The Prosperity of the Poor: So Hidden as to be Completely Undetectable

The New York Times Opinionator blog recently posted a fantastic take-down of the “hidden prosperity of the poor” concept: the idea that the relative low cost of consumer goods means that poverty isn’t as hard on people as it used to be. Post author Thomas B. Edsall details both the liberal argument that the hardships of poverty are a barrier to achievement of the American Dream, and the conservative argument that consumer products keep decreasing in price relative to income, rendering income inequality a non-issue. Edsall looks at the research and concludes that consumption inequality is in fact increasing right alongside income inequality, and that compared to other developed nations, the United States has both more poverty, and fewer resources devoted to poverty reduction.

Back in August 2011, NLIHC analyzed an exchange between the Heritage Foundation and the Center for American Progress regarding a report from Heritage making the case that the presence of appliances in the homes of poor households means poor people are not experiencing the kind of material deprivation anti-poverty advocates claim. The Center for American Progress countered with an assessment of the kind of income the sale of such appliances would provide a poor family, noting that based on prices quoted from eBay and Craigslist, poor families could sell their refrigerators and use the cash to buy eight days of food (where that food could be stored in the absence of a refrigerator is, of course, anyone’s guess). NLIHC noted in its analysis that “Ownership of consumer durables, the asset class most likely to be owned by poor households, is not equivalent to financial or other forms of wealth that have the potential to appreciate and can be exchanged more readily for cash to help a family in times of need.”

Asset poverty is a significant problem for both poor and middle income households, according to a report from the Corporation for Enterprise Development. The report finds that 44% of American families do not have enough saved to weather a three-month personal financial crisis, and that one in three families do not have a savings account. Liquid asset poverty disproportionately affects those living below the poverty line and people of color, but the report notes that a quarter of middle class families and over 58% of white households are liquid asset poor.

Can you find the “prosperity of the poor” in all this? We can’t. And while it’s tempting to suggest those low and middle income households experiencing liquid asset poverty should put less money into consumer durables and more money into savings, it’s not the $150 you’d save from cutting out one latte a week or the $200 you’d save by forgoing the purchase of a used XBox from Craigslist that will spare your family from liquid asset poverty. It’s being able to cut your greatest costs, like the cost of housing.

A low income family paying half or more of its income for rent simply will not have enough money left over for the basics, like food or medical care, much less to put away for an emergency. The solutions the Corporation for Enterprise Development suggests, like increasing the minimum wage and lifting asset requirements for assistance programs, are important ones. Another way to help poor families is to decrease the housing costs that are eating up what income they have. Our proposal to fund the National Housing Trust Fund through modification of the mortgage interest deduction would put money into the hands of more middle and lower income homeowners while giving communities across the country the resources they need to build and preserve affordable housing for their poorest residents. This is rental housing that would cost no more than 30% of the family’s income, leaving them more money to spare on their needs, today and in the future.

It is possible for America’s poor to truly prosper. What is required for this to occur is an investment in the policies, programs and resources that will help close the inequality gap. Only then will the American Dream be in reach of us all.

A call for examination of federal real estate programs

The following is a guest post by Alex Dodds, Online Communications Manager, Smart Growth America.

The home mortgage interest deduction turns 100 years old this year. Is it still doing the most it can for American families and taxpayers?

Smart Growth America recently examined the federal government’s involvement in the real estate market and its impact on homeowners, renters and communities across the country. The new report, Federal Involvement in Real Estate: A call for examination, surveys 50 federal real estate programs to better understand where this money goes and how it influences development in the United States. The spending examined in the report’s analysis includes tax expenditures, loan guarantees, and low-interest loans and grants – totaling $2.23 billion in federal spending over the five year study period.

This involvement has an enormous impact on the U.S. real estate market, and even a cursory analysis reveals this impact is uneven. Outdated programs and lack of coordination across agencies contribute to this imbalance, the report explains. As a result, many federal programs are not targeted to those most in need, are not targeted to strengthen existing communities and are not targeted to create more places with economic opportunities.

The mortgage interest deduction (MID) is one example of a program that deserves to be reexamined. The MID costs an average $80 billion annually and is meant to increase rates of home ownership. It can be claimed by homeowners, but only by households that itemize their taxes. The deduction is claimed significantly more by higher income households because of the required itemization.

There is no similar support for homeowners that do not itemize their taxes (often middle class households) or for renters. Compounding these challenges, the deduction may also be taken on second homes – possibly making it even tougher for families still working to afford their first.

This is just one of the many expenditures and commitments outlined in the new report as needing review. The National Low Income Housing Coalition has called for similar examination of federal real estate programs – and these two organizations aren’t the only ones.

The U.S. Government Accountability Office (GAO) recently released Tax Expenditures: Background and Evaluation Criteria, a report that looks at the efficacy of all federal tax expenditures and programs, and proposes developing a framework for evaluating them. Most tax-expenditures – including the MID – are not systematically monitored or routinely examined to determine if they are still achieving their intended purpose.

The GAO report suggests five questions to ask to gauge a tax expenditure’s value. Those questions are similar to Smart Growth America’s recommended criteria to evaluate programs by:

  1. Support balanced housing choices in suburbs, cities and rural towns.
  2. Reinvest in America’s existing neighborhoods and communities.
  3. Provide a safety net for American families.
  4. Help more Americans reach the middle class.

Congress is approaching the end of FY13, and discussion of next year’s budget will soon begin. As members on both sides of the aisle look for ways to be more effective with taxpayer dollars, now is the time to reexamine these federal programs.

Smart Growth America is asking allies and advocates to join the call for an examination of federal real estate spending. These programs could be helping communities grow stronger and families more prosperous — in addition to achieving their primary goals — but Congress will need to take action in order for that to happen.

Smart Growth America and the National Low Income Housing Coalition both want to help families find homes that are affordable and within healthy neighborhoods. The federal government’s investments in real estate development have huge implications for this work, and the work to examine these programs needs to begin now.

NLIHC welcomes guest posts from individuals and organizations with something to say about low income housing policy. Contact amy@nlihc.org if you’d like to submit a post.

Is homelessness something we can accept?

You’d have to have a pretty cold heart not to be moved by this story: an empathetic doctor and a homeless inventor partner together to launch the homeless man’s invention, changing both their lives in the process.

The story of Mike Williams, who became homeless after a series of financial setbacks, reminds us that as much as we’d like to believe otherwise, none of us are immune from personal disaster. Even for those with great talent or success, like Mr. Williams, hardship or homelessness could be just a short run of bad luck away.

The invention in question is a six-foot by six-foot pod with a chemical toilet, a “secure, safe place for the homeless and people [who] are displaced in society.”

Providing a safe place for people to live is a laudable goal. And no doubt, Mr. Williams has the skill and ingenuity to create something truly useful to many people. But a so-called survival pod is not a solution to homelessness.

Homelessness is not a permanent aspect of our society, nor is it a logical, unavoidable side-effect of capitalism that we must all come to accept. We should not strive to make homelessness easier for people; we should strive to end it. Homelessness exists because the housing available in our communities is too expensive for low-wage workers, seniors and people with disabilities to afford, and because some people have additional personal challenges like mental illness or domestic violence that make maintaining their housing even harder.

Survival pods, like homeless shelters, are at best an interim solution. What is necessary is for the supply of housing affordable to the lowest income Americans to increase. It is not complicated, and it can be done. Our proposal is to fund this increase through a modification of the home mortgage interest deduction that will make home ownership tax benefits available to more middle and lower income home owners, while simultaneously producing savings that can be invested in the production and preservation of housing affordable to extremely low income renters.

When it was signed into law in 2008, the National Housing Trust Fund was a beacon of hope for housing and homelessness advocates. The financial crisis of that year postponed its initial funding. But the country’s financial climate- and its political climate- have changed. Our conversations with Senators and their staffs have convinced us that the mortgage interest deduction as we know it is not long for this world. We have the chance, this year, to influence this rare and welcome debate. Our hope, and our effort, is renewed.

Mr. Williams, like all the rest of us, deserves the dignity of a safe, decent, affordable place to call home. Join with us in support of housing policy that will get us there.

News Round-Up: Making Housing a Priority

Our first news round-up of 2013 brings you stories of a big push to provide greater funding for affordable housing, and some very real reasons why that housing is so important.

First, to reasons: In The Nation we read about the connection between safe, decent housing and educational success. According to the post, “Children who lack stable homes are more anxious and less focused than their peers who have adequate housing. They are also at higher risk for poor health and developmental problems, and have lower educational attainment,” which are cited as reasons to finally fund the National Housing Trust Fund.

In a story from April re-posted on Christmas Eve, Crosscut explores what life is like for unemployed, homeless people who live at a highway rest stop outside of Seattle. The author notes that the Housing Wage in Washington State is so high that even if one of the gentlemen she interviews manages to have his application for SSI accepted, he will not earn enough to afford a modest apartment in that state.

As The Nation noted, the National Housing Trust Fund would be part of the solution to homelessness in America, but it is still without a funding source. Housing Affairs Letter and The Hill both report that Rep. Keith Ellison (D-MN) introduced a bill in December that would fund the National Housing Trust Fund, among other housing programs, through a reform of the mortgage interest deduction.

The National Low Income Housing Coalition proposes a reform to the mortgage interest deduction that would make mortgage tax breaks work for middle and lower income families, while providing the level of funding the National Housing Trust Fund would need to end homelessness in 10 years.

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.