Money Doesn't Help When Programs Don't Work

Good Housing Programs are Fueled by $$. They are Built to Work by Good Governance

Last week, it was reported that the Portland Housing Bureau was sitting on more than $106 million in unspent funds. The news came on the heels of an earlier announcement from the city’s rental services office that they had more than $20 million in surplus cash.

Reaction to the news was not unexpected. People were mad, and rightfully so.

As is often the case today, when things like this happen, our frustration often gets trapped in an endless cycle of political backlash and finger pointing. And when that happens, our brains get hijacked and we lose the ability to understand the root cause of the problem.

And this is important, because the root cause of most housing policy problems is not political nor is it the result of a couple people making a mistake.

It is most often structural.

WHAT WOULD LEO TOLSTOY SAY?

Leo Tolstoy famously wrote that while “all happy families are alike. Every unhappy family is unhappy in its own way.” This same basic premise applies to housing policy. States and cities with bad housing programs all screw up differently while those with good housing programs succeed in similar fashion.

What makes the good ones similar is very simple: They were designed and implemented within a governance framework that allowed taxpayer money to go to work.

MONEY ONLY WORKS IF IT IS PUT TO WORK

Affordable housing policy debates often start with a premise that more money will make it better. But money cannot design a housing program to work well, and a well-funded but poorly designed housing program is a lot like the Kardashian family. They have a lot of money, but what do they actually do?

For housing programs, the answer is a sad one. They repel investors who are financially motivated to create long-term value in their communities. They attract investors who are financially motivated to exploit the program for their own short-term gain. And they don’t make housing any more affordable.

This – to use a clinical term – is bass ackward.

HOW TO BUILD A GOVERNANCE FRAMEWORK

Having an effective governance framework in place before you begin is a good way to avoid seeing your housing program become a reality TV star. And like all good things in life, building one is a three step process.

STEP ONE: FIRST DO NO HARM

Before proposing any new program, policy makers should first consider doing these three things:

Consolidate Redundant Programs: Funding programs with overlapping goals should be consolidated. Requiring developers to navigate multiple programs that fund the same activities or meet the same policy objectives increases the complexity and cost of creating affordable housing without yielding any additional policy benefits.

Streamline Approvals and Compliance Requirements: Approval and compliance processes must be streamlined by eliminating duplicative requirements, standardizing forms across agencies, and embracing technology-driven solutions to reduce review times and administrative burdens. A more efficient compliance system will support more housing production without compromising accountability.

Eliminate Obsolete Regulations: Regulatory requirements should be subject to regular review and eliminated if they are outdated, duplicative, or better addressed by other mechanisms. Preserving rules simply because “they have always been there” undermines system efficiency and diverts resources from higher-impact activities.

STEP TWO: DO NOT RECREATE THE WHEEL

This is not rocket science. Successful government housing programs all work within the same basic framework that are based on the same common principles:

Consistency: Housing programs should be explicitly clear as to who is responsible for approving what by when and with what specific criteria. There should be no ambiguity or moving targets that make it harder to attract private and for-profit investment partners.

Simplicity: Programs should be simple enough to navigate without requiring technical assistance. If a program needs a technical assistance program to explain it, redesign the program until it doesn’t.

Accountability: Success must be tied to what is produced, not how much is spent. That means success is determined by units delivered, timelines met, capital leveraged, and stability achieved, and not by how much funding got approved.

Transparency: Every internal success measurement must be made public so that our elected officials can take credit for success and be held accountable for failure.

Efficiency: Housing programs should incentivize private and non-profit partners who are able to reduce costs and deliver affordable housing more efficiently. Our programs should reward those who make the most efficient use of taxpayer dollars to create more affordable rental housing and repel those who don’t.

STEP THREE: FIND GOOD RESEARCH PARTNERS

It is important that we recognize the immense pressure that our state and local governments are facing in their quest to make housing more affordable. Hard working and dedicated public officials across the country are constrained by limited resources and fragmented data that make it harder to step back and establish the framework they need to succeed.

State and local governments need an independent and credible partner who can work more closely with them to make their housing programs work more effectively. And the best partner for this mission is the research community¹.

A recent report by Arnold Ventures and the Niskanen Center examines the risks of drawing strong conclusions from weak or incomplete data and highlights how the research community can bolster its efforts to ensure that housing policy decisions are grounded in reality and can attract investment capital that is motivated to produce affordable housing that creates long term value in their communities.

This is a critical point because while housing policies may start with advocacy, they succeed when they are based in a framework that uses data, systems design, and market input. And that is what a good research partner can bring to the table.

THE BEST POLITICAL ARGUMENT IS A GOVERNMENT THAT WORKS

There are many things about Portland that are unique. The story of Portland’s unspent affordable housing funds is not one of them. Nor is it evidence of bad intent or bad actors.

It is, however, a great example of what happens when you allocate funds without a plan and it is a prime example of why we need to look beyond the press releases and focus on rebuilding the operating framework that allows us to govern more effectively.

One of my first bosses was Senator Tom Daschle. He is a great guy, and I learned a lot from him. One night, as we were leaving a long town hall meeting in a small town in rural South Dakota, I asked him why so many folks were not convinced by one of his political arguments². He responded by telling me that a political argument will never change a person’s mind if they don’t believe they have a government that works.

And that is why a common governance framework is so important. It is not code for eliminating bureaucracy. It is an explicit and intentional action to improve our bureaucracy. Because while the best government programs may have been passed by politicians, they were delivered to the people by bureaucrats who made the government work.

1. Sorry Mckinsey - not you.

2. The specific issue had to do with crop insurance and it was a riveting debate.