Ben Carson's Unaffordable Public Housing Plan

(Bloomberg) -- Last week, Housing and Urban Development (HUD) Secretary Ben Carson proposed legislation to make affordable housing “work” by making it stingier. The bill would force low-income households to pay more of their scarce earnings in rent, tripling the rent for the poorest. Carson claims the changes would “provide an incentive [for renters] to increase their earnings.” That flies in the face of research showing that making housing more affordable helps to improve economic self-sufficiency and increases children’s future earnings.

The time has come for policymakers to ensure that every American has access to decent affordable housing. As with education and healthcare, such access should be considered a basic right — one that underpins not just our social safety net, but our economic dynamism.

Almost every American knows someone who lacks access to affordable housing: a young family trying to relocate to a new school district, a friend with a job offer in a high-cost urban area, or a relative who struggles every month to cover rent and expenses. In 2016 alone, more than 900,000 renters were subject to eviction notices — as many as one in nine in some cities.

In that regard, Congress’s FY 2018 omnibus funding legislation did offer some good news. The Low-Income Housing Tax Credit (LIHTC), a crucial source of financing for affordable housing projects, received its first increase (albeit temporary) in more than a decade, and Congress also expanded the types of projects it can fund. Fortunately, lawmakers ignored the Trump administration’s proposed budget, which recommended $6.8 billion in cuts to HUD, a reduction in housing vouchers and public housing support, and the elimination of the National Housing Trust Fund.

Unfortunately, these incremental funds lack the scale and ambition necessary to address the acute shortage of affordable housing and rental stock. 

Harvard University’s report on rental housing shows that more than 20 million households pay more than 30 percent of their income on rent. That’s before any other expenses, let alone saving for a rainy day or retirement. And 43 percent of very low-income households pay more than half their earnings in rent or live in severely inadequate units.

For the most vulnerable, the shortage is even more acute. According to the National Low-Income Housing Coalition, there are 7.2 million fewer “affordable and available” homes than needed for extremely low-income households. Nevada, for example, has an 85 percent shortfall in affordable homes.

The Trump tax cut legislation made matters worse. All told, it will likely reduce the production and preservation of affordable units by 235,000 over the next 10 years, dwarfing the positive effects of the omnibus’s incremental increase in LIHTC funding. By reducing the value of deductible expenses, such as depreciation and interest expense, the lower tax rate also lowers the value of the credits. Fewer dollars available from the credits, which developers sell to raise equity for building, mean less affordable housing supply.  

The lack of affordable housing hurts more than just low- and moderate-income households. It also drags down the larger economy. Raj Chetty’s research underscores the long-term benefit to earning power for children growing up in higher income areas. We also know that neighborhoods with greater economic and racial integration offer greater upward mobility and economic opportunity.  More broadly, one recent study found that the lack of affordable housing, particularly in our most productive cities, reduced economic growth from 1964 to 2009 by more than 50 percent.

What is to be done? In the short term, several priorities loom:

First, the administration’s plan to strip out the omnibus’s funding for HUD and weaken other affordable housing programs must be blocked. Now is not the time to reduce HUD’s rental assistance and eliminate the Housing Trust Funds.    

Second, the LIHTC should be safeguarded and enhanced, beginning by making its temporary funding increase permanent. Congress should also pass the Affordable Housing Credit Improvement Act, a bipartisan bill that would provide a more generous LIHTC expansion, broaden access to affordable housing, and fund an estimated 400,000 affordable units over 10 years.

Finally, while the lack of federal funding is a huge problem, so are many state and local zoning rules and land-use restrictions. California’s recently defeated bill to promote high-density housing close to mass transit sites shows just how hard it can be to craft and gain support for local zoning reforms. The bill’s opponents highlighted the loss of local control and argued that new development could lead to gentrification and displacement. As an incentive to find solutions that work for local stakeholders, federal funds could be linked to modification of zoning and land-use regulation to allow more affordable housing.

What’s needed is ambitious, innovative policy-making at all levels of government. Our main federal policies to support affordable rental housing, HUD’s Section 8 programs and LIHTC, were enacted in 1974 and 1986, respectively. We’re long overdue for a re-think that draws on decades of experience.

The Trump Administration appears to believe that affordable housing programs will “work” if they are simply less generous. The evidence suggests the exact opposite. More and more families are struggling under the burden of rising housing costs. Existing programs aren’t meeting their needs. And this failure to lift up America’s most vulnerable is hurting the economy as a whole. Policymakers and legislators must embrace the idea that access to decent affordable housing is a basic right as well as an economic imperative. Voters, for their part, must demand that they do.

©2018 Bloomberg L.P.

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