Tag Archives: housing

Tampering with the sacrosanct

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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. 

More brainstorming: self-building

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The housing-unaffordability problem is too big, pervasive and complex to yield to single, simple remedies. Yes, government at all levels has to play a substantially bigger role than it does now. But without substantial new federal funding and subsidies — which can’t be found on mainstream politicians’ lists of spending priorities — we might as well brainstorm about piecemeal, alternative solutions.

Having touched on co-living and cohousing in the last post, we bring you a continental variant of this idea: collective building.baugruppe1

This intriguing headline in the Guardian, “The do-it-yourself answer to Britain’s housing crisis,” offers an entrée: community members, with help from a land trust, building their own affordable homes. Britain even has an organization, the National Custom and Self-Build Association, to promote such efforts.

Self-building seems to be an even bigger trend on the continent. In Germany, baugruppen, or building groups, are active all over, and reportedly account for 10 percent of new homes built in Berlin. baugruppe3These are groups of people who come together, often with something in common (they might be musicians, say, or share a political philosophy), and take responsibility for acquiring land, hiring architects and contractors, and creating their own housing. For a summary of how it works, click here, or another brief description, here.

The baugruppe is a well-established form of organization in Germany and apparently gets a good deal of institutional support, including financing from a state bank. Whether something like this could work in this country is an open question.

Mike Eliason, a designer who was author of a seven-part series on baugruppen, seems to think it could, at least in a place like Seattle. For the first article, on the website of a Seattle advocacy organization called The Urbanist, click here. As Eliason describes it, baugruppen projects cost less than traditional models because they do without developers and marketing, as well as real estate agents.baugruppe2

It all sounds reminiscent of cohousing, except that it’s commonly done in an urban setting — as the photos in this post reflect. It also sounds like a fairly middle-class phenomenon, considering how much of a personal investment it requires of its participants. Who has the time and energy necessary to do all the meeting and planning and hiring and so on? Probably not someone who holds down two minimum-wage jobs. Not that we don’t need affordable housing, sometimes called workforce housing, for middle-class professional types, too.

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.

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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.

 

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.

 

Racial disparity: here we go again

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debt

ProPublica has a fine expose on racial disparities in debt-collection litigation. Reporters examined court judgments in St. Louis, Chicago and Newark and found that court judgments were twice the size in predominantly black neighborhoods compared to predominantly white neighborhoods – even controlling for income. African Americans significantly more likely than whites to be sued by debt collectors.

So what, you might ask, does this have to with housing, or more particularly, housing discrimination (AKA fair housing)?

Two things:

  • One inference from the findings is that blacks tend to have less resources – less wealth – to fall back on in hard times. Specifically, they have less wealth in the form of home equity to pass on one from one generation to the next, and that’s a legacy of housing racial discrimination that was promoted and enforced by governments at all levels – and notably, by the federal government from the 1930s on.

As the ProPublic article puts it:

“Experts cite many reasons why blacks might face more lawsuits, foremost among them the immense gap in wealth between blacks and whites in the U.S. It’s a gap that extends back to the institution of slavery and, more recently, to 20th century policies that promoted white homeownership while restricting it for blacks.”

That gap has even widened since the Great Recession, according to the Pew Foundation. The typical black household has a net worth more than 10 times less that of the typical white household:

wealthgap

 

 

 

 

 

  • The other connection to fair housing is that the racial disparity in debt-litigation cases runs parallel to the racial disparity in predatory lending that was revealed during the housing bubble years of the early 2000s. In many areas, blacks were steered to expensive home loans even when they could have qualified for standard mortgage loans. The debt collectors insist they’re treating everyone the same and not screening cases by race. That may be true, but the mass effect is similar to that produced when minorities were are targeted by predatory lenders in the years leading up to the Great Recession.

For a brief description of how a bank was called to account under the Fair Housing Act, check out this synopsis of a case that the civil rights law form Relman, Dane & Colfax filed against Wells Fargo in Baltimore, or this summary in the Baltimore Sun.

Burlington’s housing-wage gap

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Burlington needs more affordable housing, lots of it. Affordable rentals, especially. After all, renting households far outnumber owner households in this city, and by any measure, they’re financially stressed. On average, according to a city report last year, Burlington’s renters pay 44 percent of their income on housing. More than one-third of Burlington’s renters pay more than half their income on housing. That’s what’s known among housing specialists as a severe burden.

Because of inclusionary zoning, we can be fairly confident that new, affordable rental units will be made available wherever big new developments go in. The hope here, at the Fair Housing Project, is that such developments be spread around the city. Not all the new affordable units have to go in the Old North End!

The South End would seem to be prime candidate for more subsidized, multi-family housing, and as far as we’re concerned, the Hill should be another possibility. Granted, there’s a trade-off between the price of land and the number of units that can be developed on a given tract; but still, we support the idea of locating a decent share of new affordable housing in low-poverty areas.

Here’s an interesting perspective on Burlington’s unaffordability from the point of view of low-wage workers. Consider five occupational categories that lead the state in numbers of workers: cashiers, personal care aids, retail salespeople, food prep workers and wait staff. Look at this graphic (courtesy of the National Housing Conference’s “Paycheck to Paycheck” that shows what annual income is needed to rent an apartment in Burlington without being burdened; and how their incomes compare:

paycheck2

Incidentally, personal care aide is one of the state’s fastest growing occupations. That’s a testament to the greying of Vermont, because personal care aides assist elderly or disabled adults. Is it too much to ask that personal care aides be able to find affordable housing in the same communities where they serve their clients?

What about home ownership in Burlington for these workers? Similarly out of reach:

paycheck

Jobs and affordable housing, Part 1

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“Workforce housing” has become a popular term among housing advocates. Its definition varies, but for our purposes, it simply means affordable housing that’s fairly close to the workplaces of lower-and middle-income people.

Now, the ideal is that all the people who make a town’s economy run — the cashiers and the teachers, the home health-care aides and the police officers, the waitresses and the accountants, the secretaries and the tradespeople, from carpenters and plumbers to electricians — should all be able to live in town, if they want. That’s a form of population diversity — in skill sets, in housing options — that the Fair Housing Project wants to encourage: affordable housing for people of mixed incomes near their work sites.

winooski

Well then, one might well wonder how the job locations and the affordable housing units in Vermont match up … or don’t, town by town.

There’s no easy way to get at this, but here’s a proxy approach:

Look at municipalities that are employment centers and see how many units of subsidized housing they have.

Of course, “subsidized housing” typically refers to housing for people earning up to 80 percent of the median income, so it’s not the same as housing that accommodates a wide-ranging workforce of middle and above average incomes. But at least we can get an idea of which employment centers are more or less accommodating of lower-paid workers — the cashiers and personal care aides, for example, the two occupations with the most numerous openings in Vermont, according to the Department of Labor. We’ll assume that full-time cashiers and personal care aides qualify for subsidized housing. (Cashiers’ median hourly wage in Vermont last year was $9.73; personal care aides’, $10.99. By contrast, Vermont’s “housing wage” — the hourly rate needed to afford an average apartment without paying more than 30 percent of income– was $19.36.)

As for “employment centers” there were more than 80 Vermont municipalities that offered 500 jobs or more in 2014, according to Department of Labor statistics.

Of those, more than 30 had 2,000 jobs or more. Arbitrarily, we’ll call those the “major employment centers.”

To find out how many subsidized housing units each municipality has, we simply go to the Directory of Affordable Housing on the Housing Data website , pull up all the site-specific units for each town, and add them up.

With these two figures for each municipality — number of jobs and number of subsidized (affordable) housing units — we can derive a seat-of-the-pants workforce housing index: How many subsidized units for each 100 jobs. The higher the index, the more “workforce housing” that community provides.

Well, it turns out that all but one of Vermont’s major employment centers have a workforce housing index under 10 – that is, they each have fewer than 10 affordable housing units for every 100 workers.

The exception is Winooski, where the index is a whopping 24. (The city occupies a mere square mile, much of which is included in the aerial photo above.) Winooski had 2,799 jobs in 2014 and 687 subsidized housing units — the friendliest affordability ratio in Vermont by far.

Which major employment centers in Vermont had the fewest subsidized units? Stay tuned.