It is time to face the fact that America no longer has a “housing shortage;” instead it has a “housing crisis.” The available data indicates that housing problems are becoming a national catastrophe that needs to be dealt with immediately.
Data that shows the extent of the problem includes:
- Nearly 600,000 (564,708 to be exact) people were counted as “homeless” in January 2016 in the National Alliance to End Homelessness’s State of Homelessness in America Note: this figure was undoubtedly a gross undercount because the numbers don’t include all the people staying in motels or rooming houses; living fulltime in trailers or motorhomes, sleeping on a relative or friend’s couch, staying in public housing, or renting a room in somebody’s home, because they cannot find a place of their own. It only counted those on the street, or living in shelters or cars.
- Another 1.4 million people are at risk for homelessness, Social Solutions concluded.
- The risk of homelessness is greater for some groups; including young people, veterans, Lesbian Gay and Transsexual Youth (LBGT) and the elderly, Social Solutions
- There are several cities including Boston, Los Angeles, Denver, San Francisco and Austin where middle and working class families can no longer afford to a home, Wired reported.
- Eight million families with children were spending more than half their income for rent in 2013, the Department of Housing and Urban Development’s Worst Case Housing Needs report determined.
- Five million “elderly households” were spending more than half their income on rent in 2013, the same report noted.
- Seven million “other households” mostly singles were spending more than half their income on rent in 2013.
Possible Solutions for America’s Housing Crisis
“The business of housing the poor; if it is to amount to anything must be business, as it was business with our fathers to put them where they are. As charity, pastime, or fad, it will miserably fail, always and everywhere. ” – Jacob A. Riis (1849–1914).How the Other Half Lives, Special Illustrated Edition“. 1890.
A few potential solutions for America’s housing crisis that would follow Riis’s advice by harnessing the power of the free market include:
- Extend the mortgage tax deduction to cover residential units that rent for less than $1,500 or $1,000 a month. The landlord’s mortgage payment would be tax-deductible as long as the rent stayed below that level. If the rent is raised over that level the landlord will lose the deduction and owe back taxes at the full rate. This would reward landlords that rented to lower income people.
- Offer government-subsidized low-interest mortgages to individuals or corporations that purchased, built or remodeled properties for the purpose of renting to low-income individuals. The mortgages would be underwritten by a corporation like Fannie Mae, and available through banks.
- Extend federal mortgage insurance to landlords renting to lower-income individuals.
- Make rental payments below a certain level; say $1,500 a month, tax deductible income. That would give a strong incentive for people to keep rents low.
- Make a $1,000 or $1,500 housing voucher available to all households that made less than 200% of the poverty level.
- Voucher eligibility would be purely based on income and it would be available to all citizens and legal residents of the United States regardless of employment, credit rating or parole status.
- The voucher payment would be made directly to the landlord via electronic means to ensure it goes for housing. This would encourage people to put such rentals on the market. Note: the landlord would only receive the payment if he or she was actually renting the place.
- All recipients of Supplemental Security Income; (SSI) or Social Security Disability, all honorably discharged veterans, and senior citizens no income besides Social Security would automatically qualify for the Housing Voucher.
- Increase the amount of money in the National Housing Trust Fund which is supposed to pay for homes for extremely low income people from $174 million to $25 billion.
- Create a new tax-free bond that would finance public housing projects in cities.
These efforts might work because most of them address the real underlying cause of America’s housing crisis – it is no longer profitable to build or offer affordable housing in the United States.
Why it would Work
Our corporate welfare system rewards the construction of expensive upper class housing so that is exactly what we get. If we make it profitable for average people to become landlords and start offering affordable housing to the working class that’s exactly what will happen.
The mortgage tax deduction is potentially the most powerful tool here, one reason why U.S. real estate is so pricey is the current tax deduction. Wealthy and middle class people know that they can lower their tax bill with a large mortgage so they take one out. If investors, professionals, entrepreneurs and others thought renting to lower-income people would cut their taxes they would do it.
The voucher program would increase the housing supply; because landlords would be ensured of a steady income if they rented to lower income people. Since they would also get a tax deduction, there would be too strong incentives to go into the affordable housing business.
A Real Stimulus for Average Americans
One result of such programs would be that large numbers of everyday people; doctors, lawyers, schoolteachers, construction workers, contractors, cops, firemen, insurance agents, realtors, janitors, factory workers, farmers, truck drivers etc., would start building or remodeling units for affordable housing.
This would create jobs for construction workers and professionals like plumbers electricians and work for a lot of contractors. It would also pump money into local economies in the form of increased property taxes, and all the spending on construction supplies.
Another benefit will be that lower income people would have a lot more to spend at the grocery store, Amazon, Walmart, and elsewhere. This would be a real stimulus that would boost spending, create jobs and increase sales taxes in many communities.
Finally communities would be spared all the expenses and problems created by homelessness and eviction.* There would be no more tent cities, people sleeping in the parks or in cars and related problems.
*For an interesting view of eviction and its’ terrible social and economic costs see Matthew Desmond’s excellent book Evicted: Poverty and Profit in the American City. Evicted is available on Amazon and it is an eye-opening read.
There is one certainty here; if we do not deal with the Housing Crisis it will create third world conditions in many of our cities. If we don’t want streets covered with urine and feces; and shanty towns in our cities, we must deal with the housing crisis now.