Affordable Housing: No Easy Answers
Cocheco, Steve, ABA Banking Journal
Of the phrase "affordable housing" were a piece of luggage, the range of issues the two simple words encompass would burst the hinges.
The meaning of the words "affordable housing" depends on the income, the age, the geographic location, and the ethnic group or race of the people involved. At one extreme it translates into the affordability for the first-time homebuyer of a traditional single-family house with a traditional mortgage. At the other, it translates to having any kind of roof over one's head.
Nature of problem. The issue of affordable housing has been studied to death, yet the challenge remains.
Indeed, in the massive federal study "Not In My Back Yard": Removing Barriers to Affordable Housing, a small section recounts a series of ten major federally sponsored task forces and conferences, going back to the presidency of Lyndon Johnson, that focused at least partially on affordable housing issues. In its broadest sense, the issue truly dates to the beginning of the human race, as there have always been people who could not find or afford, or were displaced from, some reasonable form of shelter.
The "NIMBY" study, released in mid-1991 by the Department of Housing and Urban Development's Advisory Commission on Regulatory Barriers to Affordable Housing, recounted many of the same obstacles reviewed in the past.
"The Commission's disturbing conclusion," wrote HUD Secretary Jack Kemp in a transmittal letter to President Bush, "is that exclusionary, discriminatory, and unnecessary regulations constitute formidable barriers to affordable housing, raising costs by 20% to 35% in some communities."
The report attacks a wide variety of regulatory barriers. In the suburbs, it cites zoning and other land-use policies that limit housing opportunities. Measures that require large minimum lot sizes drive home prices beyond the reach of many families. Population limits discourage multifamily housing.
In theory, such rules arise from concerns that additional homes and multifamily construction will place a burden on municipal services, such as sewer systems and schools. However, "the unstated rationale is that [affordable housing candidates] have lower incomes than 'we' do and 'we' don't want them living near us," says Anthony Downs, a member of the commission and a senior fellow specializing in housing issues at The Brookings Institution, Washington.
The report likewise criticizes rent control laws, which the commission believes hurt the poor in the long run by discouraging development of new multifamily housing stock.
The NIMBY report is somewhat critical of federal tax policies, pointing out, for example, that the Tax Reform Act of 1986 increased the costs of investment in multifamily housing. However, a more fundamental argument regarding taxes can be found in other literature.
One example is in a mid-1992 report called A Decent Place to Live: Revisited; The State of Housing in America, published by The Enterprise Foundation, Columbia, Md.
In the report, the foundation argues that federal spending on housing should be looked at not only in the form of direct spending, as is typical, but also in the form of "spending" through tax benefits. The federal government is found to spend four times what it spends on all low-income housing programs on tax deductions for homeowners. These include deductions for home mortgage interest, property taxes, and capital gains made when a home is sold. Many of the households benefiting from these breaks, the report states, are affluent. Taxpayers may see the broad need, but are understandably not willing to surrender what they have to solve it.
In the minds of many, "affordable housing" is synonymous with "singlefamily homeownership."
"There's a recent emphasis on affordable single-family issues because of rising single-family home prices and because the lower-middle-income group is being squeezed," observes Thomas W. …