Reparations Not the Answer

Editor’s note: Coleman Hughes, a columnist at the online magazine Quillette, delivered the following testimony at a United States House Judiciary subcommittee hearing on Bill H.R. 40 on June 21, 2019. If passed, the bill would establish a commission for reparations.

While his testimony is not specific to Virginia, this is a state that once held as many as a half-million slaves, a legacy that hangs over public policy discussions to this day. Mr. Coleman’s testimony is, we think, an important contribution to those discussions.

Thank you Chairman Cohen, ranking member Johnson, and members of the committee. It’s an honor to testify on a topic as important as this one.

Nothing I’m about to say is meant to minimize the horror and brutality of slavery and Jim Crow. Racism is a bloody stain on this country’s history, and I consider our failure to pay reparations directly to freed slaves after the Civil War to be one of the greatest injustices ever perpetrated by the U.S. government.

But I worry that our desire to fix the past compromises our ability to fix the present. Think about what we’re doing today. We’re spending our time debating a bill that mentions slavery 25 times but incarceration only once, in an era with zero black slaves but nearly a million black prisoners—a bill that doesn’t mention homicide once, at a time when the Center for Disease Control reports homicide as the number one cause of death for young black men. I’m not saying that acknowledging history doesn’t matter. It does. I’m saying there’s a difference between acknowledging history and allowing history to distract us from the problems we face today.

In 2008, the House of Representatives formally apologized for slavery and Jim Crow. In 2009, the Senate did the same. Black people don’t need another apology. We need safer neighborhoods and better schools. We need a less punitive criminal justice system. We need affordable health care. And none of these things can be achieved through reparations for slavery.

Nearly everyone close to me told me not to testify today. They said that even though I’ve only ever voted for Democrats, I’d be perceived as a Republican—and therefore hated by half the country. Others told me that distancing myself from Republicans would end up angering the other half of the country. And the sad truth is that they were both right. That’s how suspicious we’ve become of one another. That’s how divided we are as a nation.

If we were to pay reparations today, we would only divide the country further, making it harder to build the political coalitions required to solve the problems facing black people today; we would insult many black Americans by putting a price on the suffering of their ancestors; and we would turn the relationship between black Americans and white Americans from a coalition into a transaction—from a union between citizens into a lawsuit between plaintiffs and defendants.

What we should do is pay reparations to black Americans who actually grew up under Jim Crow and were directly harmed by second-class citizenship—people like my Grandparents.

But paying reparations to all descendants of slaves is a mistake. Take me for example. I was born three decades after Jim Crow ended into a privileged household in the suburbs. I attend an Ivy League school. Yet I’m also descended from slaves who worked on Thomas Jefferson’s Monticello plantation. So reparations for slavery would allocate federal resources to me but not to an American with the wrong ancestry—even if that person is living paycheck to paycheck and working multiple jobs to support a family. You might call that justice. I call it justice for the dead at the price of justice for the living.

I understand that reparations are about what people are owed, regardless of how well they’re doing. But the people who were owed for slavery are no longer here, and we’re not entitled to collect on their debts. Reparations, by definition, are only given to victims. So the moment you give me reparations, you’ve made me into a victim without my consent. Not just that: you’ve made one-third of black Americans—who consistently poll against reparations—into victims without their consent, and black Americans have fought too long for the right to define themselves to be spoken for in such a condescending manner.

The question is not what America owes me by virtue of my ancestry; the question is what all Americans owe each other by virtue of being citizens of the same nation. And the obligation of citizenship is not transactional. It’s not contingent on ancestry, it never expires, and it can’t be paid off. For all these reasons bill H.R. 40 is a moral and political mistake. Thank you.

Coleman Hughes is a Quillette columnist and an undergraduate philosophy major at Columbia University. His writing has also appeared in the New York Times, Wall Street Journal, Spectator, City Journal, and the Heterodox Academy blog. You can follow him on Twitter @coldxman

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As Arlington Housing Prices Soar, Supply is Unresponsive

The worst fears of Amazon critics are coming true. Housing prices are becoming increasingly unaffordable — even before Amazon sets up shop at its HQ2 facility in Arlington and floods the region with 25,000 employees.

The average home price in Arlington County jumped 7% in the past year to $713,000, as investors poured into the market in anticipation of Amazon’s arrival, reports the Washington Post. Inventories are so sparse that some popular Zip codes in Arlington and Alexandria show no homes for sale at all.

Alexandria saw a comparable increase in average home prices, while Fairfax County saw a year-over-year gain of 6%. Said Terry Clower, director of George Mason University’s Center for Regional Analysis: “This is a market response to the Amazon HQ2 announcement, with investors competing with residents for a shrinking number of homes for sale.” 

In a functioning real estate market, prices act as a signal for the allocation of capital. A surge in home prices would be matched by a surge in home building as developers and builders. But, as seen in the table above, based on Arlington County permit statistics, the supply of housing is increasing negligibly. In 2016 the county’s housing stock stood at 111,549 units. According to Arlington County permitting data, the increase in housing units (completions minus demolitions) was only 810 units in 2017 and a negligible 220 units in 2018 — roughly a 1% increase in the housing stock over two years.

What’s going on here? Are developers and home builders insensate to the growing gap between the supply and demand of housing? Or could we be looking at the wrong numbers? After all, it takes time after building permits are issued to actually complete construction of a dwelling. Perhaps there is a flurry of housing construction in the pipeline.

Let’s see. Here are the numbers for housing “starts” and “approvals” for the past two years.

There has been a fairly significant increase in the number of housing “starts” — nearly 5,500 units over the past two years. However, those “starts” have not translated into a remotely comparable number of completions. I cannot explain the discrepancy. If the Washington Post wants to dig deeper into the dynamics of Northern Virginia’s housing market, it might seek to understand these statistics.

What does seem reasonably clear, however, is that the number of new residential housing “approvals” was meager in 2017, even weaker in 2018, and came to complete halt in the second half of 2018. What does this mean? Did developers simply submit very few proposals in 2018? Was the zoning board hostile to new projects? Is there some other explanation entirely? 

As I have said repeatedly, the phenomenon of sky-rocketing housing prices in Arlington, Alexandria, and Fairfax County is readily understood in terms of supply and demand. Thanks to the region’s dynamic economy, demand is increasing faster than a lagging supply. Indeed, the gap is the greatest in Northern Virginia’s urban core, where demand is strongest. 

For whatever reason, the supply of housing in Arlington County is inelastic — unresponsive to surges in demand. A simplistic explanation would point to the lack of undeveloped land to build upon. But that doesn’t explain why developers are unwilling or unable to recycle land of marginal value (used car lots, aging malls and shopping centers, outdated office parks, long-in-the-tooth neighborhoods of tract housing) into higher density, mixed-use projects of the type that are currently in vogue.

Trying to solve the emerging housing crisis through direct public and private subsidies for low-income households is a fool’s errand. Public authorities can’t possibly build enough workforce housing at $350,000 per unit to make a difference. Arlington, Alexandria and other inside-the-Beltway localities need to increase the supply of housing. If they fail, Arlington will displace the middle class and create armies of homeless like San Francisco and Los Angeles, with all the attendant social ills those cities seem so helpless to solve.

A version of this commentary originally appeared on June 14, 2019 in the online Bacon’s Rebellion.

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Is the U.S. Economy Slowing Down? Are We Headed for a Recession?

Next month will mark the longest U.S. economic expansion on record. But growing signs of a slowing economy — and potentially a recession — have some businesses concerned about the future.

Increased uncertainty is never a good thing for businesses. If they don’t know the future demand for their products or services, then they hold off on plans to hire people or purchase more equipment.

Several recession indicators bear watching.

First, the shape of the yield curve, which represents the relationship between interest rates on short-term and longer-term securities, is an important signal.

Typically, the yield on a 3-month Treasury bill is lower than on a 10-year note. That’s because there is less uncertainty over what will happen in only three months compared with 10 years.

Yield curves that are steep suggest investors are optimistic about future economic growth and are willing to purchase and hold long-term Treasury notes. In contrast, an inverted yield curve where the 3-month yield is higher than the 10-year yield points to a slowing economy. Since 1956, an inverted yield curve has preceded every recession by a year and a half or so.

In mid-March, there was a slight inversion of the yield curve when the 3-month Treasury bill rose above the 10-year note. It lasted only two days and the curve had been fairly flat until May 23 when it inverted once again. As of June 3, the yield on the 3-month bill was 0.28 percentage points above the 10-year note.

The stock market is another indicator that typically falls before a recession because investors reduce equity holdings when they expect corporate profits to fall.

The S&P 500 fell about 12 percent in December and then rebounded in 2019. Since the beginning of May, it started to decline once again and was nearly 7 percent off its highs by the end of May. However, caution is needed when interpreting the change in a single indicator. As economist Paul Samuelson famously said, the stock market has predicted nine of the past five recessions.

An economic index by Chmura Economics & Analytics that predicts the probability of recession six months forward rose to a 21 percent probability of a recession in November 2019 because of the recent drop in the S&P 500 and the narrowing yield curve.

This is a 17-percentage-point increase from the prior month. But the index number is close to what it was earlier this year when it was a 26 percent probability in January and February and a 25 percent probability in March.

A single month of elevated probability in the index provides a warning that the economy is likely to slow.

The index uses the consumer price index, the spread of the Treasury curve, volatility in the Treasury curve, and the S&P 500 to predict when financial conditions are ideal for a recession. A sustained six-month period of greater than 50 percent probability establishes a clear sign that has historically been associated with recession.

The National Bureau of Economic Research is the official arbiter of recessions. The agency looks at indicators such as gross domestic product, real income, employment, industrial production and real retail sales to determine if the nation is in recession.

Currently, each of these indicators show economic growth. Real GDP grew an annualized 3.1 percent in the first quarter of 2019, and first-quarter real disposable personal income was 2.2 percent higher than the previous year.

The monthly indicators were all higher compared to a year ago in April: Employment rose 1.8 percent, industrial production increased 0.9 percent, and real retail sales were 1.1 percent higher.

Most of these indicators are holding steady or growing. Industrial production is the only indicator that is showing a worrisome slip from a strong 5.4 percent year-over-year pace in September.

Economists often talk about “headwinds” that may slow growth. Perhaps the greatest headwind to growth at this time is tariffs that will raise the price of goods consumed in the U.S. as well as potentially disrupt the supply chain of inputs needed to produce goods in the U.S. such as automobiles.

We don’t expect a recession in 2019, but there are enough warning signals to raise the caution flags.

A version of this commentary originally ran in the June 9, 2019 edition of  The Richmond Times-Dispatch.

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June Primaries Accelerate Virginia’s Leftward Drift

It’s hard to dissect a battle while the smoke is still clearing, but the June 11 Virginia primaries demonstrated again the state’s continued and steady move away from its conservative past.  It was not a Great Leap Forward for the progressive elements of the Democratic party, but where they didn’t win, they applied some serious heat.

Case in point, Senator Minority Leader and ultimate inside player Richard Saslaw of Fairfax, who only survived because the 51 percent of voters who rejected him had two liberal choices and split their votes.  Case in point, former and once-disgraced delegate Joe Morrissey, who defeated long-time incumbent Senator Rosalyn Dance for the seat stretching between Richmond and Petersburg.  Dance is no conservative but has proven willing to work across the aisle.

Morrissey’s comeback, focusing on a fairly classic time-for-a-change theme, demonstrates another key point.  Democrats are more forgiving of various political sins and always have been.  If they can forgive Morrissey, why should any Republican be surprised that the scandals surrounding Governor Ralph Northam, Lt. Governor Justin Fairfax and Attorney General Mark Herring haven’t destroyed them?

Primaries are about partisans and the general electorate in November will be swelled by moderates and independents, but no GOP strategist can assume a Democratic turnout depressed by those embarrassed statewide leaders.  Northam in particular is back in position at the head of that parade.

Republicans watch in amazement time after time as Democrats suture up their coalition in time for the general election, but never seem to learn the lesson on display.

Political parties are built from the ground up.  Future governor Jim Gilmore entered the game more than 30 years ago by winning as commonwealth’s attorney of Henrico County, once solid Republican territory.  Do we see the future now in either of the two very liberal Democrats nominated for that same job in Fairfax County and Arlington County?  George Soros and other national Democratic donors clearly do, having poured unprecedented funding onto both campaigns, enough to raise eyebrows at The Washington Post. 

In several other instances around the state (but not all), the Democrat with the more-liberal reputation or message prevailed in a contested primary, and no Democrat won touting their cooperation with Republicans or support from business.  With Saslaw’s near escape and Dance’s defeat, and the other signals from around the state, it is hard to imagine any Democrat in Virginia’s population centers campaigning as pro-business.  One business in particular, Dominion Virginia Energy, is likely to remain a popular target.

The opposite trend was demonstrated in several, but not all, Republican contests, with the more conservative reputation prevailing.  But the broad business issue that dominated in some key races – Medicaid expansion — was supported by the broad health care industry and their allies and opposed by base GOP voters.

Senate Finance Committee co-chair Emmett Hanger of Augusta County held on against a challenger upset over his support for Medicaid expansion, but less-well-entrenched Delegate Bob Thomas of Fredericksburg lost to a challenger in part on the same issue.  Delegate Chris Peace of Hanover County, who will or won’t be on the ballot in November depending on internal party arguments still underway, also lost his way with the GOP base on that issue.

Thomas’ 28th District along the Fredericksburg to Quantico stretch of Interstate 95 will be a battleground in the effort to maintain the narrow 51-seat Republican majority in the House.  Now the GOP loses the advantage of running an incumbent in that very competitive district.  Open seats all around the state will be the key in both chambers in November, many of them competitive districts.  With no incumbent bragging about seniority or delivered bacon, voters focus on ideology and specific campaign promises.

The 17 open seats will test and perhaps finally prove the theory that Virginia is now a more liberal and solidly Democratic state, fully blue, not merely purple.

Two Democratic delegates who rode the 2017 wave to carry Republican leaning districts are seeking to move up to the Senate, one in Virginia Beach and one in the Richmond area.  The seats they leave open will need to return to the Republican column for that party to hold its majority into the next session.

A few more of the 2017 wave seats are also crucial to that goal, because a new court-ordered district map will add several Democrats elsewhere.  Republicans have 42 incumbents on the ballot (43, if Peace gets there) and Democrats have 44.

Three Senate seats opened by GOP departures are the only path to the Republicans continuing to hold their 21-seat Senate majority.  The Democrats have 18 incumbents (Saslaw included) seeking re-election, none of them seriously challenged.  Morrissey is unopposed, as well.  The Republicans have 18 incumbents (Hanger included) seeking re-election, but with several of them seriously challenged.

That leaves the Democrats free to concentrate money and labor on the two open GOP seats, with Republicans needing to spread their efforts and energy.  If the best defense is a good offense, it works even better if the other team has zero offense.

The two open seats, Loudoun-based Senate 13 and Virginia Beach’s Senate 7 voted strongly for Tim Kaine over Corey Stewart, comfortably for Governor Ralph Northam, and were at best competitive in the higher-turnout 2016 presidential contest.  They can no longer be classified as safe Republican.

They were middle-class center-right suburban territory that shifted toward Republicans 40 years ago and built the reputation of a young Larry Sabato as a political sage.  Sabato (and the rest of us) have aged, those suburbs have changed, and now once again they will determine Virginia’s political fate.  That much at least has not changed:  as go Virginia Beach, Henrico County, Prince William County, so goes Virginia.

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Want More Affordable Housing? Try Free Markets

Exclusionary regulation at the local level is the root cause of unaffordable housing, and a rollback of exclusionary regulation is the best long-term solution, argue Salim Furth and Emily Hamilton, research fellows at George Mason University’s Mercatus Center.

“Contemporary American land use law embodies the bad idea that private land ought to be publicly planned. In practice, these plans routinely exclude low-income families by indirect means, causing income-based segregation,” they write in an attachment to April 2, 2019, testimony to the U.S. House Committee on Financial Services. 

Exclusion is widespread: most jurisdictions, through zoning ordinances, ban apartments and manufactured homes in all but a few locations. Single-family homes are usually allowed, but only in specified areas and often on lots larger than many buyers want. As a consequence, those states that give the most power to planners and the least authority to property owners have abysmal housing growth rates. When wages rise in those states, rents and home prices soar.

The debate over unaffordable housing is intensifying around Virginia. We hear it in Northern Virginia where community activists fear that highly paid workers at Amazon’s HQ2 project will drive up housing prices and displace the poor. We hear it in Richmond where community activists are fighting to make it more difficult for landlords to evict tenants. We hear it in Charlottesville, where gentrification is equated with racism. In almost none of these places do Virginia’s economic ignorami acknowledge that the underlying problem is the inability of the housing industry to build enough housing to keep pace with demand or, to put a finer point on it, to build enough of the specific types of housing that are in demand.

The Furth-Hamilton essay provides a valuable overview of the problem and concludes with a detailed list of policy points which, if enacted, would go a long way to addressing Virginia’s affordable housing issues. They write:

Rising  home prices in cities with growing populations are not a law of nature. In Living Downtown, Paul Froth describes how low-cost apartments, long-term hotel rentals, and single-room occupancies provided affordable housing for low-wage workers in America’s fast-growing cities in the past. Today, single-family zoning, minimum unit size requirements, and single-room occupancy prohibitions have largely eliminated new construction of these market-rate affordable housing typologies. 

In contrast, cities that have continued to allow new housing construction have avoided skyrocketing prices. Houston has exemplified a pro-housing regulatory approach, voting down zoning, shrinking minimum lots sizes, ending parking minimums downtown, and fast-tracking permitting. During a period of high demand, while the city’s population increased by half a million people, median Houston home prices topped out at $235,000, less than the national median. As a result of pro-housing policy, Houston households across a broad range of incomes can find housing that they can afford. … 

The emergence of the environmental movement in the 1970s provided a reason homeowners could organize against new development in their neighborhoods and cities while pretending not to benefit their narrow financial self-interest. Over time, this opposition resulted in regions where very little housing construction has been permitted, and increases in demand have driven prices up as a result. …

On the 50th anniversary of the Fair Housing Act, America’s housing markets are more segregated by income than at any time since the act was passed and possibly in the history of the nation. Housing is increasingly bundled with community amenities including schools, access to employment opportunities, public services, and neighborhood peer effects. This has occurred because local governments, including many [Community Development Block Grant] entitlement communities, prohibit housing construction in the quantity that would serve low-income families.

The rising inequality in cost between metro areas now overshadows the inequality within most metro areas. For instance, metro Dallas has maintained affordability even in desirable suburbs, while the San Francisco Bay Area has allowed rent to skyrocket even in poor areas. Thus, Zillow data shows that the median two-bedroom rental listing in Frisco, Texas — an affluent suburb of Dallas with an excellent school system — is $1,600 per month. In Oakland, California, where three out of four school children quality for free or reduced price meals on account of their low family incomes, the median is $2,895 per month.

The incentives of developers are generally signed with the goals of the Fair Housing Act. Where demand is high, they have an incentive to use land more intensively: building smaller units in denser clusters that accommodate more residents. Construction is a competitive industry that should be expected to bring real estate prices down to close to costs. The difference between construction costs and prices is a city’s “zoning tax” — as much as 57% of the cost of housing in Manhattan.

So-called “inclusionary” zoning is not an effective answer, the authors argue. Mandates make multifamily projects less financially viable and in some places actually may increase rent and exacerbate segregation. “Top-down land use requirements can be a poison pill that causes markets or local policymakers to shut down development altogether.”

Those who suffer the most from restrictive land use policies are, of course, low-income Americans… who are disproportionately minorities. More likely to be excluded from affluent cities and suburbs, they remain immobile and do not participate in the economies of regions where employment and wages are growing.

So, what is to be done? The authors offer these suggestions:

Expand by-right housing development

  • Expand multifamily zoned areas by at least 1 percent of the land area of the jurisdiction
  • Allow duplexes, triplexes, or fourplexes in at least one-fourth of areas zoned primarily for single-family residential
  • Allow manufactured homes in at least one-fourth of areas zoned primarily for single-family residential
  • Allow multifamily development in retail and office zones
  • Allow single-room occupancy development wherever multifamily housing is allowed
  • Reduce minimum lot sizes by at least 50 percent in at least 25 percent of residential zoned areas
  • Reduce the number of buildings protected by historic preservation by at least 25 percent
  • Increased the allowable floor area ratio (FAR) by at least 25 percent in multifamily areas that must cover at least 5 percent of the land in the jurisdiction
  • Create transit-oriented development zones that account for at least 5 percent of the city’s residential zones and allow for a FAR of 10 or greater

Reduce costs of development

  • Eliminate parking minimums
  • Adopt parallel-process permitting
  • Establish one-stop permitting
  • Allow prefabricated construction
  • Eliminate minimum unit size requirements
  • Eliminate architectural standards other than those required for safety

Expand use rights in existing building stock

  • Adopt land value taxation
  • Adopt additive zoning
  • Adopt form-based zoning
  • Adopt non-zone-based regulatory frameworks
  • Adopt pre-approved plans for accessory dwelling units, single-family homes, duplexes, triplexes, and fourplexes
  • Reform subdivision regulations to allow for traditional mixed-density and mixed-use neighborhoods in new development

The main drawback of this presentation is that Furth and Hamilton do not address the “externalities” of greater housing density and the population growth it enables — particularly transportation congestion, water/sewer/storm water and other infrastructure, new schools, and taxes.

A couple of quick observations: First, as the authors themselves point out, every housing strategy has externalities. The primary externality of the prevailing housing policy is … unaffordable housing. Which is worse — traffic congestion or unaffordable housing? The answer, I suspect, depends largely on how much money one makes and how much value one puts on one’s time.

Second, higher density creates its own transportation solutions. With greater density, walkable, mixed-use neighborhoods, a greater variety of destinations are accessible by foot, mass transit becomes more economical, and car trips are shorter when they do prove necessary.

Third, mixed use development at higher density requires less investment in roads/public works/utility infrastructure per household than does low-density, sprawl-style development. The fiscal footprint is lighter, ameliorating some of the need for higher taxes.

Bacon’s bottom line: Let free markets work.

This commentary originally appeared in the June 2, 2019 edition of the online Bacon’s Rebellion.

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