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“Non-profit” housing at NYT

Summary:
Every now and then the old New York Times resurfaces, with detailed reporting, actual facts, whether or not they support The Narrative. Such is the case with an article I recommend, Housing Boss Earns Million to Run Shelters Despite a Troubled Past, by Amy Julia HarrisSince 2017, ... the city has awarded more than ...

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Every now and then the old New York Times resurfaces, with detailed reporting, actual facts, whether or not they support The Narrative. Such is the case with an article I recommend, Housing Boss Earns $1 Million to Run Shelters Despite a Troubled Past, by Amy Julia Harris

Since 2017, ... the city has awarded more than $352 million to a nonprofit run by Mr. [Jack A Brown to operate shelters. The money is meant to help homeless people regain their footing in life, but it has benefited Mr. Brown, too.

The nonprofit has channeled contracts worth at least $32 million into for-profit companies tied to Mr. Brown, allowing him to earn more than $1 million a year, The New York Times found. Millions more have gone to real estate companies in which he has an ownership interest. 

...In addition to serving as the chief executive of the nonprofit he founded, CORE Services Group, Mr. Brown started a security guard company that polices his shelters, a maintenance company that makes repairs in them and a catering company that feeds the residents, records showed. Mr. Brown heads each of them, collecting total compensation that tops $1 million. He is the highest-paid shelter operator in New York, according to a review of available records.

Mr. Brown, 53, has profited in other ways: Along with partners, he owns two companies that have rented buildings to CORE, and his mother, sister, aunt and niece have all worked at the nonprofit, in addition to his brother, who has collected a six-figure salary.

At the same time, residents at one of the largest shelters in Mr. Brown’s operation, Beach House in Queens, said they lived with vermin infestations, creeping mold and violent fights in the hallways.

The last part of the article goes on about Mr. Brown. I have to say I admire the man's cleverness. He starts and closes companies with alacrity, always one step ahead. 

I am reminded of the famous railroad robber barons, like the one whose name adorns my university, who ran railroads that received massive federal subsidies, but also ran construction companies hired by the railroads to do the work. That's where they made their money, and economic historians still haven't untangled the web. 

But Mr. Brown is not a lone individual, he's just the human face of the story. As the article makes clear, this is the systematic pattern in the business: 

An investigation by The Times, based on hundreds of pages of legal filings, business records and tax documents, as well as interviews with homeless people, city officials and shelter employees, found that under the cloak of charity, executives at nonprofits have collected large salaries, spent their budgets on companies that they or their families controlled and installed relatives in high-paying jobs.

One landlord started a nonprofit that handed out millions of dollars to real estate and maintenance companies that he and his family owned. A Bronx shelter operator was charged earlier this year with laundering kickbacks through a consulting company run by his family. A former board member of another homelessness organization is under criminal investigation after the city said the group paid millions of dollars to a web of for-profit entities he secretly oversaw.

Now, perhaps the gloss of blaming problems in well-meaning programs on malfeasant individuals got this past the the Times' editors. But ponder just how much this story undermines the Standard Progressive Narrative. Most of all, it is these days fashionable to view "for profit" companies as evil, and "non-profits" as morally and ethically superior. 

For example,  

When Mayor Bill de Blasio came into office, he criticized a small group of landlords for charging the city exorbitant rates to house people in squalid rooms while doing little to curb homelessness. In 2017, the mayor pledged to open dozens of new shelters that would be managed by nonprofit groups. Their mission, he said, would be altruistic rather than driven by financial gain.

You only have to read a little between the lines that the whole system of city grants to "non-profits" is completely and inherently corrupt.  Non-profit means a) tax exemption b) no pesky shareholders to ask questions and unseat bad management. Alas, the desire for gain remains in the human spirit. The war on for-profit universities has a similar tone.  

...This year, the city has directed $2.6 billion to nonprofits to operate homeless shelters, and officials already know they have a problem with some of them.

...About 77,000 homeless people live in New York City, 

$2.6b/77k = $34,000. (The right number should be the number in this housing, which the article does not give.) Well, that's better than San Francisco, where we add a zero.  



John H. Cochrane
In real life I'm a Senior Fellow of the Hoover Institution at Stanford. I was formerly a professor at the University of Chicago Booth School of Business. I'm also an adjunct scholar of the Cato Institute. I'm not really grumpy by the way!

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