Category Archives: elected leaders

Tampering with the sacrosanct

affordable housing, economic growth, elected leaders, home ownership, housing crisis, housing subsidies, middle class, mortgage-interest deduction, renters, tax policy, tax reform, , , , , , ,

The presidential candidates have a lot to say about tax reform, but with one exception, they’re not about to get rid the big sacred cow — the mortgage-interest deduction, found on Schedule A of Form 1040:scheduleA (2)

Economists have been complaining about the mortgage-interest deduction for years. It’s a regressive benefit, increasing with income. It enhances inequality, effectively inflates property values and misallocates resources, or so the argument goes. In 2012, the mortgage interest deduction cost the federal government $70 billion, according to the Urban Institute, compared $36 billion for low-income housing subsidies.

But nobody expects that deduction to go away any time soon. It’s a firmly entrenched loophole (aka “third rail”) not only for the wealthy elite, but for the simple majority. The home ownership rate in this country exceeds 60 percent (in Vermont, it’s over 70 percent), and of course the lion’s share of those people are mortgage-holder beneficiaries. IRS2

The ranks of renters are increasing, though, and the more they do, the more seriously they might be taken as a political constituency. Politicians take renters seriously in Germany, where renters are in the majority and the regulatory climate is much more in their favor. Germany doesn’t offer a mortgage-interest deduction, either.

Might the growing numbers of American renters be mobilized to support the elimination of the mortgage-interest deduction — which ostensibly doesn’t benefit them anyway — in favor of increased housing subsidies for low- and moderate-income tenants? That seems like a stretch, unless another Occupy-style movement sweeps the country.

Well, if eliminating the mortgage-interest deduction discourages home ownership, so be it. There’s even evidence that home ownership isn’t necessarily such a wonderful thing, because it damages labor markets:

“We find that rises in the home- ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state,” write economists David Blanchflower and Andrew Oswald, in a 2013 paper. Why? Partly because higher rates of homeownership curtail labor mobility and lead to longer commutes.

So, who’s the exception among the presidential candidates? Ben Carson. bencarson He’s the only one who has said he’d do away with the mortgage-interest deduction. (Even Bernie Sanders doesn’t go that far – he’d cap it at $300,000.) For a full-throated defense of this Carson stance from someone who doesn’t agree with much of anything else he says, click here. 

Affordability with an expiration date

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expireIf we’re going to address the housing-affordability shortage, two things have to happen. The first is obvious: more affordable units have to be built or developed. The second is less obvious: For the affordable units that already exist, insufficient as they are, affordability has to be preserved.

Preservation is necessary because affordability typically derives from public subsidies, such has low income housing tax credits, that expire – after 15 years, in the case of LIHTC. As the expiration nears, a private owner might well be tempted to convert the units to market rate or to sell to a new owner who will have no affordability restrictions. Such a sale might be particularly tempting in hot real estate markets.

A wave of coming expirations across the country prompted this ominous Blooomberg headline last week, “A lot of cheap housing is about to get very expensive.” The story drew from an Urban Institute blog post on a review of 1.2 million project-based rental assistance units around the country that found about one-third were at risk of losing their affordability status in the next couple of years. The Urban Institute researchers recommended that local preservationists (such as housing non-profits and land trusts) focus their efforts on units in “high-opportunity” or low-poverty areas, where owners’ temptation to convert to market rates might be particularly strong.

greenhousemorgue1

Vermont, mercifully, has benefited from a concerted preservation effort since the late ‘80s – a combined initiative of state agencies (Vermont Housing Finance Agency and Vermont Housing & Conservation Board) that marshal state and federal dollars to provide and extend subsidies, and non-profit organizations, such as land trusts, that step in to acquire properties before they disappear from affordability ranks.

A survey last year turned up 822 units in privately owned apartments in Vermont with subsidies due to expire before 2020. An additional 1,649 units controlled by non-profits were found to be eligible for new investments, such as capital improvements or subsidy-extensions, before 2020.

Whether Vermont will be able to maintain its historically high rate of preservation for these units will depend, in large part, on the availability of public funds to underwrite the needed subsidies and investments, and the outlook for that, at both state and federal levels, is dubious.

burlingtonapt

And even if Vermont could preserve the affordability in perpetuity of all the current affordable units, there aren’t anywhere near enough of them to meet the demand. Many more affordable units have to be developed, and more public money will be necessary for that, too. That’s money that won’t be available until political leaders make housing a priority.

 

California’s sideshow

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Nowhere, seemingly, is the U.S. housing crisis more acute than in California.

GG1

So you might suppose that here, in unassuming, modestly-overpriced Vermont, we can safely ignore what’s unfolding in California. To the contrary, it does make sense to pay some attention, for these reasons:

 

  • California social trends and public policies have a way of diffusing through the rest of the country. Not only that, middle-class Californians, in exodus because they’ve been priced out of the housing market, are moving in droves to other parts of the country and effectively bidding up housing prices in the places where they relocate.
  •  Sundry housing-affordability initiatives in California might give us some ideas about what to do here. San Francisco has a Nov. 3 election with a ballot full of affordable housing measures. Redwood City, to the south, just approved an affordable-housing impact fee over developers’ objections. People in L.A. are looking into the prospects for land trusts, something Vermonters already know a fair amount about. And as we’ve mentioned before, school districts are facilitating workforce-housing developments merely to attract and retain teachers.
  •  California generates much of what we consume here as mass-media entertainment, so we should be aware of the social context.
  •  Unavoidably, the part of entertainment value in what we’re hearing about the extraordinary California housing market, especially the one in the Bay Area, is in the form of Schadenfreude. Apparently, “there goes the neighborhood” applies when Apple employees start moving in.

Any dreams you have of moving out there should be dispelled by this short film, “Million Dollar Shack,”

a middle-class lament is filled with tales of egregiously over-priced properties, skyrocketing rents, absentee overseas investors, etc.

 

At the root of school segregation

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It wasn’t the failure of “forced busing” that led to current racial disparities in school achievement outcomes. The problem, rather, is that the nation’s schools have become more segregated over the last three decades, as integration dropped from the agenda of education policy-makers.

So wrote a Syracuse University education professor, George Theoharis, in an interesting piece in the Washington Post Sunday. syracuse1

Two startling observations derive from his home town — which happens to be in our neck of the woods.

He notes the enormous disparities in programs, and outcomes, between a middle school with an 85 percent black and Latino student body and another middle school, 10 miles away, that’s 88 percent white. And he points out that in 1989, the city’s schools were about 60 percent white and 20 percent black/Latino, and that now, the district is 28 percent white, 55 percent black/Latino.

Theoharis goes on to discuss how a renewed emphasis on desegregation in educational policy could provide remedies: Redesigning school districts, for example, and putting them together “like pie pieces, so they cut across urban, suburban and even rural spaces”;  or creating magnet schools; or providing incentives to school districts to desegregate.

(Note: Magnet schools were the Burlington School District’s remedy for socioeconomic achievement gaps.)

But Theoharis never delves into the heart of the matter: residential segregation. This has grown worse in many cities since 2000, with an increase in the number of high-poverty neighborhoods, as we noted in an earlier blog post citing “The Architecture of Segregation,” a paper that detailed the demographic trends. In Syracuse since 2000, according to that paper, “the number of high-poverty tracts more than doubled, rising from twelve to thirty… As a result, Syracuse now has the highest level of poverty concentration among blacks and Hispanics of the one hundred largest metropolitan areas,” as shown in this table:

syracusetable

 

 

 

 

 

 

The takeaway is that addressing residential segregation iskey to addressing school segregation. Another analysis of school segregation and racial performance disparities, by the Economic Policy Institute’s Richard Rothstein, put it like this:

“Education analysts frequently wonder why a black–white achievement gap remains, even when individual poverty and family characteristics are similar. Partly it’s because of greater (and multigenerational) segregation of black children into neighborhoods of high poverty, few employment opportunities, and frequent violence….

“It is inconceivable to think that education as a civil rights issue can be addressed without addressing residential segregation … Housing policy is school policy; equality of education relies upon eliminating the exclusionary zoning ordinances of white suburbs and subsidizing dispersed housing in those suburbs for low-income African Americans now trapped in central cities.”

That’s what affirmatively furthering fair housing is all about, right? But you already knew that.

 

Right under our nose

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We’ve heard a lot over the last few years, both in Vermont and nationally, about how “health care is a human right.” But what about housing as a human right?

If we haven’t been hearing much about that, it’s because we haven’t been paying attention.

UN1

Adequate housing as an international human right has been a familiar theme in the United Nations for years. In fact, it’s centerpiece of the message that the U.N.’s housing rapporteur delivers regularly to the General Assembly. The current rapporteur, appointed last year, is Leilani Farha, executive director of Canada Without Poverty, a lawyer. Her full title is “Special Rapporteur on adequate housing as a component of the right to an adequate standard of living.”

That title derives from the Universal Declaration of Human Rights, adopted in 1948, which, while not declaring housing a right per se, does say this:

Article 25.

Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services …

and this, foreshadowing the spirit of fair housing law:

Article 13.

  • (1) Everyone has the right to freedom of movement and residence within the borders of each state.

Over the years through assorted covenants and agreements, we learn by browsing U.N. documents, housing has achieved recognition as a human right.

Here we pause to note that much of the Universal Declaration of Human Rights (which is worth reading, if refresh your memory of how many rights remain unfulfilled) has been willfully ignored by many U.N. members. And of course the U.N. has negligible power to enforce compliance. (We seem to recall that the U.N. brought its “water is a human right” message to Detroit last year. How did that turn out?)

We turn now to the website of the U.N.’s High Commissioner for Human Rights:

“Increasingly viewed as a commodity, housing is most importantly a human right. Under international law, to be adequately housed means having secure tenure – not having to worry about being evicted or having your home or lands taken away. It means living somewhere that is in keeping with your culture, and having access to appropriate services, schools, and employment.

“The right to housing is interdependent with a number of other human rights: rights to health, to education, to employment, but also to non-discrimination and equality, to freedom of association or freedom from violence, and ultimately to the right to life.

Too often violations of the right to housing occur with impunity. In part, this is because at the domestic level housing is rarely treated as a human right…”

The rapporteur’s 2014 report notes that “under international human rights law, it is the State that is held responsible for the compliance with international human rights to which it is bound.” That means national governments, but also, in the case of housing, “state/provincial and municipal governments.”

She acknowledges that ”the evolving nature and diversification of the State and the multiplicity of actors who may be involved in fulfilling its obligations under international human rights law make implementation all the more complicated.”

She can say that again, in housing’s case.

 

A digital-age summit in the oral tradition

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The J. Ronald Terwilliger Foundation for Housing America’s Families held a daylong “housing summit” Friday attended by assorted luminaries and seven presidential candidates (six Republicans and one Democrat).

summit

No doubt you’re wondering what they said. You’re probably also wondering about J. Ronald Terwilliger. He is, among other things, a developer of rental apartments in Atlanta, Charlotte, Nashville and Raleigh/Durham. He established the foundation last year, the foundation’s website informs us, “to recalibrate federal housing policy to more effectively address our nation’s critical affordable housing challenges and to meet the housing needs of future generations.” The foundation’s five-member executive board, besides Terwiller, comprises former senator Scott Brown, former congressman Rick Lazio, former HUD secretary Henry Cisneros, and Harvard Business School real-estate lecturer Nic Retsinas.

Besides the candidates, who were each allotted about a half-hour in a conversation format, the event featured several panel discussions, including one on “Accessing Private Capital to Build Affordable Housing.”

Fine, so what was said of substance? Don’t ask the J. Ronald Terwilliger Foundation. No transcript was made of the proceedings. For some reason, perhaps because it’s relatively new, the foundation didn’t take any steps to “seize the narrative” of its own event. The only record of the summit is in a spotty collection of news stories and snarky commentaries.

Chris Christie got a fair amount of attention, in a Boston Globe story and a harshly critical Times blog post, but also for his Twitter-worthy remark that housing doesn’t get a lot of notice in the presidential campaign “because it’s not the sexiest issue in the world to talk about, and it kind of depresses people.”

The most comprehensive account we’ve found was an article on a TV station’s website. The Republicans (who also included Jim Gilmore, Lindsey Graham, Mike Huckabee, Rand Paul and George Pataki) acknowledged that many Americans have an affordability problem, but some tried to link that to federal regulation. The lone Democrat, Martin O’Malley, called for doubling funding for the low income housing tax credit program and Community Development Block Grants.

But we’re not going to attempt a synopsis. You’ll just have to be satisfied with the summaries you get at places like Real Estate News or Forbes or NH1 TV news, or a video clip of Huckabee, on base guitar, backing Scott Brown’s daughter, the singer. Good luck finding any account of the panel discussions.

 

What they didn’t talk about

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debate2

The Democratic presidential candidates had a fair amount to say last night about the disappearing middle class, but not about where all of those fallen people can afford to live. Housing unaffordability is a “crisis” throughout the country, judging from news accounts, but it was not among the “pressing issues” deemed worthy of discussion in the debate.

One likely reason is that “pressing issues” for the purpose of this debate were defined, in part, by the volume of traffic they generate on Facebook. Perhaps housing advocates need to devote themselves more devoutly to social media.

Another reason, as we’ve suggested in previous posts, is that any substantial solution to the affordability problem will require major federal investments, in the form of subsidies, public housing and so forth. To be sure, raising wages – as the candidates pledged to do – will help alleviate the problem, but even a minimum wage of $15 will leave millions of people house-poor.

Here’s an idea that might have been introduced during the debate’s back-and-forths about capitalism, but wasn’t: Housing, like education and health care, is basic human need that requires major governmental intervention and that can’t simply be left to market forces. Don’t take our word for it –check out what an establishmentarian magazine, The Economist, has to say about housing as one of capitalism’s unmet challenges.

Another housing topic the candidates bypassed was the pronounced racial segregation that still marks residential settlement patterns in metropolitan areas all over the country, 47 years after the passage of a Fair Housing Act that was intended to undo that segregation.

They had opportunities to discuss this, when they were invited to talk about “issues of race in America” or the unrest in Baltimore, but the focus remained on reforming the criminal justice system, improving educational opportunities, and so forth. Not that these aren’t important, but there’s another perspective on the events of Baltimore and Ferguson that deserves attention. Consider this analysis by the Economic Policy Institute’s Richard Rothstein, published soon after the Baltimore riots:

“Whenever young black men riot in response to police brutality or murder, as they have done in Baltimore this week, we’re tempted to think we can address the problem by improving police quality—training officers not to use excessive force, implementing community policing, encouraging police to be more sensitive, prohibiting racial profiling, and so on. These are all good, necessary, and important things to do. But such proposals ignore the obvious reality that the protests are not really (or primarily) about policing.

“Baltimore, not at all uniquely, has experienced a century of public policy designed, consciously so, to segregate and impoverish its black population. A legacy of these policies is the rioting we have seen  ….Whether after the 1967 wave of riots that led to the Kerner Commission report, after the 1992 Los Angeles riot that followed the acquittal of police officers who beat Rodney King, or after the recent wave of confrontations and vandalism following police killings of black men, community leaders typically say, properly, that violence isn’t the answer and that after peace is restored, we can deal with the underlying problems. We never do so.

“Certainly, African American citizens of Baltimore were provoked by aggressive, hostile, even murderous policing, but … (w)ithout suburban integration, something barely on today’s public policy agenda, ghetto conditions will persist, giving rise to aggressive policing and the riots that inevitably ensue. Like Ferguson before it, Baltimore will not be the last such conflagration the nation needlessly experiences.”

Variations on a sordid theme

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“Forty families on one lot, using one water faucet. Living in barren one room huts, they were deprived of the glory of sunshine in the daytime, and were so poor they could not even at night use the electricity that is to be generated by our great river…

“I found one family that might almost be called typical. Living within one dreary room, where no single window let in the beneficent sunlight, and where not even the smallest vagrant breeze brought them relief in the hot summer – here they slept, here they cooked and ate, here they washed themselves in a leaky tin tub after carrying the water for 100 yards. Here they brought up their children ill-nourished and amid sordid surroundings…”

The speaker was Congressman Lyndon B. Johnson, in his home district of Austin, describing the “slum tarnish” he observed during a Christmas Day walk through town. He made his remarks in a radio address to his constituents (this was well before LBJ himself got into the radio business), hoping to win their support for something new in town: public housing. The address became known as his “Tarnish” speech.

Here’s a photo (albeit not from Texas) that seems to capture what he was talking about:

slumscene

 

 

 

 

 

Thirty years before he orchestrated the passage of the Fair Housing Act as president, Johnson – whose ambition as a young congressman is captured by this 1937 photo of him shortly after his election, with FDR in Galveston – prevailed in that housing campaign.

lbj1938B

The first public housing in the country built under the 1937 housing act was in Austin. It was segregated, like most public housing that sprang up around the country over the next few decades, but less sordid than what they replaced. LBJ used that word – sordid – to good effect at HUD’s inauguration, when he declared: “Our cities and our new urban age must not be symbols of a sordid society.”

“Sordid” might be an apt description for some blocks of big-city, high-rise public housing, thoroughly segregated, underfunded and bereft of hope, if not sunlight. High rises came into planners’ favor in the ‘40s, but a couple of decades later they were not. For a tidy history of public housing, click here.

Some argue that public housing outside the big inner cities has worked quite well, and perhaps that can be said for places like Vermont, which apparently got into public housing fairly late in the game. (Burlington’s housing authority dates from 1961, and the state’s, from 1968.) If a history of Vermont’s public housing hasn’t been written, it’s a thesis topic in waiting.

Housing opinions get short shrift in D.C.

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questionnaire

You may have missed it, but the MacArthur Foundation, by way of Hart Research Associates, did a national poll of 1,401 adults last spring on housing issues – the third such survey since the Great Recession. Guess what: A majority thought the housing crisis isn’t over yet!

No surprise there, given that 60 percent said they regard housing affordability as a “serious problem,” and 55 percent said they’d made at least one sacrifice (e.g. taking second job, eating more junk food, etc.) to cover their housing costs.

We’ll spare you the responses to the questions on class mobility and Millennial stresses, and simply highlight a couple of disconnects:

  • Respondents appeared divided about what role, if any, the federal government has in addressing the housing-affordability problem. Fifty-three percent said it wasn’t the federal government’s responsibility, compared to 39 percent who thought the federal government should be involved.

And yet, a big majority – 75 percent – said they want elected leaders in Washington to make housing affordability a priority. (See? We’re not alone in saying stuff like this, or this.) And 79 percent said they wanted state and local elected leaders to do so.

  • But those elected leaders – national, state and local – are not making affordable housing enough of a priority, at least in respondents’ eyes, as suggested by this chart:

Maca$

Dare we suggest a reason why public officials are not responding? Because they have a sense of impunity, inasmuch as making affordable housing a high priority would, in all likelihood, require spending appreciable amounts of tax dollars. How would the poll’s respondents feel about that?