastly underutilized.

Source: Bureau of Land Management, http://www.blm.gov/public_land_statistics/pls11/pls1-3publandsmap_11.pdf

In fiscal year 2009, federal agencies reported 45,190 underutilized buildings, an increase of 1,830 underutilized buildings from the previous fiscal year. In fiscal year 2009, these underutilized buildings accounted for $1.66 billion in annual operating costs, according to the General Accounting Office (GAO). The majority of federally owned and leased space is held by the Departments of Defense and Veterans Affairs, the U.S. Postal Service, and the General Services Administration (GSA).[i] For example, the federal government’s landlord, the GSA, owns or leases 9,600 assets with more than 362 million square feet of workspace. According to the GSA, in a 2009 report, almost 40 percent of its assets were under performing. In October 2010, a congressional study evaluated the savings that could occur based on better administration of the government’s above ground assets that totaled over several hundred billion dollars.[ii]

IER estimated the worth of the government’s oil and gas technically recoverable resources to the economy to be $128 trillion, about 8 times our national debt. Further, the Congressional Budget Office (CBO) estimated that state and national coffers would generate almost $150 billion over a 10 year period from royalties, rents, and bonuses under the current leasing program and another $7 billion if certain additional resources that are either statutorily or administratively withheld were immediately opened to oil and gas leasing. The CBO study estimates are considered to be conservative when compared to historical data and estimates by other analysts and do not consider the earnings from taxes paid by these industries. IER estimated the government’s coal resources in the lower 48 states to be worth $22.5 trillion for a total worth to the economy of fossil fuels on federal lands of $150.5 trillion, over 9 times our national debt. Most of the coal resources in Alaska are deemed to be federally owned and are estimated to be 60 percent higher than those in the entire lower 48 states but are not included in these estimates.

The Federal Government’s Assets above the Ground

As mentioned above, the GSA owns or leases 9,600 assets covering over 362 million square feet of workspace. GSA is one of nine federal agencies—Department of Defense, Veterans Administration, Department of Energy (DOE), Department of Homeland Security (DHS), Department of Interior(DOI), Department of State, National Aeronautics and Space Administration (NASA), and the U.S. Postal Service–that own or manage 93 percent of federal property.

The average age of GSA’s real property inventory is 46 years and a third of its assets are older than the agency itself. In 2003, GSA indicated that it had 236 vacant or underused properties consisting of commercial office space, warehouses, manufacturing facilities, and special use facilities such as court houses and a shopping mall, and these still remain vacant or underutilized. According to the General Accounting Office (GAO), DOE, DHS, and NASA report about 10 percent of their facilities as excess or underutilized. If this number is extrapolated government wide, about 330 million square feet of government facilities would be excess or underutilized.

Because of legal and regulatory requirements that agencies must meet when they dispose of government property, they are slow at taking those steps.  Government agencies are required to assess and implement corrective actions needed to meet environmental, repair and maintenance issues before a property can be disposed, as well as screening the property for other federal uses. Agencies rarely recoup the costs of these activities. Although Congress passed legislation in 2004 to bypass some of these requirements, agencies are still not readily disposing of unused assets.

GSA now leases more property than it owns. For example, in fiscal year 2009, GSA leased 184 million rentable square feet, while owning 177 million rentable square feet. GAO found that leasing may be beneficial for small agencies or programs with short-term needs, but it is not beneficial for larger ones that need the space for 20 or 30 years.

The Department of Transportation owns or leases about 69,500 real property assets—more than 4 million miles of roads, a heavily subsidized Amtrak, and more than $17 billion in passenger rail infrastructure. In each of these, a study found mismanagement of federal dollars to achieve goals that should have provided benefit. For example, Amtrak managed several projects to improve speed and performance but accomplished only half of the speed other countries are adopting in an area where high-speed rail could be profitable.

The federal government also owns about 1,700 miles of levees, 650 dams, 383 major lakes and reservoirs, 12,000 miles of commercial inland channels, and 75 hydroelectric generating facilities. The study found that the Army Corps of Engineers is also underperforming, costing the government and taxpayers money because of delays in its project planning process that needs streamlining.

While progress has been made on many fronts, including significant progress with real property data reliability and managing the condition of facilities, agencies face long-standing problems with overreliance on leasing, excess and underutilized property, and protection of federal facilities.

Federal Government Assets below the Ground

Federal assets below the ground are primarily mineral and energy resources, such as oil, natural gas, and coal.  For example, the United States owns millions of acres and billions of barrels of oil that can be developed on federal lands and waters. Currently, the government leases only 2 percent of federal offshore areas and less than 6 percent of federal onshore lands for oil and natural gas production. Areas that the federal government could open to oil and gas development include:

These technically recoverable resources total 1,194 billion barrels of oil and 2,150 trillion cubic feet of natural gas that is owned by the federal taxpayer. At $100.00 per barrel of oil and $4.00 per thousand cubic feet of natural gas, the oil resources are worth $119.4 trillion and the natural gas resources are worth $8.6 trillion for a grand total of $128 trillion, or about 8 times the U.S. national debt.[iii]

In August of this year, the Congressional Budget Office (CBO) produced a study that evaluated the potential budgetary effects of immediately opening certain federal lands and waters to oil and gas leasing.[iv] In 2012, the office estimates that bonuses, royalties and rents to the government from current leasing provisions would total $10 billion, 6 times the amount the United States loses in annual operating expenses based on underutilized facilities according to GAO. Over a 10 year period, the CBO estimates that the amount from bonuses, royalties and rents from current leasing provisions would total $148.9 billion. The CBO further estimated that if certain resources currently off limits were immediately opened to oil and gas leasing, another $7 billion would be realized over that 20-year period.

While these are interesting numbers, IER has found them to be very conservative. For starters, we believe that the CBO is understating the potential for bonus bids in ANWR, which they estimate at about $5 billion for the decade of 2013 to 2022, since in FY 2008, total bonus payments were more than $10 billion.

Further, other analysts have projected much larger receipts for federal and state governments from expanded oil and gas leasing. For example, in a February 2009 study, Joseph Mason estimated that in the long-run, expanded OCS development (not including ANWR) would yield an average of $14.3 billion in extra royalty revenue per year. He also estimated an additional $54.7 billion in federal tax revenue annually and $18.7 billion in additional state and local tax revenue that would result from expanded economic activity.[v]

CBO is vastly restricted in its assessment of potential values that might accrue to the U.S. Treasury from oil and gas lease sales because a good portion of its work relies upon U.S. Department of Interior estimates, which are notoriously bad.  For example, DOI estimated that a February, 2008 lease sale in the Chukchi Sea off the northwest coast of Alaska would generate $67 million, but industry actually spent 40 times as much — $2.66 billion – for the right to explore for and produce oil and gas from the region.[vi]  CBO’s numbers should therefore be understood to be limited by the quality of the data it receives from the agencies who report data to it about oil and gas prospectivity of a given lease.  Clearly, those whose jobs depend upon finding and producing oil and gas arrive at different conclusions than those whose information may be much more limited and academic in nature.

According to a multi-agency government study, the federal government owns 957 billion short tons of coal in the lower 48 states, of which about 550 billion short tons are located in the Powder River Basin in Wyoming and Montana. The study did not assess what portion of Alaska’s coal resources are federally owned, though much of them are deemed to be federally owned, due to the lack of specific data. Coal resources in Alaska are larger than those in the lower 48 states, exceeding them by about 60 percent.

Within the Powder River Basin, less than 1 percent of the mineral estate is currently available for mining, containing less than 1 percent of the federal coal (3 billion short tons).[vii] Since the percentage is small, we evaluate the entire 957 billion short tons of federally owned lower 48 coal at an average price of $15 per ton for the subbituminous Powder River Basin coal and $35 per ton for the remainder of the federal lower 48 coal. Thus, the worth of federally owned coal in the lower 48 states to the economy is $22.5 trillion. Added to the oil and natural gas worth to the economy, we get a total fossil fuel worth of $150.5 trillion, excluding Alaskan coal.

Conclusion

The U.S. government owns assets both above and below the ground that could be better managed through sale or lease. The above the ground assets include underutilized buildings as well as roads, levees, rail infrastructure, and hydroelectric generating facilities to name a few. GAO estimated the cost to the taxpayer of annual expenses to underutilized buildings at $1.66 billion annually. These facilities could be sold but for onerous rules that the government has for environmental and structural issues regarding the properties.

In contrast, the government owns an enormously large mineral estate (oil, natural gas, and coal resources) that has an estimated total worth to the economy of over $150 trillion, over 9 times the national debt. These resources could be leased under the right government policies to earn the state and national government royalties, rents, and bonus payments that CBO conservatively estimates could total almost $150 billion over 10 years for the oil and gas leases alone. That figure excludes tax payments that would be provided to state and national governments from the direct and indirect effects of unleashing tens of trillions of dollars of economic activity here in the United States and the extended benefits of more supplies on reducing the costs of energy for consumers and businesses.  It is well known that abundant, reliable and affordable energy supplies act as fertilizer for economic growth that in turn generates new revenue sources.

It is time to better utilize government assets owned by the U.S. taxpayer, and in turn, unleash the U.S. economy’s potential.

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The bill of rights on private property-

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Many people were fearful that the Constitution still concentrated too much power in the hands of the federal government. The electorate in key states insisted upon a “Bill of Rights” lest they would reject the proposed Constitution.

These amendments soon became incorporated into the new Constitution. Six of these ten amendments pertain either directly or indirectly to private property rights.

The Third Amendment states, “No soldier shall in times of peace be quartered in any house, without consent of the owner, nor in times of war, but in a manner prescribed by law.” This amendment grew out of abuses by the British, who had forced people to allow troops into their homes. The amendment clearly protects the rights of homeowners, but is too specific for wider applications.

The Fourth Amendment includes the clause, “The rights of people to be secure in their persons, houses, and effects against unreasonable searches and seizures shall not be violated and no warrants shall issue, but upon probable cause . . .” The “search and seizure” clause has been interpreted to pertain primarily to criminal cases, but the stated intent of this statement is to make people secure in their persons and possessions. In civil cases law enforcement officials presently are able to seize property without a warrant and place the burden of proof upon the owner to show that he did not commit a crime. In fact, some local governments now use civil seizures to supplement their budgets.

The Seventh Amendment requires that for civil cases in federal courts, “no fact tried by a jury, shall be otherwise re-examined in any court of the United States than according to common law.” The common law, as we have seen, rests upon three pillars, including private property rights. This indirect recognition of private property only protects individual owners against other private parties. These common law property claims become enforceable against the federal government under the Ninth and Tenth Amendments.

Amendment Nine states, “The enumeration of certain rights, shall not be construed to deny or disparage others retained by the people.” Amendment Ten further stipulates, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states are reserved to the states and the people.” The original intent of the “enumeration” and the “reservation” clauses clearly reaffirm the contract theory of government held by John Locke and James Madison alike. All “powers not delegated to the federal government” includes any and all private property rights described under the common law. Historically, however, U.S. courts have never used the “reservation” clause to decide important cases.

The most explicit recognition of private property comes in the Fifth Amendment which states “Nor shall [anyone] be deprived of life, liberty, or property without due process of law; Nor shall private property be taken for public use without just compensation.” The first clause is called the “due process” clause while the second part is referred to as the “takings” clause.

Until the middle of the twentieth century, the “due process” clause was often used to strike down regulations imposed on private property especially if they amounted to confiscation by regulation or if they exceeded the federal government’s constitutionally delegated authority. For example, when President Franklin Roosevelt’s National Recovery Act required all trades and businesses to form trade associations, restrict entry, and establish minimum wages and prices, the Supreme Court overturned this wholesale reorganization of U.S. industry as a violation of the “due process” clause. This prompted President Roosevelt to threaten to “pack” the Supreme Court. Although Roosevelt failed to gain congressional approval to expand the Supreme Court from nine to fifteen members, the Court no longer overturned New Deal policies. Subsequently, Courts have created an artificial distinction between “property liberties” and “personal liberties.” Rarely, do Courts use the “due process” clause to uphold “property liberties” anymore. Current judicial theorists argue that the Constitution does not prescribe a particular economic system (capitalism). Therefore, private property liberties are not protected while “personal liberties” such as First Amendment guarantees of free speech are still upheld under the “due process” clause.

The “takings” clause requires all levels of government to justly compensate owners for property taken for public use. Whenever land is condemned or taken for highway construction, military bases, and so forth, courts must estimate the fair value of the property to be paid to the owners. The “takings” clause also requires governments to compensate owners when confiscatory taxes are imposed or regulatory acts render property worthless.

The “takings” clause was intended to prevent the government from forcing a few property owners to bear the burdens of legislative measures intended to benefit the general public. It reduces the uncertainties of property ownership arising out of the political system, helping to mitigate the problems of “mutable” policy alluded to by Madison. Requiring government to compensate owners for the resources that it takes for public use also enhances proper cost-benefit planning on the part of policymakers; but the primary purpose of this clause is to protect property owners from arbitrary governmental power, not to assist bureaucratic planners–or else the framers would have added a “givings” clause entitling the State to be compensated for the public benefits it claims to generate.

Until the twentieth century, U.S. courts never applied the “takings” clause to regulations falling short of transferring legal title to the government. Courts, however, did respect private property. Owners could find relief under the “due process” clause which could overturn state and federal legislation altogether. Indeed, the failure to apply the “due process” clause in property cases places the “takings” clause as the final barrier to full governmental supremacy over private property rights.

At present, courts are evolving their opinions regarding the “takings” clause. They are willing to allow the regulation of property to some extent, but if the regulation goes too far it may become a taking. The current legal uncertainty results from the clashing views on the nature of private property. Does property constitute the rights of individual owners to actions which enjoy constitutional protections against arbitrary government actions or is the government supreme? In our forefathers’ day, the latter view was known as “the divine right of kings.” During the middle of the twentieth century, the economic system which allows ownership on paper while the government made all of the important decisions regarding the uses of property was called fascism. Today, in the United States government supremacy over individual property owners means that the government may temporarily permit us to hold title to certain of its possessions and use them in limited ways at its pleasure. So far, the opponents of constitutional property rights have refused to give their system a new name, but it amounts to the same old system called tyranny.

The essence of private property is the bundle of actions which owners may rightfully perform. Logically, any legislation restricting these ownership acts amounts to a regulatory “taking” and the owner ought to be entitled to be compensated for the decline in value of his assets. The Constitution did not establish unlimited majority rule. Even the legislature must be subject to the rule of law.

Nevertheless, many regulations would not involve compensation under the Fifth Amendment because they either do not involve a regulatory “taking” or measurably reduce the fair market value of property. For example, if landowners have a right to be free of pollution under the common law of nuisance and the owners are too disorganized to protect their rights against polluters, a governmental statute may empower the executive to bring the polluters to court under the common law and even impose special statutory penalties upon them. Since the right to pollute did not exist, no “taking” is involved and the government is merely performing its legitimate role in defense of private property. Other regulations, such as Civil Rights public accommodations cases, the regulatory requirement to serve all patrons would not adversely affect the value of the property. Zoning laws often increase land values. No compensation would be required unless the value of the “takings” is measurably reduced.

Under any interpretation, the “takings” clause is a comparatively weak protection of private property. The government may still impose taxes and acquire resources for public use. Courts must still determine “fair” value by making very imprecise approximations. Finally, some government regulations inhibit trade while actually augmenting the value of certain properties. For example, a zoning ordinance which severely restricts the land available for commercial use might increase the value of the property already employed in trade. Although such laws stifle growth and commercial liberty, the “takings” clause offers no relief to prospective businessmen who are unable to enter the market. The broad interpretation of the “takings” clause is no substitute for the judicial protection of “property liberties” under the “due process” clause.

Following the Civil War, the Thirteenth Amendment ended slavery and the Fourteenth Amendment extended the application of the “Bill of Rights.” Section 1 of the Fourteenth Amendment reads, “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor deny any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

The application of the “due process” clause to the states gives to individuals and businesses the same Fifth Amendment grounds to challenge state regulations as they already possessed against federal law. The “equal protection” clause extends the basic rights of citizenship to all Americans, regardless of race and sex.

Both clauses were specifically intended to protect the property and liberty of blacks from outrageous actions on the part of southern states. It obviously outlaws the old southern “separate but equal” segregation laws. Thanks to the Fourteenth Amendment, all citizens are joint heirs to the old Saxon and English Whig concepts of liberty and property.

Where Have All Our Property Rights Gone?

The constitutional history discussed above clearly shows that the founders did take private property seriously and designed the Constitution accordingly. In order to limit the potential for tyranny the framers:

(1) Divided the powers into three separate branches (legislative, executive and judicial).

(2) Further separated the functions of government between federal and state levels, giving the federal level only a few enumerated powers.

(3) Incorporated a “Bill of Rights” which specifically listed some of the most important applications of individual rights for all people to read and the courts to uphold.

The constitutional protections of our liberties have withered over the years. The division of powers within the federal government may have checked the expansion of one part of the federal government into the domain of another, but there is no protection for the people and states against collusions and the conspiracies among the different branches to exceed the delegated powers of federal authority. For example, the Constitution does not grant the federal government jurisdiction over education, housing, agriculture, or energy, but these functions have been elevated to cabinet level status in Washington by Congress, administered by the executive branch and approved by the courts.

Federal regulations have become so extensive that Congress often delegates its rule-making powers to numerous, non-elected agencies, such as the FTC, FDA, OSHA, SEC, and EPA. These agencies combine executive and judicial functions with their rule-making authority–subverting the division of power concept becoming laws unto themselves with feudal-like dominions in command over the private property held by commoners. James Madison condemned “the accumulation of all powers legislative, executive, and judicial in the same hands, whether of one, few or many and whether hereditary, self-appointed or elective, may justly be pronounced the very definition of tyranny. Were the Constitution chargeable with this accumulation of power or with a mixture of powers, having a dangerous tendency to such an accumulation, no further arguments would be necessary to inspire a universal reprobation of the system.”6

Most recently, the federal government’s appetite for power exceeds its capacity to raise revenues. Instead of taxation and spending, Congress prefers to subvert the rights of private property owners by imposing unfunded mandates upon them, such as “family leave” and employer mandates or forced “contributions” to proposed health-care legislation. The words of Madison decrying the problems of “mutable” policy have been drowned out amidst a flood of ever wider calls for new government powers.

The usurpation of powers and rights belonging to the states and people by the federal government is partly due to defects in the Constitution itself. The framers, unfortunately, never established an effective check or balance that state governments could invoke against the encroachment of federal power into their proper domains. Ever since the Civil War, the threats by states to secede or nullify laws are not taken seriously, no matter how intrusive federal regulations become. Abuses of federal power may only be addressed in federal courts, hardly an independent or adequate restraint on federal authority.

The unfortunate legacy of slavery also made it more difficult to defend both private property and federalism. The framers granted the same constitutional protections to slave-holding as it accorded to legitimate private property. This has led to the mistaken notions among scholars, including noted Civil War historian James McPherson who called the abolishment of slavery in the Thirteenth Amendment as representing one of “the greatest seizures of property in world history.” In fact, no one can ever legitimately own another human being. The English Whigs understood that the first right was self-ownership. The emancipation of slaves recognized the legitimate claims by southern blacks to self-ownership. The United Stated did not “seize” the slaves as third world governments take over factories. The Thirteenth Amendment set the captives free.

Following the Civil War, the southern states frequently violated the property rights and liberties of black people. The Fourteenth Amendment gave the federal Congress the power to protect their civil rights. This amendment was necessary, but it also established a precedent, “a hook” which the federal government has used to exceed its legitimate powers. Today, federal usurpation of the domain belonging to the states and people goes unchecked. “Liberal” scholars consider private property rights to be government grants of privilege–to be tolerated when convenient to the government, but no longer as a significant human right in itself. The concept of “states’ rights” holds even less respect because it reminds one of past injustices committed by states, rather than as safeguards against the centralization of power.

The “Bill of Rights” provides very explicit words guaranteeing the rights of the common people. Unfortunately, words are not self-enforcing. The constitutional contract between the people and the government must provide incentives, counterforces, etc. to ensure that politicians remain the servants of the people, rather than the other way around. Even the most ingenious constitutional safeguards will wither and die if the public no longer appreciates the importance of liberty and property and if they can be made to believe that the crises of the day invariably requires extra-constitutional remedies.

Modern intellectuals do not take private property seriously, nor do they wish to constrain the makers of public policy. Ever since the “New Deal” of the 1930s, “liberal” scholars have rejected the belief that any economic system is proper for all periods of history. To them, political economy does not reveal any enduring set of legal principles. Political economy instead molds itself to the crises of the moment. The Great Depression, The War on Poverty, Projected Environmental Disasters, and the Health-Care Crisis, all supposedly require radical reorganization of the economy. Property rights and the rule of law must give way to the reformers.

In truth, no crisis is ever bigger than the Constitution. A solid education in economics would teach that private property and markets normally align the interests of property owners with the public. Most of the attempts by government to eliminate poverty, regulate prices, control macro-economic fluctuations, or otherwise manage the economy have proven very costly and usually counterproductive. It is also probable that many of the recent ecological scares are scientifically unfounded. Real world problems can usually be addressed within the context of private property and market economics.

Infrequently, a government regulation may provide a convenient route in mitigating a particular problem of the day, but the benefits of infringing property rights are small compared to the sheer costs of government and the uncertainties found in the law today. Moreover the Constitution contains an amendment process to handle situations where the need to act is great and normal remedies appear to be inadequate. This amendment process, however, is a slow, deliberate one which enables the people and the experts alike to investigate, study, and analyze the problem and the costs of alternative remedies. Prudent, reasoned solutions require time.

Neither the Constitution, nor the rule of law can long endure the blight of a misinformed public. As friends of liberty, our eternally vigilant task must be an educational one. The people must ever remember the words of the founders, the wisdom of economists, and the lessons of history. Let us endeavor to turn back the regulatory lords in Washington, the twentieth-century pretenders to our property.

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Private property and government under the constitution-

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Modern Intellectuals Do Not Take Private Property Seriously

by Gary Pecquet
The economic concept of private property refers to the rights owners have to the exclusive use and disposal of a physical object. Property is not a table, a chair, or an acre of land. It is the bundle of rights which the owner is entitled to employ those objects. The alternative (collectivist) view is that private property consists merely of a legal deed to an object with the use and disposal of the object subject to the whims and mercies of the state. Under this latter view, the state retains ownership and may at any time regulate or even repossess the property it temporarily cedes to individuals.

The Founding Fathers upheld the economic view of property. They believed that private property ownership, as defined under common law, pre-existed government. The state and federal governments were the mere contractual agents of the people, not sovereign lords over them. All rights, not specifically delegated to the government, remained with the people–including the common-law provisions of private property. Consequently, the constitutional rights regarding free speech, freedom of religion, the right of assembly, and private property rights are all claims that individuals may hold and exercise against the government itself. In brief, private property refers to the rights of owners to use their possessions which are enforceable against all nonowners–even the government.

The Economic Concept of Ownership

“We may speak of a person owning land and using it as a factor of production,” writes Nobel laureate Ronald Coase in his essay on “The Problem of Social Cost,” “but what the owner in fact possesses is the right to perform certain (physical) actions.” These “rights to perform physical actions,” called private property, constitute the real factors of production and the real articles of trade. Legal title itself means nothing. At best, a title or deed amounts to proof of ownership, not the rights inherent in ownership.

Many people confuse the economic concept of ownership with the mere holding of legal title. Often, title and ownership coincide, but not necessarily. Sometimes businesses lease equipment from manufacturers under circumstances which transfer all of the meaningful rights of ownership to the lessee while title remains with the manufacturer. Here are two examples: if a lease approximates the useful life of the equipment or if the lease itself contains an option to buy the equipment outright for a nominal sum. In both cases the lease transfers ownership in the true economic meaning of rights to employ the equipment without actually changing title. Proper accounting principles, in such cases, require the lessee to record the equipment on its books as an asset and the lease itself becomes a method of financing the purchase. The manufacturer although still retaining title to the equipment no longer “owns” the property and, accordingly, should not include it as an asset.

In other cases, the “bundle of rights” to use an object may be separated and sold apart from the title. Once again, here are two examples: landowners may lease property for a specified period of time while retaining the residual rights to the land upon termination of the contract or the same landowner may sell only the mineral rights, while retaining title along with most of the “sticks” in the property rights bundle. The validity of these contracts implies that ownership refers to the many legitimate uses and disposal of things, rather than title to the object itself.

The economic view of property consisting of primarily actions, rather than things, is also compatible with intellectual property, such as copyrights and patents. The right to publish a book or construct a machine may be reserved to the author/inventor. These species of private property do not refer to any specific objects at all, but are legitimate articles of property nonetheless.

The Common Law Boundaries of Private Property

The British common law has established the legal limits to property rights through case precedents, reflecting the practical needs of trade long before the North American colonies even existed. The common law provided a clear picture of ownership to the Founding Fathers.

The common law has three pillars: private property, tort liability, and the law of contract. Property and tort liability are inexorably intertwined. No one has a right to infringe upon the legitimate rights of others.

If one uses his possessions to create a health hazard or nuisance to others, he is fully liable for damages. In some instances, an injunction may even prevent an unlawful action before it causes damages to others. The very boundaries of private property are defined by common law liabilities. For example, if Mr. A erects a six-foot fence at the border of his land and this fence blocks the sunlight to Ms. B’s garden, does Ms. B have a common law right to access the sunlight? If so, she would have a claim under tort law. If not, Mr. A may construct the fence and Ms. B either relocates her garden or persuades or compensates Mr. A to move his fence away from the established boundary. The point is that a reasonable and efficient result should occur under either rule. What is important is for the liability limits to property be well-established and clearly defined. After many case precedents the common law courts begin to sharply define the boundaries of private property. Owners may then negotiate, mutually reaching an arrangement, without going to battle in court over a legal ambiguity or seeking a new statute.

The “bundle of rights” we call private property comprise the subject matter for all contracts. Every time goods exchange hands, land is purchased, and an employment contract is signed, “bundles of rights” to resources are exchanged. All commerce, and the prosperity which it generates, depend upon the security and certainty of property rights. If an urban area has a notorious high crime rate, local businesses will tend either to relocate or increase prices. If the courts do not establish consistent liability rules, then litigation costs increase and the basis for agreements is undercut. If the legislature threatens to regulate business, then potential competitors may be frightened away. If the potential uses to which property may be employed are subject to regulation by a governmental body, then the value of property declines. Men like James Madison and Alexander Hamilton understood that prosperity depends upon the security and certainty of property rights and designed the Constitution accordingly.

The common law does evolve slowly to reflect changes in both technology and social mores, but it provides a stable set of rules of conduct. Moreover the common people on juries decide common law cases, not kings, not legislatures. This establishes an important rule-making authority outside of any centralized government.

The English Whigs on Property and Government

Our American forefathers did not develop their political theories in an intellectual vacuum. More than a century before the American Revolution, a Civil War raged in Britain. It pitted the Monarchy against Parliament. Among the opponents of the Monarchy were the seventeenth-century English Whigs. Over the course of a few decades, English Whig intellectuals expounded their theories about property and government. These thinkers, including John Locke, Algernon Sidney, and Thomas Gordon, taught America’s founders much about property and government.1

Prior to the rise of the English Whigs, the “divine right of kings” had held that all rights, liberties, and properties actually belonged to the king. The king merely permitted his subjects to use their possessions. The king, however, might regulate the use or even seize these possessions outright at his whim. The people had no claims or rights which could be exercised against the sovereign. Their possessions were at the mercy of the government.

By contrast, the English Whigs believed that the fountainhead for all rights was the sanctity of the individual, not the divinity of the state. John Locke contended that human rights were “natural rights” which pre-existed government. The original owners of the land were the real sovereigns, not the king. Remember the old English saying, “A man’s house is his castle and every man is king.” Owners, however, might consent to give up a small part of their liberty and property to government in order to institute criminal law and national defense and to perform certain other specifically delegated tasks. Legitimate government is formed by contract and may never acquire more rights than delegated by the property owners who institute it. The authorities must never exceed their narrow constitutionally delegated authority–lest they become despotic.

According to the Whig view, legitimate government is an agent, a servant, a mere convenience charged with certain specific tasks. Moreover, even elected governments tend to become despotic as the British Parliamentary experience illustrated. Most of the descriptions of political power during colonial times were negative. Thomas Gordon discussed the issues of the day in Cato’s Letters. Power was often shown as a “clutching grasping hand” or described as a “cancer that eats away at the body public.”

It is also relevant that the Whigs expressed all rights in terms of property. Each man owned his own person and labor. Slaveholders were condemned as man-stealers, the lowest sort of thief who stole the whole person, not merely part of his labor. Whenever the Whigs argued for freedom of religion, the teachers of our forefathers referred to “property in one’s conscience.” When they opposed Sabbatarian laws, prohibiting certain activities on Sunday, they referred to “property in one’s time.” The Whig view equated property and liberty, once again reflecting the economic concept that property refers primarily to freedoms to act.

The Founders and Framers on Property and Government

The best way to examine the importance of private property to our forefathers and its place under the law is to study the words of the founders and framers themselves: men like Thomas Jefferson, James Madison, and Alexander Hamilton. In the passage below Jefferson argues that the colonial landholdings had always been held free and clear of the British crown. Throughout American colonial experience, the British crown exacted a small fee called a quit-rent upon all landholders. The quit-rent often went uncollected and never raised much revenue, but it remained on the books as a legal assertion that all land titles were held subject to the crown. In 1774, Jefferson disputed this kingly claim. Jefferson’s reasoning gave historical teeth to the Whig view that sovereignty belongs to individuals and that property pre-exists government. Therefore the United States government formed two years later would be established by free men, not serfs. Neither could the new government claim to be the recipient of any superior monarchial rights or claims to private landholdings. According to Jefferson:

That we shall at this time also take notice of an error in the nature of our landholdings, which crept in at a very early period of our settlement. The introduction of the feudal tenures into the kingdom of England, though ancient, is well enough understood to set this matter in its proper light. In the earlier ages of the Saxon settlement feudal holdings were certainly altogether unknown, and very few, if any, had been introduced at the time of the Norman conquest. Our Saxon ancestors held their lands, as they did their personal property, in absolute dominion, disencumbered with any superior. . . . William the Conqueror first introduced that system [feudalism] generally. The lands which had belonged to those who fell at the battle of Hastings, and in the subsequent insurrections of his reign, formed a considerable proportion of the lands of the whole kingdom. These he granted out, subject to feudal duties, as did he also those of a great number of his new subjects, who by persuasions or threats were induced to surrender then for that purpose. But still much of the land was left in the hands of his Saxon subjects, held of no superior, and not subject to feudal conditions. . . . A general principle indeed was introduced that “all lands in England were held either mediately or immediately of the crown”: but thus was borrowed from those holdings which were truly feudal, and applied to others for the purposes of illustration. Feudal holdings were therefore but exceptions out of the Saxon laws of possession, under which all lands were held in absolute right. These therefore still form the basis of the common law, to prevail whenever the exceptions have not taken place. America was not conquered by William the Norman, nor its lands surrendered to him or any of his successors. Possessions are undoubtedly of the [absolute disencumbered] nature. Our ancestors however, were laborers, not lawyers. The fictitious principle that all lands belong originally to the king, that they were early persuaded to believe real, and accordingly took grants of their own lands from the crown. And while the crown continued to grant for small sums and on reasonable rents, there was no inducement to arrest the error.2

In The Federalist Papers, James Madison and others argued that the proposed U.S. Constitution would protect the liberty and property of the citizens from usurpations of power from the federal government.

Power in the new government was to be divided into three branches: legislative, executive, and judicial. This would create a system of checks and balances necessary to hinder the unwarranted expansion of political power. The division of power would also make it more difficult for a majority to oppress a political minority and political stability would more likely result. In the following passage James Madison discusses the problems of “mutable policy” (governmental activism). Madison believed that the new Constitution would establish a consistent, stable set of laws necessary to promote prosperity. Otherwise, he warned:

The internal effects of a mutable policy are still more calamitous. It poisons the blessings of liberty itself. It will be of little avail to the people that the laws are made by men of their choice if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood; if they be repealed or revised before they are promulgated, or undergo such incessant changes that no man, who knows what the law is today, can guess what it will be tomorrow. Law is defined to be a rule of action; but how can that be a rule, which is little known, and less fixed?

Another effect of public instability is the unreasonable advantage it gives to the sagacious, the enterprising, and the monied few over the industrious and uninformed mass of the people. Every new regulation concerning commerce or revenue, or in any manner affecting the value of the different species of property, presents a new harvest to those who watch the change, and can trace its consequences; a harvest, reared not by themselves, but by the toils and cares of the great body of their fellow citizens. This is a state of things in which it may be said with some truth that the laws are made for the few, not the many.

In another point of view, great injury results from an unstable government. The want of confidence in the public councils damps every useful undertaking, the success and profit of which may depend upon a continuance of existing arrangements. What prudent merchant will hazard his fortunes in any new branch of commerce when he knows not but that his plans will be rendered unlawful before they can be executed? What farmer or manufacturer will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim of inconsistent government? In a word, no great improvement or laudable enterprise can go forward which requires the auspices of a steady stream of national policy.3

Alexander Hamilton contended that the new federal Constitution would protect private property and liberty from abuses arising at the state level. Between the end of the Revolutionary War in 1781 and the ratification of the Constitution in 1788 state governments faced debtor uprisings, such as Shays’ Rebellion.

State legislatures sometimes granted debt relief or “stays” on the payments of debts. Hamilton believed the proposed Constitution had “precautions against the repetition of those practices on the part of the State governments which have undermined the foundations of property and credit.”4 He referred to Article I section 10 of the Constitution which explicitly protects creditors by forbidding states to pass laws “impairing the obligation of contract” or even devaluing debt obligations by making “any thing but gold and silver a tender in payment of debts.”

The “impairment of contract” clause remains effective today. New state laws affecting long-standing agreements may only alter future contracts, not existing ones. This protects interstate commerce, such as insurance and banking, from potential abuses by state and local politicians who may be tempted to rewrite contracts to redistribute income from outsiders to local constituents.

In the body of the Constitution, Article I sections 9 and 10, also expressly forbids both federal and state governments to grant titles of nobility. This prohibits the establishment of a formal, hereditary class in the United States. In England, the titles “Prince,” “Duke,” and “Earl” consisted of much more than a prefix to a name. Nobility also laid feudal claim to the land held by the common people. Feudal titles, such as Prince of Wales and Duke of York, pretend ownership to the entire realm, subordinating the rights of the landholdings of commoners. America’s framers hated the European class system and the feudal pretense to the land that it represented. The United States are forbidden to ever establish feudal land tenures to lands because sovereign landholdings are essential to a free “Republican form of government.”

The U.S. Constitution contained a number of flaws, most notably, the official sanctioning of slavery. Nor did the Constitutional framers advocate laissez-faire capitalism. Some of the framers, including Alexander Hamilton, believed that the government should actively encourage economic growth through protective tariffs. Nonetheless, the framers all held private property in high esteem. Indeed, commercial prosperity seems to be the chief end of good government to them. The economic system under the Constitution is capitalism with a very few specific exceptions explicitly delegating limited powers to Congress, i.e., coin money, establish a Post Office, lay customs duties, etc. James Madison summarized, “The powers delegated to the federal government are few and defined.”5

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Applicants-obligation-earned income-studies-gov paid–

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Applicants may apply for a Section 8 housing voucher at any county or city housing authority office in their state, and although rules vary according to each authority, in general, residents of a particular area who receive a voucher from the jurisdiction in which they live may use the voucher anywhere in the country, but nonresidents of the jurisdiction must live in the jurisdiction that issues the voucher to them for 12 months before they can move to a different area. Also, priority for vouchers is often reserved for those who reside in the service area of that housing authority.[citation needed]

In many localities, the PHA waiting lists for Section 8 vouchers may be thousands of families long, waits of three to six years to obtain vouchers is common, and many lists are closed to new applicants. Wait lists are often briefly opened (often for just five days), which may occur as little as once every seven years. Some PHAs use a “lottery” approach, where there can be as many as 100,000 applicants for 10,000 spots on the waitlist, with spots being awarded on the basis of weighted or non-weighted lotteries, with priority sometimes given to local residents, the disabled, veterans, and the elderly.[18][19] There is no guarantee that anyone will ever receive a spot on the waiting list.[citation needed]

Family obligations

Families who participate in the program must abide by a series of rules and regulations, often referred to as “family obligations”, in order to maintain their voucher, including accurately reporting to the PHA all changes in household income and family composition so the amount of their subsidy (and the applicable rental unit size limitation) can be updated accordingly. In recent years, the HUD Office of the Inspector General has spent more time and money on fraud detection and prevention.[citation needed]

Earned Income Disallowance

There is a provision for disabled people who have a Section 8 subsidized dwelling to have their rent frozen for a specified time if they are working part-time below a certain amount of money. This is called the Earned Income Disallowance or Earned Income Disregard (EID) and is stipulated under US 24 CFR 5.617, “Self-sufficiency incentives for persons with disabilities—Disallowance of increase in annual income”. This was enacted as part of Quality Housing and Work Responsibility Act of 1998 (QHWRA) (Sec. 508(b); 42 U.S.C. 1437a(d). This requires Public Housing Authorities and some owners, in calculating rent, to temporarily “disregard” increased income earned when certain public housing residents and disabled participants in certain housing assistance programs return/go to work or job-related programs. The idea is to foster self-sufficiency for those who are on subsidies and disability and other assistance.[20][21][22]

Studies

Howard Husock, vice president for policy research at the Manhattan Institute, heavily criticized Section 8 in a 2003 book on housing policy as a vehicle for exporting inner city social problems to the suburbs.[23]

Hanna Rosin, an American journalist, has argued that Section 8 has led to crime being more evenly spread out across U.S. metropolitan areas, without any net decrease. This was the core thesis of her article published by The Atlantic in 2008, in which she linked Section 8 to a crime wave in the Memphis, Tennessee, metropolitan area.[24][25] Rosin’s article attempted to position Memphis as just one particularly troubling example of a nationwide trend: “Still, researchers around the country are seeing the same basic pattern: projects coming down in inner cities and crime pushing outward, in many cases destabilizing cities or their surrounding areas.” Rosin’s article has been highly influential among politicians in cities claiming to be negatively affected by Section 8, such as Lancaster, California.[26]

Rosin’s article was later criticized by Greg Anrig[27] in an article published on The American Prospect. In the article, Anrig accuses Rosin of placing an excessive amount of blame on housing policy for the reported increase in crime. The article makes reference to the fact that Rosin never made a conclusive argument that those who participate in Section 8 were responsible for the higher rates of crime, as those who receive housing support are subject to screenings based on drug use and previous criminal activity. Rosin instead relies on a heat map of crime created by Richard Janikowski and Phyllis Betts who are reported to have said they were “[…] amazed – and deflated – to see how perfectly the two data sets fit together.”

Janikowski and Betts later disavowed any connection between housing vouchers and increases in crime in the area in a later letter to the editor for the Atlantic. Rosin failed to mention that there was a consistent decrease and increase in crime from inner-cities to the inner-ring suburbs across most metropolitan areas due to shifting populations. Anrig argues that economic factors are more likely responsible for Memphis’s increase in crime, as male unemployment almost doubled between the years of 1990 and 2000. Anrig also makes reference to Moving to Opportunity (MTO), a randomized policy experiment. The study concludes that there was no increase in violent crime for the participants of subsidized housing or their surrounding neighborhoods in the five cities tested; Memphis was not a part of the study. Even though the participants were far more likely to stay in poorer areas when given the chance to leave, families still received a modest academic and psychological benefit. In fact, according to a paper prepared for the U.S. Department of Housing and Urban Development and the Office of Policy Development and Research[28] rather than increasing crime, those who use housing vouchers are more likely to move into areas where crime is increasing.

source-eid-earned income disallowance-earned income disregard-eid-qhwra-quality housing and work responsibility act of 1998-husock, howard-manhattan institute-rosin, hanna-atlantic-anrig, greg-american prospectjanikowski, richard-betts, phyllis-mto

Section 8 (housing) government money–

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Section 8 of the Housing Act of 1937 (42 U.S.C. § 1437f), often called Section 8, as repeatedly amended, authorizes the payment of rental housing assistance to private landlords on behalf of approximately 4.8 million low-income households, as of 2008,[1] in the United States. The largest part of the section is the Housing Choice Voucher program which pays a large portion of the rents and utilities of about 2.1 million households. The U.S. Department of Housing and Urban Development manages Section 8 programs.[2]

The Housing Choice Voucher Program provides “tenant-based” rental assistance, so a tenant can move from one unit of at least minimum housing quality to another. It also allows individuals to apply their monthly voucher towards the purchase of a home, with over $17 billion going towards such purchases each year (from ncsha.org analysis).[citation needed] The maximum allowed voucher is $2,000 a month.[citation needed]

Section 8 also authorizes a variety of “project-based” rental assistance programs, under which the owner reserves some or all of the units in a building for low-income tenants, in return for a federal government guarantee to make up the difference between the tenant’s contribution and the rent in the owner’s contract with the government. A tenant who leaves a subsidized project will lose access to the project-based subsidy.

The United States Department of Housing and Urban Development (HUD) and the United States Department of Veterans Affairs (VA) have created a program called Veterans Affairs Supportive Housing (VASH), or HUD-VASH, which distributes roughly 10,000 vouchers per year at a cost of roughly $75 million per year to eligible homeless and otherwise vulnerable U.S. armed forces veterans.[3] This program was created to pair HUD-funded vouchers with VA-funded services such as health care, counseling, and case management.[4]

History

Federal housing assistance programs started during the Great Depression. In the 1960s and 1970s, the federal government created subsidy programs to increase the production of low-income housing and to help families pay their rent. In 1965, the Section 236 Leased Housing Program amended the U.S. Housing Act. This subsidy program, the predecessor to the modern program, was not a pure housing allowance program. Housing authorities selected eligible families from their waiting list, placed them in housing from a master list of available units, and determined the rent that tenants would have to pay. The housing authority would then sign a lease with the private landlord and pay the difference between the tenant’s rent and the market rate for the same size unit. In the agreement with the private landlord, housing authorities agreed to perform regular building maintenance and leasing functions for Section 236 tenants, and annually reviewed the tenant’s income for program eligibility and rent calculations.

The Housing and Urban Development Act of 1970 introduced the federal Experimental Housing Allowance Program (EHAP) and the Community Development Corporation and authorized larger outlays for housing subsidy programs and rent supplements for moderate-income households.[5][6]

In the 1970s, when studies showed that the worst housing problem afflicting low-income people was no longer substandard housing, but the high percentage of income spent on housing, Congress passed the Housing and Community Development Act of 1974, further amending the U.S. Housing Act of 1937 to create the Section 8 Program. In the Section 8 Program, tenants pay about 30 percent of their income for rent, while the rest of the rent is paid with federal money.

The Section 8 program initially had three subprograms—New Construction, Substantial Rehabilitation, and Existing Housing Certificate programs. The Moderate Rehabilitation Program was added in 1978, the Voucher Program in 1983, and the Project-based Certificate program in 1991. The number of units a local housing authority can subsidize under its Section 8 programs is determined by Congressional funding. Since its inception, some Section 8 programs have been phased out and new ones created, although Congress has always renewed existing subsidies.

The 2008 Consolidated Appropriations Act (Public Law 110-161) enacted December 26, 2007, allocated $75 million funding for the HUD-Veterans Affairs Supportive Housing (HUD-VASH) voucher program, authorized under section 8(o)(19) of the United States Housing Act of 1937. This new program combines HUD Housing Choice Voucher rental assistance for homeless veterans with case management and clinical service support which is provided by Veterans Affairs administration at its own medical centers and also in the community.[7]

Summary

The main Section 8 program involves the voucher program. A voucher may be either “project-based”—where its use is limited to a specific apartment complex (public housing agencies (PHAs) may reserve up to 20% of its vouchers as such[8])—or “tenant-based”, where the tenant is free to choose a unit in the private sector, is not limited to specific complexes, and may reside anywhere in the United States (including Puerto Rico) where a PHA operates a Section 8 program.[citation needed]

Under the voucher program, individuals or families with a voucher find and lease a unit (either in a specified complex or in the private sector) and pay a portion of the rent. Most households pay 30% of their adjusted income for Section 8 housing. Adjusted income is a household’s gross (total) income minus deductions for dependents under 18 years of age, full-time students, disabled persons, or an elderly household, and certain disability assistance and medical expenses.[9]

There is an asset test in addition to earned income. Over a certain amount, HUD will add income even if the Section 8 tenant does not receive any interest income from, for example, a bank account.[10][11] HUD calls this “imputed income from assets” and, in the case of a bank account, HUD establishes a standard “Passbook Savings Rate” to calculate the imputed income from the asset.[12][13] By increasing the amount of a tenant’s total income, the amount of imputed income from assets may affect a tenant’s assigned portion of rent.[citation needed]

The PHA pays the landlord the remainder of the rent. Each year, the federal government looks at the rents being charged for privately owned apartments in different communities, as well as the costs of utilities (heat, electricity, etc.) in those communities. The Fair Market Rents (FMRs) are amounts (rents plus utilities) for medium-quality apartments of different sizes in a particular community.[9] As an example, 2012 FMR for 1 bedroom housing in San Francisco is $1,522 and in New York is $1,280 while in many other places it is less than $500.[14]

The landlord cannot charge a Section 8 tenant more than a reasonable rent and cannot accept payments outside the contract.[15]

In addition, landlords, although required to meet fair housing laws, are not required to participate in the Section 8 program. As a result, some landlords will not accept a Section 8 tenant. This can be attributed to such factors as:

  • not wanting the government involved in their business, such as having a full inspection of their premises by government workers for HUD’s Housing Quality Standards (HQS) and the possible remediations required[16]
  • a desire to charge a rent for the unit above FMR[citation needed]

Depending on state laws, refusing to rent to a tenant solely for the reason that they have Section 8 may be illegal.[17] Landlords can use only general means of disqualifying a tenant (credit, criminal history, past evictions, etc.).

However, other landlords willingly accept Section 8 tenants, due to:

  • a large available pool of potential renters (the waiting list for new Section 8 tenants is usually very long, see below)[citation needed]
  • generally prompt regular payments from the PHA for its share of the rent[citation needed]
  • tenants’ incentive to take good care of the property (PHA’s require that tenants not damage rental properties. In many instances a tenant may be removed from the program if they owe a previous landlord monies).

Whether voucher- or project-based, all subsidized units must meet the HQS, thus ensuring that the family has a healthy and safe place to live. This improvement in the landlord’s private property is an important byproduct of this program, both for the individual families and for the larger goal of community development.[citation needed]

source-wikipedia-housing act of 1937-housing choice voucher-hud-va-vash-veterans affairs supportive housing-hud act of 1970-ehap-experimental housing allowance program-the moderate rehabilitation program-voucher program-2008 consolidated appropriations act- pha-public housing agencies-fmr-fair market rents-hqs-housing quality standards

 

Public Housing–more gao and waste

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HUD was not originally intended to have much direct involvement with public housing. The Housing Act of 1937 encouraged the construction of public housing projects by the creation of a federal housing authority to purchase local construction bonds, but local authorities were to build and manage the projects. Public housing was supposed to be supported through rents and local funding.

However, the exodus of working-class families from public housing, along with a rent cap imposed by Congress in 1969, made local housing authorities dependent on federal operating and repair subsidies doled out by HUD. The turning point was legislation that limited rents to 25 percent of tenant income (later 30 percent), which had the unintended consequence of sharply cutting the revenues of housing authorities — and thus maintenance spending.

Federal operating subsidies for public housing were $4.4 billion in 2016, while federal capital spending on public housing was $1.3 billion.10 The economic stimulus bill of 2009 provided an additional one-time infusion of $4 billion for capital spending.11 Individuals in about 1.1 million households currently live in federally financed public housing.12

Most people agree that big public housing projects can be noxious environments for their tenants. They are disproportionately home to extremely poor, single-parent households, along with the crime, social problems, and poor academic performance associated with that demography. Ironically, public housing was originally meant to serve lower middle class working families. But as the economy boomed after World War II, those families found private homes in the growing suburbs, and by the 1960s they had abandoned public housing. Left behind were poor, nonworking families, almost all of them headed by single women. Public housing became a key component of the vast welfare network that gave young women their own income and apartment if they gave birth to illegitimate kids. As the fatherless children of those women grew up and went astray, many projects became lawless places, overrun with gang activities.

Public housing projects have also damaged the city neighborhoods that surround them. They have radiated dysfunction and social problems outward, damaging local businesses and hurting nearby property values. They have also harmed surrounding cities by inhibiting rundown areas from coming back to life by attracting higher-income homeowners and new business investment. Fear of those who live in housing projects has driven away striving, upwardly mobile people who are the ones that make neighborhoods flourish.

Local policies have often made matters worse by ensuring the permanence of public housing. Since public housing cannot be bought and sold on the market, it has disrupted the healthy recycling of property that helps dynamic cities grow and that spawns opportunities for rich and poor alike. Unlike privately owned buildings, public housing has almost always become property permanently fixed in a particular, low-value use, even as surrounding cities and metropolitan areas have changed.

In recent decades, hundreds of thousands of public housing units have been demolished after falling into disrepair and being overtaken by crime and disorder. Chicago’s Robert Taylor homes, for example, consisting of 28 apartment buildings of 16 floors each, were completed in 1962 and demolished by 2007. Chicago’s infamous Cabrini-Green complex has also been mainly demolished, as have many other troubled housing projects across the nation.

To replace some of the units of these complexes, the Hope VI program was launched in the 1990s as the latest incarnation of public housing. Hope VI focuses on creating low-rise projects with a mixed-income group of tenants. Such projects are predicated on the theory that if higher-income families live in the same complexes as poor families, the successful tenants will set a good example for the less successful tenants. Perhaps so, but so far there is no evidence of this. It might be just as likely that the children of the dysfunctional families set bad examples for the children of the more successful families.

It is also far from certain that many Hope VI projects will be able to attract a mix of households in the first place, or over time. And, like prior federal efforts, Hope VI is based on the fallacy of “environmental determinism” — the false belief that the right kind of public housing can cure the ills of distressed households. The truth is that the struggle to improve one’s lot and move to a better neighborhood is what encourages the habits of thrift, education, and marriage which lead, in the long run, to social and economic success.

The Obama administration had proposed to end HOPE VI funding. To replace it, the administration launched the Choice Neighborhoods Initiative to “build on the success and lessons learned from the HOPE VI program.”13 That view is predicated on a program whose success is based on that which it has replaced — severely distressed public housing — rather than any evidence that HOPE VI developments can be well-maintained over time and that low-income tenants in Hope VI projects can been launched toward upward mobility.

Another response to the failure of traditional public housing has been the creation of the Low Income Housing Tax Credit (LIHTC) in 1986, which has subsidized construction or rehabilitation of about 100,000 units of housing each year on average over the past decade. This is another failed attempt to manipulate markets, and it has a variety of negative effects. For one thing, the structure of the program encourages the location of projects in particularly low-income areas, thus exacerbating the concentration of poverty in cities, just as traditional public housing did.14 Another problem is that the method of allocating tax credits to the states results in subsidies going to areas of the country where few housing affordability problems exist.15 And yet another problem is that the bureaucracy and complexity of LIHTC projects appears to substantially raise the costs of such projects.16

Further, the projects built under the LIHTC program have income caps for tenants, which create the same disincentive effects for personal advancement that traditional welfare programs do. Finally, the program essentially functions as a subsidy program for developers. Economists Edward Glaeser and Joseph Gyourko argue that developers effectively pocket the $6 billion or so in annual federal tax credits, while the rents in buildings constructed under the program are generally no lower than they would have been in the absence of the program.17

Rental Subsidies

Though crime-ridden public housing projects are the most infamous symbol of federal housing policy, much more funding today goes toward rental subsidies for low-income families in private dwellings. About 2.1 million households receive federal tenant-based aid, while 1.2 million benefit from project-based aid, which subsidizes rent in particular buildings.18 The cost to federal taxpayers of these programs was about $30 billion in 2016.19

The idea for rental vouchers originated with Lyndon Johnson’s Kaiser Commission on Urban Housing. The commission mistakenly believed that private housing markets could not provide the poor with adequate housing, despite the fact that private markets had been steadily improving housing standards for many decades for families at all income levels. Accepting the commission’s rationale, the Richard Nixon administration proposed what became Section 8 of the Housing and Community Development Act of 1974, which authorized federal rent subsidies, or vouchers, for privately owned apartments.

The rationale for vouchers was straightforward: instead of placing an aid recipient in a government-built housing project, the federal government would provide a voucher that subsidized rent in a privately owned building. Liberals embraced Section 8 vouchers because they believed poor families could not afford decent market-rate housing. Conservatives embraced vouchers because it seemed to be a market-based method of steering the private sector toward serving a public policy goal.

Unfortunately, housing vouchers have caused many of the same problems as public housing, including long-term government dependency and the concentration of poverty. Although traditional federal welfare payments were reformed in 1996 to encourage work and self-sufficiency, Section 8 housing remains an open-ended benefit that recipients can remain on permanently. The problem is compounded by the fact that the value of Section 8 benefits is quite large. For example, the value of a New York City Housing Authority voucher for a two-bedroom apartment in 2017 was a hefty $1,768.20

Although anyone earning less than 80 percent of the median income initially qualifies for the program, priority for vouchers goes to the poorest applicants. By law, 75 percent of vouchers must go to households earning 30 percent or less of median family income for an area. Local housing authorities can go even further in targeting the poorest applicants, and many do. The result is that vouchers are heavily tilted toward very low income single-parent households.

Today, most Section 8 recipients receive a variety of open-ended federal benefits, including food stamps, Medicaid, and the Earned Income Tax Credit, which together constitute substantial permanent welfare support for single-parent households. These programs and housing vouchers risk encouraging the formation and continuation of government-dependent households. Because Section 8 rent is pegged at 30 percent of income, any increase in a recipient’s wages above that amount leads to a steep rent increase, and thus Section 8 creates a strong disincentive for individuals to expand their market earnings and seek personal advancement.

By contrast, unsubsidized housing markets are supportive of a healthy social fabric because they inspire and enable individuals to advance. Private markets reward effort and achievement by giving people the chance to live in better homes in better neighborhoods. As people work hard and gain job experience, they can earn their way to larger homes in nicer neighborhoods. There is no hurdle to improvement, as there is with income-targeted government benefits.

Whereas public housing projects created highly visible pockets of crime and poverty, Section 8 vouchers were supposed to spread out poor families more widely. But that has not happened, and Section 8 tenants have become concentrated in particular buildings and certain areas of cities. Former Democratic Senator Barbara Mikulski of Maryland noted that vouchers have replaced “vertical ghettos with horizontal ones.”

Some landlords specialize in Section 8, becoming experts at the complex regulations, and they skillfully work the system to their financial advantage. With Section 8 tenants, landlords do not have to worry about nonpayment, because the government deposits its share of the rent — the lion’s share — directly into the property owner’s bank account. Moreover, for many buildings the government-paid rent is more than the market rent would be. The reason is that the program allows voucher holders to pay up to the average rent in their entire metropolitan area, and landlords in lower-income neighborhoods, where rents are below average, simply charge voucher holders exactly that average rent.

Taken together, both housing vouchers and public housing contribute to the creation of what might be called “frozen cities.” Subsidized tenants remain stuck in public housing projects and Section 8 buildings for years, even decades. In addition, the actual buildings that subsidized tenants inhabit remain tied to one particular low-value use, which prevents the affected areas of cities from enjoying the natural changes and upgrading over time that other neighborhoods experience. Neighborhoods with subsidized housing do not get renewed, and they offer fewer opportunities for individuals to improve their lives and their surroundings.

Many policymakers remain in thrall of the “free market” voucher. They have yet to grasp that Section 8 vouchers establish no real private market, but are instead merely a categorical income assistance program that has helped to form and perpetuate a social and economic underclass. Republicans have often acquiesced in Section 8 program’s growth, while urban Democrats use the program’s growing funding to shower benefits on their constituents.

To its credit, the George W. Bush administration tried to freeze funding on traditional Section 8 vouchers, and it pushed for the more than 2,000 local housing authorities across the country to make vouchers less of an open-ended benefit. While Section 8 was originally a Republican program, Democrats have consistently come to the defense of it, blocked cuts and reforms, and successfully promoted expansion.

The Obama administration took several counter-productive steps. The Obama-era HUD resisted proposals by congressional Republicans to expand the Clinton-era Moving to Work program. Currently authorized for just 34 of the thousands of public housing authorities, MTW frees local public housing authorities to experiment with reforms. Some authorities have set time limits on voucher rental units and set fixed rents for tenants, which are positive steps for a system that increases rent as tenant income rises and discourages upward mobility.

source-housing act of 1937-hope v1-choice neighborhoods initiative-low income housing tax credit-lihtc of 1986-glaser, ed-gyourko, joe-lbj kaiser commission on urban housing-section 8 jousing and community development act of 1974-

Private Markets and Low-Cost Housing-more waste-

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For eight decades, supporters of subsidized housing have acted on the belief that private markets cannot provide adequate housing for lower-income families. New Deal administrator Harold Ickes frequently made such claims in support of housing subsidies.21 Ickes claimed that “slums cannot be eradicated except on the basis of a government subsidy.”22 In 1935, Catherine Bauer — an influential public housing crusader at the time — claimed that private housing markets could not serve fully two-thirds of Americans, and thus most people would need public housing assistance. The same year, prominent architect Albert Mayer claimed in a New York Times op-ed that 50 percent of the population could not afford to rent in private dwellings.23

The post–World War II era’s explosion of home ownership quickly gave the lie to those sorts of claims, as private markets produced millions of new homes in the suburbs. Unfortunately, all sorts of federal housing subsidies had already been put into place and were difficult to repeal — even with the poor performance of the subsidies and the excellent performance of the private sector in providing new housing during that era.

Before federal subsidy programs, and before the widespread use of detailed housing regulations and zoning ordinances, private markets did a good job of provided housing for lower-income Americans. From 1890 to 1930, for example, vast amounts of new working-class housing were built in American cities. In Philadelphia during that period some 299,000 brick row homes were built — and many of them were so solid that they are still in use. Data from that period show that a significant percentage of residents of poor neighborhoods did not live in overcrowded tenements, but instead lived in small homes that they owned or in homes where the owners lived and rented out space.

From the end of the Civil War until the New Deal, private markets generated a cornucopia of housing types to accommodate those of modest means. In those years, Chicago saw the construction of 211,000 low-cost two-family homes — or 21 percent of its residences. In Brooklyn, 120,000 two-family structures with ground-floor stores sprang up. In Boston, about 40 percent of the population of 770,000 lived in the 65,376 units of the city’s three-decker frame houses. These areas of low-cost, unsubsidized housing were home to the striving poor. In Boston, as pioneer sociologists Robert Woods and Albert Kennedy describe it in their 1914 work, The Zone of Emergence, those neighborhoods teemed with skilled and semi-skilled workmen, the large majority of whom owned their homes.

Even in the poorest neighborhoods, housing was rarely abject. A 1907 report by the U.S. Immigration Commission, for instance, found that in the eastern cities, crowding in such neighborhoods was by no means overwhelming. “Eighty-four of every 100 of the homes studied are in good or fair condition,” wrote the commission.24 True, many lived without hot water or their own bathrooms, but this was a time in America that was far less wealthy than today in general, and rental costs, contrary to legend, were not unduly burdensome. A 1909 study by the President’s Homes Commission of Washington, D.C., found that a majority of the 1,200 families surveyed paid but 17.5 percent of their income for housing costs.25 Many of the poor — just like the “emerging” class that Woods and Kennedy described — lived in small homes they owned or in small buildings in which the owner lived.

We know from Jacob Riis’s powerful 1891 book, How the Other Half Lives, some families lived in very poor conditions. But it is essential to remember that the conditions in which these poor families lived were not permanent — a fact unacknowledged by either Riis or today’s housing advocates. After all, the generation of children for whom Riis despaired went on to accomplish America’s explosive economic growth after the turn of the century and into the twenties. By 1930, the New York settlement-house pioneer Lillian Wald would write in her memoirs of the Lower East Side that, where once Riis had deplored overcrowding, she now found herself surrounded by “empties” because most of the poor had climbed the economic ladder and headed to Brooklyn and the Bronx. In other words, “substandard” housing was a stage through which many families passed, but in which they did not inevitably remain.

Perversely, subsidized housing advocates usually make matters worse when they try to ban the conditions that offend them. By insisting on unrealistically high regulatory standards that drive up housing prices beyond the means of the poor, they help create housing shortages. Since the New Deal, a flood of regulatory mandates — whether for the number of closets, the square feet of kitchen counter space, or handicapped access — have caused private owners and builders to bypass the low-income market in particular. Under current building codes and zoning laws, much of the distinctive lower-cost housing that shaped the architectural identity of America’s cities — such as Brooklyn’s attached brownstones with basement apartments — could not be built today.

It is true that even with relaxed building and housing codes, we might not be able to build brand-new housing within the reach of all those with low incomes. But housing structures last for decades, which facilitates the continual passing along of gradually older homes to those of more modest means. When new homes are built for the middle class, their homes are passed along to the lower middle class. When lower-middle-class families move up to better accommodations, they pass their homes and apartments along to those who are poorer, and so it goes.

A major social benefit of private and unsubsidized rental and housing markets is the promotion of responsible behavior. Tenants and potential homeowners must establish a good credit history, save money for security deposits or downpayments, come with good references from employers, and pay the rent or mortgage on time. Renters must maintain their apartments decently and keep an eye on their children to avoid eviction. By contrast, public housing, housing vouchers, and other types of housing subsidies undermine or eliminate these benefits of market-based housing.

Support for housing subsidies rests upon a failure to understand the importance of the means — such as marriage, hard work, and thrift — by which families improve their prospects so they can move to a better home in a better neighborhood. Better neighborhoods are not better because of something in the water but because people have built and sustained them by their efforts, their values, and their commitments. Subsidies are based on the mistaken belief that it is necessary to award a better home to all who claim “need,” but it is the effort to achieve the better home, not the home itself, that is the real engine of social improvement.

source- Harold Ickes- Catherine Bauer- Albert Mayer-homes commission of washington d.c.- Jacob Riis’s- Lillian Wald-