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.