Economist Cautions Legislative Committee Against Housing Cuts

Economist Cautions Legislative Committee Against Housing Cuts

Glenside, PA – June 1, 2009 – (RealEstateRama) — The same economist who issued a recent study saying that state investment in housing could provide a stimulant to economic recovery, now warns that proposed cuts in state investment could have just the opposite effect – a further slowing of the recovery.

The testimony from Econsult Corporation director Lee Huang came before the state House Urban Affairs Committee at a specially called hearing in Philadelphia on May 31.

“The proposed budget cuts would lead to losses to local economies greater than the direct investments by the Commonwealth. Those investments have a ripple effect in terms of economic activity, employment, and earnings: take away the initial investments, and the ripple effects are also lost,” Huang said.

The Housing Alliance of Pennsylvania had hoped to use the hearing to recommend creating a Housing Trust Fund in Pennsylvania that would invest in working-class housing. But executive director Liz Hersh testified that while the trust fund is badly needed to help the economy, cuts to housing now would compound mistakes of the past, such as too much reliance on homeownership and not enough on quality rental housing.

“We watched in frustration as people who had no business being homeowners were enticed into buying homes with all kinds of exotic and unsustainable mortgages. We watched as the rental stock continued to decline in quality and availability while prices rose,” she said.

Hersh testified that the Housing Alliance years ago raised the red flag about what it calls “the steak and caviar” housing market, and she now argues that cuts to housing as proposed by the state Senate would continue those same mistakes.

“People with very low wages have found themselves living in poorer and poorer conditions, farther and farther from job centers, or bouncing from place to place. Homelessness has increased statewide, while we have a glut of homes on the market,” Hersh said.

Richard Barnhart, Chairman and CEO of Pennrose Properties, an affordable housing developer, told the committee that when the state invests in housing it attracts other monies.

“The beauty of public investment in housing is that those dollars are often the first in. We have done deals where the state dollar invested has been multiplied ten-fold by other investors coming to the table. That’s why a state housing trust fund could be such a boost to the state’s economy, while giving families more rental options,” Barnhart said.

“As an economist, I am aware of the difficult choices our elected officials face. As Thomas Sowell once remarked, ‘There are no solutions; there are only trade-offs.’ The current recession is necessitating tough choices that will not be without pain; some of those choices will have to be made, and some of us will have to bear some pain,” said Huang.

Committee chairman Rep. Frank Dermody of Allegheny County told those testifying they had made a very informative presentation and that committee members will take the information presented into account in considering creation of a state housing trust fund.

For more information contact:
Kirk Dorn


The mission of The Housing Alliance of Pennsylvania is to ensure that all Pennsylvanians, especially those with low incomes, have access to safe, decent and affordable homes.

Formed in 1985, (originally as the Pennsylvania Low Income Housing Coalition), the Housing Alliance is a growing and influential membership organization, with over 500 organizational and individual affiliates statewide.


2 South Easton Road
Glenside, PA 19038
Phone: 215-576-7044

Kirk Dorn
Phone: 215-735-6760

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