Housing Policy: Turning around the U.S. Disaster
Peirce, Neal, Nation's Cities Weekly
A real mess. There's no other way to describe national housing policy in America today.
There's the massive subprime crisis--caused in no small part by lackadaisical federal regulation.
Fannie Mae and Freddie Mac--mainstays of the multitrillion-dollar U.S. mortgage system--face the biggest crises in their histories.
We have a Department of Housing and Urban Development largely ignored by a White House either contemptuous of or oblivious to the critical nature of national housing policy.
Finally, there's the grim fact: Millions of Americans still struggle to put a roof over their heads. The National Low Income Housing Coalition reports there's not a single American community in which a minimum-wage worker can reasonably afford to rent an apartment.
Sums of federal housing assistance do flow--some through public housing and federal "Section 8" renter subsidies. But the vast majority of federal housing expenditures--roughly $80 billion a year--finance the home mortgage housing deduction. Only 30 percent of taxpayers use it. Applicable to homes worth up to $1 million, it overwhelmingly benefits the richest Americans.
So--assuming Fannie Mae and Freddie Mac can be stabilized--where do we go from here?
Tackle the mortgage deduction head-on, counsels Bart Harvey, recently retired chairman of Enterprise Community Partners, a major national nonprofit that helps finance housing for low-income families. "Even in a time of fiscal distress, it can be done," Harvey told a National Housing Conference gala recognizing him as "Housing Person of the Year."
The federal dollars now used for the deduction, said Harvey, could be shifted to people in real need of housing. One suggestion is to convert the deduction into a straightforward tax credit for low-income renters, or to benefit middle-income renters or homebuyers in highly inflated local housing markets.
But at the same meeting where Harvey spoke, staffers from the Senate Banking Committee told me it would never happen--that the resistance of homebuilders and the real estate industry is so fierce that the deduction is an untouchable "third rail" of American politics.
Maybe so. But it's also true that in 2005, President Bush's bipartisan Advisory Panel on Federal Tax Reform endorsed converting the mortgage deduction to a less regressive tax credit. And our demographics are changing. A big wave of "millennials"--would-be homeowners in their mid- to late-20s--is now fast approaching, notes John McIlwain, the Urban Land Institute's top housing expert: "If they received a benefit, there'd suddenly be a huge rise in housing demand--which the homebuilders should be ecstatic about."
Right now, Congress has an opportunity to help low-income renters by approving the national, affordable housing trust fund. …