Reforming a Deduction to Provide Homes for the Poor

When the National Low Income Housing Coalition first launched our proposal to fund the building and preservation of affordable housing with the savings from modification of the mortgage interest deduction, there were skeptics who told us the mortgage interest tax break was untouchable. With everything we heard about “sacred cows” and “third rails,” it would not have surprised us if we suddenly found ourselves working on a dairy farm or in a subway station.

Just a few weeks have passed, and it seems the cows have shed their halos and the rails are no longer electrified. The reality of our nation’s fiscal challenges has shocked many in Congress into realizing that what was once viewed as untouchable might indeed be a source of funding for many things, including deficit reduction.

Conventional wisdom aside, it just so happens that this is far from the first time the mortgage interest deduction has come under scrutiny. Back in 1984, even President Reagan suggested that it might be worth reconsidering the deduction. But even more relevant to our interests is a 1972 proposal from HUD Secretary George W. Romney (father of Governor Mitt Romney) for a “staged reduction” in the mortgage interest deduction, with a shift of the savings to affordable housing for low income people.

In the midst of the fear and furor over sequestration and the fiscal cliff (and the argument over whether there even is a cliff at all), it is easy to forget one simple truth: as it is, the federal programs that provide safe, affordable housing for the lowest income Americans do not have enough funding to serve all of the people who need them. Housing advocates wish we had the luxury of defending housing programs from “entitlement reform;” while entitlements like Social Security are promised to everyone who qualifies, only about 25% of people who qualify for housing assistance receive it, because the funding just isn’t there to serve everyone who needs help with housing. The result? For every 100 extremely low income renter households, there are only 30 housing units affordable and available to them. This means that 4.3 million renter households stand at the edge of their own fiscal cliff, every day of the year.

So before they go scrambling to fill in holes in the federal budget with money from sacred-cow deductions, we hope lawmakers take a step back and consider the impact investing these savings into people and communities, not just deficit holes, could have. Building and rehabilitating affordable housing means low income renters will have some disposable income to spare, and they can then spend that cash in their communities. Safe, stable housing means kids who can concentrate in school, and go on to lead productive, fulfilling lives. Healthy homes for families and seniors mean lower healthcare costs for all of us.

We think it’s time to reform the mortgage interest deduction and use the savings to fund the National Housing Trust Fund, which can build and rehabilitate housing that lower income people can afford. If you feel similarly, we hope you’ll sign on to support our proposal and help us show lawmakers that there is a better way.

News Round-Up: Housing Disasters, Natural and Man-Made

In this week’s News Round-Up, we find news stories showing that both natural disasters, and the disastrous economy, have combined with the nationwide shortage of rental housing affordable to low income people to create a crisis for many American families.

In Vermont, manufactured home park residents whose homes were flooded during Hurricane Irene had no other choice but to destroy their own homes, as repair was impossible and the fee to dispose of them was more than the residents could afford. In a state with the second lowest rental vacancy rates and the seventh highest rents, these former homeowners will have a tough time finding a place they can afford. They will also find themselves in competition with other low income families for scarce affordable rental opportunities. As the need grows, service providers have difficulty stretching the state and federal funding available to them, and must cobble together donations and other resources to help their clients.

Franklin County, Pennsylvania’s shelter system is under stress due to the poor economy and lack of housing affordable to low income people. Waiting lists for vouchers and public housing mean the shelters stay full.

We find a similar story in Indiana, where the minimum and low wage jobs available pay nowhere near the $17.84 Housing Wage there. Service providers say they’re seeing an increase in homeless families in particular.

News Round-Up: Changing Priorities

You’ve read it here before: in New Jersey, as in other parts of the country, “The housing bust has not only hurt homeowners — who have lost equity and, in too many cases, their homes — it has made it more difficult for those who choose not to buy a home to find affordable rental properties.”

Let’s set aside the question of whether lower income people are truly “choosing” not to buy a home, and look at some of the consequences of, and reactions to, this ongoing problem.

In Alaska, we find that larger families- those that need apartment with more than two bedrooms- have a particularly hard time finding affordable rentals. According to a representative of the Alaska Housing Finance Corporation, it doesn’t make economic sense for a developer to build three- or four-bedroom apartments. Unless, of course, there is a subsidy involved.

What subsidies are available have not been able to create enough low-cost housing to meet the demand. In South San Francisco, 3,000 households applied for just 109 apartments in a new low income housing development. Similar waiting lists exist in San Francisco itself, and many people with Section 8 vouchers that allow them to rent apartments in the private market affordably find that landlords don’t want to rent to them. With budget cuts negatively impacting programs like public housing and HOME, there are few other places for low income families to turn.

Public housing agencies have attempted to offset the expense of offering affordable rental housing by creating mixed-income development. But as this article on the Chicago Housing Authority’s Plan for Transformation shows, mixed income can create decidedly mixed results. Just a small fraction of the low income apartments CHA demolished were replaced, and many higher-income units remain unsold, or were never built.

While it may feel like America has always had a large population of people who cannot afford housing, that is simply not the case.  As this article notes, family homelessness only became a problem in the 1980s, in large measure due to changing federal spending priorities.

News Round-Up: Strapped for Cash

Farmworkers are essential to maintaining a functioning economy in areas where agriculture is an important industry. But often, agricultural workers’ wages are so low that they are unable to afford housing in their communities. This report from Ventura County, California shows the impact of low wages and high rents on farmworker families, like extreme overcrowding and impacts on the ability of children to learn.

Farmworker housing advocates in Ventura are raising money to support the development of more housing affordable to agricultural workers and their families. But according to NLIHC President and CEO Sheila Crowley in an interview (subscription required), relying exclusively on local funding for housing results in an inequitable situation.

“There are some local communities which are very wealthy that have an economic base that would allow them to be able to come up with these kinds of programs and pay for them,” Crowley said. “But by and large, local governments are really strapped for cash, and they have enormous obligations, in particular education. So the notion that there will be extra money floating around to do these kinds of things seems highly unlikely.”

While many cities and service providers feel federal block grants, like HOME and CDBG, provide necessary funding for local projects, some in the House of Representatives attempted to limit or eliminate those programs, favoring the exclusive use of local funds.

News Round-Up: No New Funding

In Massachusetts, state lawmakers and social service organizations are working to improve services available to victims of domestic violence. According to this story, incidences of domestic violence are on the rise in the U.S., with 1.03 million incidents reported in 1998, and 7 million reported in 2010. While better, more coordinated services are planned, shelter for victims of domestic violence is another issue. A shortage of shelter beds, disaster-related housing losses and having the eighth highest rental costs in the nation all make it difficult for victims of domestic violence to find new, safe places to live.

No new funding is on the horizon in Massachusetts for domestic violence shelters. But a group of nuns, calling themselves the “Nuns on the Bus,” is working to change that. They traveled across the country recently gathering support for an alternative to the proposed FY13 budget authored by Rep. Paul Ryan (R-WI). They heard stories from many Americans, including a gentleman who must choose between paying the rent and buying food for his family. The nuns support the “Faithful Budget,” which includes funding for the National Housing Trust Fund.

News Round-Up: Desperate Times, Inadequate Measures

Evidence has been mounting for decades that there exists in the United States an extreme shortage of rental housing affordable to the lowest income Americans. What those with influence choose to do about this situation is another matter.

The Los Angeles Times and the Huffington Post reported last week that a Los Angeles landlord took advantage of that city’s demand for low-cost rental housing by subdividing a triplex into 44 separate apartments. While housing this substandard is illegal, and criminal charges have been filed, as Huffington Post notes it is no surprise that demand exist for this kind of living situation, when the national Housing Wage is $18.25.

Presumably, those Los Angeles renters must now move to new apartments. As reported by Affordable Housing Finance and in Memo to Members, a recent study from the Brookings Institution and First Focus shows that switching schools due to a move is detrimental to a child’s education, as well as to her physical and mental health. The report recommends funding the National Housing Trust Fund, as well as increasing funding for HUD’s voucher, public housing, and project-based rental assistance programs.

How will Congressional appropriators address this issue? The House passed its FY13 budget for HUD on Friday with inadequate funding for key programs serving low income people. According to Coalition president Sheila Crowley, in spite of the efforts of a few Representatives to introduce helpful amendments to the bill,

“The U.S. House of Representatives broke faith with many thousands of the poorest, most vulnerable Americans who are served by the programs of the Department of Housing and Urban Development. Housing assistance is not an abstraction. Real people, the majority of whom are elderly or disabled, will lose their homes if these cuts are enacted. And turning the clock back on fair housing shows that the House is out-of-step with 21st century American values.”

It might be some time before the FY13 budget is decided; the Senate has yet to weigh in with its own appropriations bills.

News Round-Up: Something Has to Give

In this week’s News Round-Up, we find that one thing remains true for American cities large and small: there is not enough housing affordable to lower income people.

According to HUD, the Washington, D.C. has the second highest rents in the country, which matches with the Coalition finding that the D.C. metropolitan region has the nation’s 10th most expensive rents. In Marshall, a town of 24,000 in eastern Texas, low income renters face the same challenges as their counterparts in the nation’s capitol. With 22% of area residents living at or below the poverty line, many families are cost burdened by their rents. As an expert interviewed for this story says,  “’If you’re spending 50 percent on housing, it simply doesn’t work. Something has to give.’”

Minimum wage workers are among those Americans having the hardest time finding housing they can afford. Even with an increase in the minimum wage, like the one signed into law in Rhode Island recently, low wage workers will have a difficult time finding an apartment they can afford on the private market. A law in Massachusetts requires 10% of housing stock in cities and towns must be affordable. This article shows that while some towns struggle to meet the target, others have found success, making it possible for more people of all incomes to live stable lives in that state.

News Round-Up: Doubling Up

This week’s news round-up shows the affects our nation’s high rental costs have on families and communities.

According to the Coalition, Maryland is the 4th most expensive state for rental housing in the country. The Sentinel reports that many Maryland households are “doubling up” in response, putting a strain on households and putting more families at risk of homelessness.

Both the New York Times editorial page editor’s blog and the MSNBC Lean Forward blog posted NLIHC’s popular minimum wage map last week. Andrew Rosenthal of the Times  points out that “there are plenty of single-parent households as well as families where, for various reasons, only one member is able to work,” making the comparison between two-bedroom apartment rents and what minimum wage earners can afford relevant to the policy debate, and the presidential election.

It is easy to predict the result of this disparity between wages and rents: low income Americans are desperate for rental housing they can afford. In Sacramento, the county housing authority plans to open its Housing Choice Voucher waiting list this week. The housing authority has just 3,000 spaces open on its waiting list, and while housing authority staff have no way of predicting how many applications they will receive, they expect many individuals and families will be interested. The last time the list opened up, 35,000 applications were received.

Long-term un- and underemployment lead to cost burden among renters, but even an improving economy can put stress on the rental market. In inland California, the rental occupancy rate is up, as are rents. An economist quoted in this article suggests that as the job market improves, people who have doubled up are starting to use their new income to move into the rental market on their own, making affordable apartments even more scarce.

Funding the National Housing Trust Fund

The National Housing Trust Fund was signed into law in July of 2008. Since then, NLIHC and the National Housing Trust Fund Campaign have focused on securing short- and long-term funding for the program.

Back in June, we held a webinar where we reported to the NHTF Campaign about the NHTF regulations proposed by HUD, and the funding sources currently identified for the program.

The first source we discussed is the $1 billion mandatory, one-time funding requested by President Obama in his FY12 budget. The President left to Congress finding a way to offset this expenditure in the budget, but it could be possible to find an offset in a future tax bill. The President requested NHTF funding in FY10 and FY11 as well.

The second possible source is a bill in both the House and Senate that would provide $1 billion in one-time funding from proceeds from the sale of TARP warrants. These bills- S. 489, sponsored by Sen. Reed (D-RI), and H.R. 1477, sponsored by Rep. Cummings (D-MD)- have some potential for controversy as some Members of Congress say all new revenue should go to deficit reduction.

A third option for funding the NHTF could come from a new housing finance structure that could someday replace the current government supported enterprises (GSEs) for housing, Fannie Mae and Freddie Mac. While such a funding source could result in $1 billion to $5 billion in yearly funding for the NHTF, there is some controversy. Housing finance reform discussions in the House of Representatives have included a bill to abolish the NHTF, which passed out of subcommittee.

Finally, the fourth source of funding identified for the NHTF is reforming the mortgage interest deduction (MID) and using the savings to fund the NHTF. The MID subsidizes home ownership and goes to just 25% of taxpayers, with the top 32% of taxpayers by income receiving 72% of the benefit. Many advocates are beginning to see the inequities inherent in subsidizing home ownership for higher income people to this extent, and there is a growing call for a rebalancing of American housing policy. MID reform could result in up to $30 billion annual for the NHTF, while actually increasing the percentage of home owners eligible for the deduction.

Want to support the National Housing Trust Fund? Contact your Member of Congress and let him or her know that investment in the NHTF is the right thing to do for our communities- and that there are funding sources out there waiting to be tapped.