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The Mixed-Income

by David Stanowski
30 July 2011

It is a well-settled fact that most people select the area where they want to live based on the belief that they will share the same basic value system and behavior as their neighbors. Sometimes the selection process includes a common racial makeup, ethnicity, religion, educational level, profession, and other factors, but in modern times, the two most important factors seem to be income and behavior.

If this is what people do when they have the freedom to make choices, why would anyone see a need to interfere with this process?

It's called "social engineering"!

Many elites don't like the fact that people sort themselves in this way, and blame this natural process for the failure of some low-income people to advance in society, but some social analysts, like Howard Husock, recognize that this natural process is a very good thing, because it directly rewards those who strive to increase their income, and save; and adopt middle-class behavior. It has worked in one form or another since the founding of this country to develop a merit-based society where those who struggled to get ahead, and played by the rules could rise from the lowest levels of society to the very highest.

Learn Purchase Real Estate for Cents on the Dollar!

When elites observe those who are unwilling to sacrifice and struggle, and to adopt acceptable behavior failing to advance, often from one generation to the next; they feel compelled to tamper with the natural process. Many examples could be cited, but their latest venture into social engineering is something called "mixed-income development".

The hypothesis of this social experiment is that those who have failed to climb the social and economic ladder, could do so if they had the proper role models. Allow them to live next to a hard-working middle class family, and they will see what they need to do to succeed!

What are some of the preliminary results of this experiment?

"When middle-class residents are combined with those requiring “deep subsidy,” solid, striving citizens are inevitably plagued by underclass behavior—a fact of life at Fairfield and Linden. Projects combining the classes, or low-income projects built in middle-class neighborhoods, make it more difficult for the emerging black middle class to consolidate its economic gains, to stake out buildings and neighborhoods of its own, in which price is a barrier to those who do not adhere to middle-class norms of behavior. Moreover, the critical mass of middle-class residents necessary to secure such neighborhoods is diminished because the state lures some of them to subsidized units."
Subsidizing Discrimination at Starrett City

"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."
Public Housing and Rental Subsidies

"Revisiting the early history of public housing suggests some parallels with HOPE VI initiatives and casts doubt on the ability of policy makers to sustain socially engineered communities."
“Is Mixed-Income Development an Antidote to Urban Poverty?”


In short, there are still major questions surrounding this social experiment:

Why will the middle class want to volunteer to be role models? What incentive do they have to leave their safe and comfortable middle-class neighborhoods to become "lab rats" in this experiment?

What if the low-income residents do not respond to their new role models, and just make life difficult for the middle-income neighbors?
What will happen to their Utopian experiment? 

"However, while more research into this topic is clearly needed, it is probably fair to say that the mixed-income approach has a varied record of success in accomplishing its goals. Its clearest success seems to be in alleviating community objections to low-income housing, while the most questionable results are in achieving positive social or economic gains for low-income families through interaction with their higher-income neighbors. Also, while a mixed-income approach offers potential benefits, it also presents additional costs and risks. Furthermore, in many situations the benefits offered by mixed-income housing might be achieved in developments without a significant mix of incomes."
Mixed-Income Housing Developments:
Promise and Reality

Economic Impact:
An earlier article examined the potential economic impact of building large mixed- income developments in this city. It found that adding 1,527 total units into an existing total of 32,368 housing units, with 12,425 of them, or 38%, vacant; will probably have major negative impact on the local real estate market!

If 4,473 of the vacant housing units are classified as second homes for seasonal, recreational, or occasional use that still leaves 7,952 vacant housing units, or 25% of the total housing units in the City, that are “distressed” due to the fact that they are of no current benefit to the owners.

If the 1,527 new housing units are filled with current residents of the City of Galveston, then these tenants will be pulled out of existing properties and will create 1,527 additional vacant housing units for local property owners.

If the average rent for these units is $700/month, the lost income per month would be $700 x 1,527 = $1,068,900, or $12,826,800 per year!

Studies of mixed-income developments have found that in order to be successful they must make a healthy profit, or the  maintenance will fail whether the units are subsidized or not!

"In this model, nonprofit community groups run smaller, mixed-income apartment buildings, financed by monies raised through the Low-Income Housing Tax Credit, a program set up in 1986 to encourage corporations to support low-income housing. In New York City some 200 nonprofit groups manage 48,000 housing units. Though at this point such housing is widely viewed as successful, the New School for Social Research has found, in an examination of 34 developments in six cities, that “beyond an initial snapshot of well-being, loom major problems which, if unaddressed, will threaten the stock of affordable housing in this study.”

"Predictably enough, more than 60 percent of the projects already had trouble maintaining their paint and plaster, elevators, hall lighting, and roofs."

We Don’t Need Subsidized Housing

"The assumption is that the hard thing to do is to get housing built. In fact, the hard thing is to run it well."

Don’t Let CDCs Fool You

The unexamined and unanswered question is how well do these artificially-created developments fare in other cities, and what can be expected in Galveston.

Key Addmission:
On 24 February 2011, the GOGP filed an ORR with the GHA asking for its communications with Lone Star Legal Aid. GHA attorneys appealed to the Attorney General asking to withhold this correspondence. WHY? What didn't they want the people of this city to see?

After several months of debate, the AG finally ruled in our favor, and we received 950 pages of documents. One proposal, from Georgia State University, included this shocking statement, "In our analysis of crime and traditional project-based public housing in Atlanta, we have found something rather intriguing. Specifically that crime, both non-violent and violent, is actually more pronounced in the new HOPE VI mixed income redevelopments than in the traditional public housing. Much of this has to do with crimes of opportunity (there will be more opportunity in the mixed income developments)."

Is this what they were trying to hide from public view?

After reading this shocking statement, from GHA's own consultants, we decided to do some more research into the social dynamics and problems that may arise in mixed-income developments.

Social Impact:
The success of this social experiment rests entirely on enticing a large number of middle-income residents to choose to live in the development. What incentives can the developer offer to make this happen?

The two that come to mind are price and location. However, since the GHA seems locked in to spending about $250,000 per unit, market-rate units can hardly offer bargain rent. They may be "First-Class" or "Class-A" apartments, at that cost, but will many people want to pay the estimated $2,500/month for a 2 Br/
2 Ba unit when a house can be purchased for the same monthly payment?

The location that is often touted to convince the skeptics that this will work in Galveston is the old Magnolia site. It is close to UTMB, and downtown, but hundreds of vacant housing units are already available within a mile or two of the Magnolia site, so this is hardly a major incentive to accept what is an unnatural living arrangement for the middle class along with steep rental payments.

Some mixed-income developments are built close to downtown areas of major cities where there is an extreme shortage of available units. This would offer an incentive to middle-class renters in other cities that just does NOT exist in Galveston!

It is difficult to find a great deal of information in the media about how mixed-income developments are faring in other places. Are all the units filling up? Are the middle class buying in to the social experiment? Are they proving to be a positive influence on their low-income neighbors, or is the experiment failing to prove the hypothesis?

"One of my friends, for a short time, rented a "market rate" unit in another nearby mixed income development called North Town Village. He couldn't wait to leave. His car got broken into repeatedly, his bike got stolen, he had to deal with trash strewn all over the place, and neighbors who camped out on his shared porch all hours of the day and night partying. Not a good experience. You don't hear about experiences like his in the news."
How is Mixed-Income Doing in Chicago?

The same article reports that another development called Parkside of Old Town offered its market-rate units for sale, but is having a lot of trouble selling them.

"Could it be -- and could people be afraid to admit -- that market rate buyers simply don't want to live right next door to government subsidized renters?"

"Mixed-Income housing comes with a steep price indeed. Many of these individuals fail to assimilate and quickly revert to insidious taskings such as robbery, burglary, drug dealing, etcetera. Last week a work crew was robbed at gunpoint next door and prior to that a neighbor at the next house down had a gun drawn on him while removing a childseat from his car right in front of his home. The excessive loitering, the front yard card games and barbecues as well as the makeshift candy stores should have been left in the projects!"

"My 1/2 million dollar home, my Mercedes and my executive status does not make me an inspiration to these people, it makes me a target!"
Arresting Tales

"A high proportion of the relocated public housing respondents described what could be called psychological benefits from their move, while relatively fewer of the affordable and market-rate renters and owners mentioned this."

"On the other hand, respondents across housing tenure and income lines expressed increasing concern about the conduct of some neighbors, both in the development and from the surrounding neighborhood. Over time, significantly fewer residents discussed relations among neighbors in positive terms and there seemed to be more focus on the challenges presented by living in these diverse environments."

"Beyond perspectives on the general tenor of interaction, about half of the affordable and market-rate respondents expressed specific frustration at the conduct of relocated public housing residents."

"It’s just irritating. It’s just really inconsiderate. Weren’t you ever told that perhaps at 2:00 a.m. on a weeknight some people may have to go to work?… There are people in our building and people in the surrounding buildings that do need to get up to go to work and [they] disregard anybody needing that. When they’re playing the music so loud the windows are shaking and they’re screaming and laughing, it’s well, I’m glad you’re having a good time, but not at 3:00 a.m. on a Wednesday."
Market-rate owner, Westhaven Park

Areas of concern included loud music and other forms of noise at all hours of the day and night, parties in the parking lot, “loitering” in front of the entryways of buildings, littering, a general lack of care for the surroundings, and, above all, unsupervised, unruly children playing in and around buildings and “running wild.” These frustrations with neighbors’ behavior do not break down purely along class lines; some relocated public housing residents also expressed concerns about the conduct of some of the residents and their visitors in the new developments."
Living in a Mixed-Income Development:
Resident Perceptions of Benefits and Disadvantages

Much more investigation needs to be done about this social experiment before Galveston makes any further commitment to it!

The False Promise of the Mixed-Income Housing Project


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