U.S. Housing Needs ‘Social’ Solution : For-Profit System Has Had Its Chance but Failed Miserably

It’s time to question whether the for-profit housing system on which 98% of Americans depend can meet the nation’s need for decent, affordable housing. Consider these facts:

* More than 9 million American families pay half or more of their income for housing; nearly 4 million pay 70% or more.

* One in 16 homeowners is 30 days or more behind in mortgage payments; foreclosure rates are at an all-time high.

* Overcrowding and doubling up are on the rise; the New York City Housing Authority reports that 100,000 of its 174,000 apartments are occupied by one or more persons not on the lease.

* There may be 2 million to 3 million outright homeless; increasingly, they are families with children.

A simple explanation underlies these problems: For more and more Americans, housing costs are outstripping household incomes. The costs of land, building materials, mortgage money, insurance, utilities, property taxes and maintenance keep increasing, rising faster than the wages and income supports of lower-income Americans.

These problems have been getting worse, and the future is bleak. A recent congressionally funded study estimates that within a generation, 19 million Americans may be at risk of becoming homeless.

If we truly want to provide all Americans with “a decent home and suitable living environment”--the goal set in National Housing Act of 1949 and reiterated by Congress in 1968--we must reevaluate our faith in the market-dominated housing system.

Simply put, the profit-maximizing demands of those who build, finance and operate housing are incompatible with the realities of what people can afford. Unless radical changes are made, ever greater numbers of Americans will be living in substandard, overcrowded and unaffordable quarters or, worse, in shelters, church doorways and subway stations.

What must that radically restructured housing system look like?

We must foster a vast nonprofit “social sector” to develop, renovate and manage substantial parts of the nation’s housing stock--not to maximize profits but to provide the best housing, at the lowest cost, for the most people. Government housing subsidies should go exclusively to social-housing entities: churches and synagogues, community organizations, labor unions, resident cooperatives.

It must deal effectively with the housing-cost element that dwarfs all other housing costs combined: the cost of money borrowed to build and purchase virtually every new and newly purchased dwelling unit. Roughly two of every three consumers’ housing dollars go to pay off this debt--directly by owners, indirectly by renters. This debt is, in effect, a permanent housing cost, because even if a mortgage is paid off, the property incurs a new and higher debt burden when sold.

One-time up-front government capital grants must instead be used, by social housing developers, for new and rehabilitated housing. And government funds must be used to permanently retire the debt on a substantial portion of existing units, which will belong the social-housing sector.

Occupancy costs for debt-free, socially owned housing would be roughly one-third of current costs. For those with incomes too low to afford even these reduced costs, additional housing allowances must be provided.

Finally, a restructured housing system must provide far more government subsidies for the ill-housed than we now provide. There are no gimmicks here, no magic. The gap between housing costs and the legacy of decades of inadequate funding means that we must devote several times what we now spend on housing subsidies in order to achieve the national housing goal.

The money is there. We can reallocate current government expenditures to place decent housing for all up there with B-2 bombers and the savings-and-loan bailout. We can progressively restructure the tax system to make American democracy mean something, in material terms, for the ill-housed. We might even simply match government housing expenditures for lower-income Americans to the indirect housing aid given, through the tax system, to largely upper-income homeowners through tax deductions for mortgage interest and property tax payments and other favorable treatment. The homeowner deduction now regressively provides $40 billion to $50 billion a year in benefits, five times what the Department of Housing and Urban Development now spends in direct housing subsidies for the poor.

It’s time to acknowledge and comprehend America’s desperate and growing housing crisis, and create new programs and institutions based on that understanding.