How not to do affordable housing: Denver’s folly

 

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Denver’s St. Joseph Hospital in central Denver is thrilled with a city plan that will subsidize the rent of lower-income residents at higher-end apartments. The program will pay the difference between what a lower-income resident can afford and the market rent of an apartment.

Denver Mayor Michael Hancock announced the plan in his July 10, 2017 State of the City address.

“I am excited to announce that we will pilot a new partnership to open 400 existing, vacant apartments to low- and moderate-

income residents struggling to find an affordable place to live,” Hancock said. “We have apartments sitting vacant because there’s a gap between what it costs and what people can afford. Working together with the Denver Housing Authority, employers and apartment building owners, we aim to fill that gap.”

“Denver has some of the highest inventories for apartments for families with the highest incomes and some of the lowest inventories for families with some of the lowest incomes,” Erik Solivan, executive director of the mayor’s Office of Housing and Opportunities for People Everywhere (HOPE), said to Denver station KMGH-TV.

Well, of course St. Joseph is thrilled with the program. What company wouldn’t be happy to see somebody else subsidize their lower-paid employees.

Think about it.

St. Joseph says it will contribute $100,000 to the program. The rest of the money needed will come from Denver, some other employers and some charitable foundations. The city says it expects to spend about $500 a month subsidizing a single person and $900 for a family.

St. Joseph’s president, Jamie Smith, told the Wall Street Journal on Jan. 8 that he hopes the program will help house dozens of employees.

Let’s be conservative and say 26 of those subsidies go to St. Joseph employees, 13 of whom are single and 13 of whom have families. Subsidies to St. Joseph employees alone will total $218,400 the first year. ($6000 per single, $10,800 per family = $78,000 for all the singles and $140,400 for all those with the families = $218,400.)

So St. Joseph invests $100,000 and gets $218,400 back for its employees, with $118,400 of that coming from other companies and charitable organizations.

 “These folks (medical technicians and newly graduated nurses) are in high demand,” Smith told the Wall Street Journal. “They’re driving by four or five other hospitals much closer to their home to get to us, and at some point it becomes a problem from a recruitment and retention standpoint.”

If St. Joseph’s Hospital is having a hard time recruiting and retaining medical technicians and newly graduated nurses, the answer is to pay them more, rather than pleading for public subsidies and contributions from charities.

“This is not a welfare program or anything like that,” said Mike Zoellner, a local developer who helped create the program.

Sure it is, for the hospitals, hotels and food service businesses Zoellner expects the program to help. Meanwhile, it puts St. Joseph’s competitors at a competitive disadvantage.

Whatever happened to the free market and business competition?

 

 

 

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