I recently wrote an article about the projected impact of the tax bill on affordable housing. As I described, we need dramatically more affordable housing in this country than we’ve got. According to a 2017 analysis by the National Low Income Housing Coalition, there are nearly 11.5 million families in this country struggling to survive on incomes either at or below the poverty line, or at less than 30 percent of the median family income in their area. Yet we have only about 4 million units available to these families. That leaves a gap of about 7.5 million units, which means the wealthiest country in the world has only 35 affordable and available units for every 100 of the poorest renter households. Every state in the country has a shortage of affordable housing for the most needy among us.
We have developed a number of programs to help bridge the gap between supply and demand. They don’t do enough, but without them the affordable housing crisis would be even more dire. Contrary to what most people think, the best weapon in our policy arsenal is not public housing. It’s in the tax code, and the most important tool in the code is the Low Income Housing Tax Credit (LIHTC). The LIHTC awards housing developers a stream of tax credits in exchange for constructing affordable housing. The developer can sell these credits to investors and use the money to fund its projects and manage its property. Since its creation in 1986, the LIHTC has helped finance the construction of over 2.5 million affordable units across the country. Tax credit housing now accommodates about twice as many households as public housing.
Importantly, the investors lose the tax credits if the buildings are not built and maintained to a high standard, which helps guarantee that LIHTC housing will not only be affordable, it will be safe. For that reason, LIHTC housing has become an important part of community revitalization in distressed neighborhoods. The LIHTC is a win-win: Some of the poor get quality, affordable housing while investors get a tax credit.
Yet significant elements of the LIHTC are in the GOP crosshairs. According to a careful analysis by the Tax Reform Resource Center, the House version of the tax bill would cut the program in a way that would lead to nearly 1 million fewer units of affordable housing over the next decade, while the Senate version would reduce production by about 300,000 units. Even without these changes, the LIHTC cannot do enough to meet our needs. The thought that Republicans would hobble it is even more is horrifying.
In my earlier column, I described the rippling effect of a tax bill that all-but-guarantees some of our neediest neighbors will be pushed into homelessness. To put it simply, the research consistently shows that quality, affordable housing leads to better outcomes in health and education, and lower rates of crime. But some people evidently consider the idea that we would interfere with the market, and even worse, that the government would be involved in housing, as blasphemy. At least, that seems the inescapable implication of the comments that the article inspired.
For these people, a reminder is in order that modern democracies tweak the market all the time. We routinely build incentives into the law—and especially the tax code—that reward certain investments or economic choices and discourage others, all of which represent a manipulation—a tweak—of the market. More than that, the odds are extremely good that every person reading this, and every person who objected so strongly to the idea of enlisting the government to help create affordable housing, is and has long been the benefactor of precisely such tweaks.
What, you think the market created that mortgage interest deduction that systematically favors home ownership over renting and adds so much value to your house? You think the market gave you a break on your taxes because you got married? That the market gives you a tax deduction for charitable donations? Here’s a news flash: the market doesn’t give a shit if you own or rent, and certainly doesn’t care if you’re married (nor does it care who you marry). Government might, but the market is colossally indifferent. You might think any one of these deductions or credits is a swell thing, but you’re not tipping your hat to the market; you’re thanking government.
Think about the things you have relied upon or come to expect as your birthright as a person living in this country. They do not come to us courtesy of a benevolent market. They come to us because of government. Are you counting on social security when you retire? Thank the government, not the market. Do you now or have you ever gotten unemployment insurance? What about workmen’s compensation or disability payments? Why do we get them? Because the market won’t do it. Are you or your parents on Medicare (for the elderly) or Medicaid (for the poor)? That’s not the market, that’s government. Now think about what it would mean suddenly to be without them.
Did you go to school on the GI Bill or any of its successors? Did you qualify for a home loan at sub-market rates because you’re a veteran? Did you come back from Iraq or Afghanistan or Korea or Vietnam or France or the Pacific scarred and broken in body and soul and get treatment at the local VA? Do you know how much the market cares about your service to your country? That and $0.99 will get you a cup of coffee at Dunkin Donuts. Did you open a small business with tax credits or a low-interest loan financed by the government? You can’t thank the market for that.
What about your work history. Every piece of state and federal legislation aimed at achieving equality in the workforce is, by definition, a tweak of the market. Are you over 65? Employers can’t lawfully discriminate against you because of your age. Are you white or black or Latino or Asian? They can’t discriminate against you because of your race or ethnicity either. Are you a man? Same for gender. Catholic? Same for religion. And it’s not just employment. Do you want to live in this neighborhood rather than that? You want to buy rather than rent? Don’t thank the market. Thank the government. No one can lawfully tell you where to live.
And no one can force your kids to learn at segregated schools and eat at segregated lunch counters and sit in the back of segregated buses. You think all this is the magnanimous gift of the market? I know there are people who want to go back to the days when discrimination was perfectly legal. When Jews couldn’t get a job and Catholics couldn’t hold office and blacks couldn’t buy a house. But I think most of us don’t. And sure, I know the anti-discrimination laws are imperfect and that plenty of people feel their rights are trammeled. But you only have the right to be protected against private discrimination because government gave it to you. As flawed as they are, I think most of us would rather have the anti-discrimination statutes on the books than go back to the days of separate but equal.
So why do we need the government to be involved in affordable housing? Because the market can’t do it alone. Precisely because affordable housing is affordable, the rents will never cover the cost of purchasing the land, constructing the building, keeping it up to code, and maintaining it over its lifetime. The market, in other words, will not create affordable housing on its own. If we want affordable housing, we need to tweak the market. It’s as simple as that. And the most successful tweak we have developed to provide affordable housing for the working poor is the LIHTC.
In short, to say that the government has no business tweaking the market is idiocy. It happens all the time, and most of us would never want it otherwise. If you or your family took advantage of any of these tweaks, or if you plan to do so in the future, what you’re really saying when you rant about affordable housing is that the government should help you, but not the working poor and the most vulnerable among us. Well done you.