In a column posted over the weekend, The New York Times' Josh Barro wrote about 500 West 30th Street, a luxury building in Manhattan with two-bedroom apartments that go for around $7,272 per month—except for some units that rent for about $780 a month. The reason some lucky tenants get an almost 90 percent discount is that New York City cut a deal with developer Related Companies: In exchange for the right to build a larger building, the firm had to set aside a portion of the units for lower-income tenants at below-market prices. This arrangement is called "inclusionary zoning," and it's a key component of New York City Mayor Bill de Blasio's push to create about 80,000 new units of "affordable housing" over the next decade.

Barro calculates that Related Companies is providing an implicit subsidy of about $90,000 a year for each of the two-bedroom affordable units, and he writes that one of the "appealing facts about inclusionary zoning" is that "developers pay for it, so there's no direct fiscal cost."

Here Barro is buying into a common fallacy that New York City's real estate industry is all too happy to propagate. In practice, density bonuses are almost always just one component of a rich package of government perks that developers gets in exchange for building affordable housing. Housing lottery winners saving $90,000 a year on their rent have, for the most part, taxpayers to thank.

Let's consider the building Barro focuses on: 500 West 30th Street. According to a recent regulatory filing, Related Companies got three major perks in addition to the right to build a bigger building: a local real estate tax exemption that lasts for 20 years, $10.4 million in equity, and the right to finance the project with $163 million in tax-exempt bonds. These subsidies come through manipulating the tax code, so it's impossible to assign them a precise dollar value—which is one of the most insidious aspects of affordable housing policy. Voters don't get to weigh the benefits of subsidizing apartments in luxury Manhattan buildings against other priorities because the spending is hidden.

500 West 30th Street. |||The $10.4 million in equity came through the federal Low Income Housing Tax Credit program, in which state agencies give developers tax credits that they can then turn around and sell to banks in exchange for cash. Banks get to use these credits as a rebate on their federal taxes over the course of a decade. In other words, the money comes from taxes that otherwise would have been collected.

The subsidy that comes in the form of $163 million in tax-exempt financing is also money that otherwise would have been collected if the bonds had been fully taxable, which is impossible to tally. Likewise, you'd need a crystal ball to determine what the city would have made on 500 West 30th if it weren't for the local real estate tax exemption, because all New York City properties are reassessed an annual basis. These subsidies end up being rich enough that Manhattan developers will almost always seize the opportunity to build 80/20 (80 percent market and 20 percent affordable), such as with 500 West 30th Street, even when there's no density increase on the table.

Are your eyes glazing over yet? Keeping all the subsidies arcane and off budget is the foundation of New York City's crony-capitalist housing industry.

I wrote about inclusionary zoning and the city's affordable housing cartel for the New York Daily News last October.