Albuquerque City Councilor Alan Armijo's proposal to add to the mixed used affordable housing program was overwhelmingly defeated in a 7-1 vote. The rest of the council recognized the purchase was ineffective, fiscally irresponsible and patently unfair to property taxpayers and private apartment owners.
And, it would not have provided low-income housing as the headline on Armijo's recent commentary, "Need For Low-Income Housing Is Now," suggested. That is a completely separate program.
This specific proposal would have spent $23 million to provide only 200 more affordable apartments (out of 658 total), an investment of $115,000 per affordable unit.
It would have also removed millions of dollars from the tax rolls while the public is being hit with major property tax increases. The direct cost in lost property taxes at current rates would be about $240,000 per year total, or $1,200 per affordable housing unit.
Spread out over the total base of 658 units, the property tax subsidy for each would have been around $365 per year and would have subsidized tenants who do not need or deserve such taxpayer-funded largess.
Just because these apartments are privately managed does not mean they are subject to market constraints. Far from it.
They start out with a property tax subsidy that gives them a 7 percent advantage over private owners, assuming the average unit grosses $5,000 per year in rents. The typical well-managed private property can hope to make only about 6-8 percent in a normal market. Thus, on the basis of the property tax subsidy alone, private owners can only compete for market rate tenants by operating at cost.
On top of this, city-owned apartments are funded by tax-free bonds with rates that are about two-thirds what private owners pay. This adds about another 2 percent advantage. In total, if the private owner pays property taxes, borrows money at market rates, and tries to make a modest profit of 7-8 percent on his investment, he is competing for market rate housing tenants with a city owned mixed-use property that has at minimum an 10 percent advantage.
And this assumes a "normal" market, not the current near depression. Tenants are being drawn out of the older apartments because the newer ones are offering money-losing rents and give always as the entire industry struggles to survive in a market that has seen falling rents and rising vacancy for the last three years.
Freed from the necessity to pay burdensome property taxes or make a profit, the city-owned so-called market rate units in our neighborhood are actually being offered at a steep discount that we cannot compete with, pay taxes and still be profitable.
This is why the council heard from so many owners of new and old, large and small properties, all of which face the worst economic conditions since the "bust" of the late '80s. The current situation is a windfall for local tenants, who pay by far the lowest rents of any Southwestern city.
But it is also a serious drag on the local economy and tax base to have this large industry be so depressed year after year. The construction of unsubsidized market rent apartments has ground to a near halt, costing the city hundreds of jobs and thousands in tax revenues. This is not good for anyone.
The core issue is not that rents are too high in Albuquerque. Rather, it is that the average pay here is near the bottom of the nation and local economy is near-stagnant. This has occurred while the rest of the Southwest and nation has enjoyed an economic boom. Is this the legacy of years of uncompetitive taxation, poor services and anti business governmental attitudes at both the state and local level?
Rather than wade further into the morass of public housing, and drive still more business and investment away, Councilor Armijo and his colleagues would do well to make building a healthy local economy "job one" in the new millennium. Let's shift the focus away from allocating poverty and instead stress creating prosperity.
And finally, let's stop scape-goating our private apartment industry, which houses so many people cheaply and well and pays millions of dollars in taxes every year. Instead, let's start doing the things we need to do so that our people can make a decent living in this town and afford to pay a fair rent for a good home.