There is no shortage of experts that the government is willing to hire to gain public favor for a particular policy. For Connecticut, that expert is a man named Cameron Rifkin, a policy associate for the National Council of State Legislatures. On December 4, 2023, at a legislative roundtable discussion on housing, Mr. Rifkin spoke of the grim reality of the housing situation in Connecticut, stating, “Sixty-eight percent of renters in Connecticut with extremely low income are severely cost-burdened, spending 50 percent of household income on rent. About 13 percent of middle-income households are spending 30 percent or more on rent. An income of $66,000 is needed to afford a two-bedroom rental.”
Other problems presented at the roundtable included a deficit of eighty-nine thousand housing units for low-income people and zoning laws preventing larger multifamily properties from being built. Mr. Rifkin presented some solutions, including promoting workforce and multifamily housing, transit-oriented development, and loosening zoning laws. However, he stated that there is “no real one-size-fits-all” and “no magic solution.”
Is this true? No, Mr. Rifkin is wrong; the “magic answer” lies with the very reason there is a housing problem in the first place: government policy. Instead of merely saying this is a nationwide problem and therefore any real solution is out of our hands, current economic policy first should be examined.
Property Taxes
Connecticut, according to WalletHub, ranked forty-ninth out of fifty-one states in the US for the highest real-estate property taxes in the country at two percent; Hartford County is even higher at 2.37 percent. Zillow noted that the median housing cost in Connecticut is up 11.1 percent over the past year, now at $384,277, leaving the annual tax at $8,110 per year. A larger building, such as a fifteen-unit apartment complex listed on LoopNet for $1.3 million, will find its landlord paying an annual tax of $30,810 with the current Hartford property tax.
Unbearable taxation discourages productive behavior, and landlords will face numerous choices on how they should invest in their property while also making a profit. Rent increases for tenants, less maintenance on their buildings, and evictions are all considerations many landlords are faced with. For instance, protests in the north end of Hartford erupted over the poor conditions of apartments and the inaction of the owners to fix the problem: “Arlington is currently in the midst of several lawsuits from residents of other properties operated by the management company. The cases cite similar complaints, with some units rendered uninhabitable due to mold, according to court documents.”
No business can survive on continual losses; buildings cannot be maintained if the landlord cannot make a profit, and there is no incentive to continue operations if the subsequent losses will leave the owner in financial ruin. This is why the median rent in Connecticut is $1,900; discouraged entrepreneurs have no incentive to meet the demand for housing in the state if losses are the end result.
Construction Costs and Public Works
Despite the high property taxes, this isn’t to say that no one has any interest in building in Connecticut. The CT Mirror reports that there are five thousand to six thousand housing permits issued each year. Experts say that there aren’t enough low-cost starter homes and buildings that can house up to four families, but there is nothing alluring about building in Connecticut. The state ranks seventh in the most expensive state to build in, finance writer Michele Lerner writes:
The price per square foot to build a house in Connecticut ranges from $125 to $270 on average, but luxury homes can cost as much as $700 or more per square foot. The average cost to build a 2,500-square-foot house in Connecticut ranges from $312,500 to $675,000. Luxury homes sell for more than $1 million in most parts of the state.
The Connecticut General Assembly in 2023 passed a $7.5 billion spending bill, with $5 billion going to housing, transportation, and other public projects. Around $400 million was put into the Housing Trust Fund in order to create and preserve low-income housing; this type of funding has failed before. The town of Stamford saw the Coleman Towers housing complex receive millions in state financing for renovations. The results were as follows: “They’re living in an unheated building that is a dusty, dirty, noisy construction site. Some have been moved in and out of apartments as construction progresses from floor to floor; others have been asked to move out of the building.”
Taxation affects all incomes; the $7.5 billion in the spending bill came from the residents of Connecticut, from the highest and lowest incomes. Productive activities that would’ve been undertaken by private individuals and businesses are now scrapped, jobs are destroyed, and houses go unbuilt.
Section 8
Low-income families have been the driving force behind the political action and speeches of Connecticut politicians. One topic, however, has been avoided in the discussion of finding the “magic” answer: Section 8 housing. Section 8 assists low-income families in finding housing in the private market and subsidizing the rent, but like all welfare, it destroys productive behavior because of rules built into the system. For example,
Eligibility for a housing voucher is determined based on the household’s annual gross income and the PHA’s definition of a family. Participation is limited to U.S. citizens and specified categories of non-citizens who have eligible immigration status. Generally, the family’s income may not exceed 50 percent of the median income for the county or metropolitan area in which the family chooses to live.
Connecticut’s capital, Hartford, has the highest amount of Section 8 housing in the state, currently at 40.8 percent. The median income of families in the city of Hartford is $36,154. Families on the Section 8 voucher program cannot have an income that exceeds 50 percent of this, $18,077. The Data Commons reports that 10.96 percent of Hartford households make less than $10k a year. Residents on Section 8 have no reason to increase their productivity; otherwise, they will lose their benefits if their income exceeds that of the median. Section 8 subsidizes bad behavior.
Conclusion
Connecticut is a dog running after its own tail; the very policies implemented by state and local governments are the cause of the housing crisis. The magic answer is less government intervention, but the jobs of Cameron Rifkin and Governor Ned Lamont rely on making promises to the public, and the only reason these demands are going unmet is because of barriers put up in front of entrepreneurs and builders. Until people realize this, residents in Connecticut will continue to suffer under the tax regime of Governor Lamont.
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