OK, you say, these are national figures, but housing markets are local. This may be a problem in San Francisco, Los Angeles, New York, Boston, and Washington, D.C., but it isn't a problem in the "heartland," the rest of America.
The gap between incomes and housing costs is widening in every part of the country. According to the "Out of Reach" report, a full-time worker at minimum wage cannot afford a typical apartment anywhere in the country.
No other major industrial nation has permitted the level of destitution and decay found in America's cities. We see the consequences every day: deadly levels of crime and violence; Third World levels of infant mortality; a growing army of homeless people sleeping on park benches and in vacant buildings. Americans accept as "normal" levels of poverty, crime and homelessness that would cause national alarm in Canada, Western Europe or Australia.
But the good news is that these other countries demonstrate that the housing crisis is solvable. The U.S. has the resources, technology, and policy ideas to guarantee that every American has a safe, decent, affordable home. What's missing is the political willin Washington, Sacramento, and greater Los Angeles.
One of the biggest myths about housing is who gets federal subsidies.
Most Americans think that federal housing assistance is a poor people's program. In fact, fewer than one-fourth of all low-income Americans (those who have Section 8 rental vouchers or who live in government-assisted developments) receive federal housing subsidies. In contrast, almost two-thirds of wealthy Americansmany living in mansionsget housing aid from Washington.
The largest housing subsidies are tax breaks for homeowners. These cost the federal government almost $90 billion$70.1 billion for the mortgage interest deduction and $19.3 billion for the property tax deductionaccording to a report by the Congressional Joint Committee on Taxation. That would be OK if most of it helped middle- and working-class people. But it doesn't. Those with the highest incomes and the most expensive homes (including second homes) get the largest subsidy.
More than half (53.7 percent) of the $89.5 billion homeowner subsidies went to the 11.8 percent of taxpayers with incomes over $100,000. More than one-fifth (20.6 percent) went to the wealthiest 2.3 percent of taxpayers with incomes over $200,000.
Wealthy households are most likely to own homes and to itemize deductions. Half of all homeowners do not claim deductions at all. Tenants, of course, don't even qualify. As a result, 62 percent of households with incomes above $200,000 receive a mortgage interest tax break, averaging $7,219. In contrast, only 3.5 percent of households with incomes between $10,000 and $20,000 receive any subsidy, averaging $317. If anything, these tax deductions help push up housing prices artificially, especially at the upper end, because homebuyers include the value of the tax subsidy in their purchase decision. This leads wealthy homeowners to buy bigger houses than they would without the tax breaks.
In recent years, many middle-class families have found it more and more difficult to buy a home. Contrary to the rhetoric of the real estate industry, these deductions aren't the salvation of the middle class. Only one-third of the 52 million households with incomes between $30,000 and $75,000 receive any homeowner subsidy.
As a result, a wealthy corporate executive is more likely to receive a much bigger homeowner tax break than a garment worker, a construction worker or a school teacher. The current system subsidizes the rich to buy huge homes without helping most working families buy even a small bungalow.
Housing subsidies for the rich are virtually an entitlement, but for the poor it is a lottery. While the tax code provides about $50 billion in homeowner subsidies for families with incomes above $100,000, the entire U.S. Department of Housing and Urban Development (HUD) budget is under $35 billion. This provides housing assistance for less than one-quarter of the nation's poor. Under President George W. Bush, the number of poor people (now 37 million) has increased, while he's cut housing subsidies for low-income families. For example, there are more than 20,000 families on the waiting list for Section 8 vouchers in LA alone because HUD doesn't have enough money to meet the need. So the gap between housing subsidies for the rich and the poor has been widening.
I support federal (and state) subsidies for working class and middle class families so they can buy a home, but not for rich people to purchase mansions.
Local officials, meanwhile, have to cope with the housing crisis in their own backyards, without much help from Washington or Sacramento. Cities can't solve the problem on their own. They lack the resources and the legal authority. Even so, some cities are better than others at stepping up to the plate and pushing the limits of what's possible.
One such city is Santa Monica. The city has a strong policy agenda for both protecting existing affordable housing (and tenants who live there) and expanding the overall supply of affordable housing. How?
Santa Monica provides affordable housing incentives above and beyond the required state density bonus. It includes parking reduction, height bonuses, and a density bonus for developers who serve poor and moderate income households. Affordable housing developments get fast-track treatment through the streamlined bureaucracy. The city encourages mixed-use (housing and commercial) projects and channels new housing into the underdeveloped commercial corridors. The city has an inclusionary zoning law that requires market-rate developers to include affordable housing within projects rather than pay an in-lieu fee.
Santa Monica requires commercial developers to pay a "linkage"housing mitigationfee, which is used to fund affordable housing. In fact, even though Santa Monica only has about 2% of L.A.'s population it spends about 10% of what L.A. allocates for affordable housing. It funds nonprofits to provide a range of housing optionssenior housing, supportive housing, transitional housing, shelters, and housing for the working poor. Its nonprofit arm, the Community Corporation of Santa Monica, is successful because the city provides enough capital funds to support a pipeline of projects. In that way, it serves as a housing production engine. It has produced 1,400 units already. Another 200 units are scheduled for this year. (That would be the equivalent of 9,000 affordable units in L.A.).
Santa Monica, where the Rent Control Board is elected, had a strong rent control law until the mid-1990s, when the state legislature tied cities' hands. Even so, Santa Monica strongly enforces its vacancy decontrol law. To restrain landlords from unlawfully evicting tenants so they can raise rents to market levels, Santa Monica pro-actively educates renters about their rights, through mailings, workshops, and support for tenant outreach and counseling. It has a strong law against harassment of tenants and prosecutes landlords who violate tenants rights. The city does not allow any conversions from apartments to condo.