A Housing Policy of Alms for the Rich

Read the latest reports from America's housing analysts and a nauseous feeling hits you. It seems more and more likely that the homelessness we've seen on our streets is just the tip of the iceberg, the harbinger of much worse things to come.

Among all our crises of the '90s, this problem could be the easiest to solve. And the answer doesn't need to be massive expansion of government's role in housing. All we need do is spend the $113 billion the federal government already puts into housing each year in a radically different way.


The case for a shake-up has never been more compelling. Swelling numbers of people are making their way to homeless shelters. Millions of people are paying half or more of their meager incomes just for a roof over their heads. During the 1980s, the federal government all but stopped subsidizing new rental housing for the poor.

The 1980s also brought us the first decade of declining homeownership since the Great Depression. Homeownership was 64.4 percent of households in 1980; it dropped to 64.2 in 1990.


How bad are things right now? The U.S. Conference of Mayors report, released in December, showed requests for emergency shelter and food up sharply in the 28 major cities surveyed. The cities are so hard-pressed they're turning away one in six people who appeal for help. "Morning in America" has been translated into Dickens-era misery for many.

For 20 years, the number of low-income renters -- people who subsist a paycheck away from homelessness -- has risen steadily. But the number of homes and apartments cheap enough for them to rent has declined drastically, according to a joint report of the Center on Budget and Policy Priorities and the Low-Income Housing Information Service. The gap is now 4 million units. (In 1970, there were 400,000 more low-income units than renters in need of them.) Unless government intervenes, the shortfall seems certain to keep increasing, throwing more and more families onto the streets.

The competition for cheap apartments is so fierce that even a big recession in real estate hasn't brought relief, reports Harvard's Joint Center for Housing Studies. Most rents nationwide have stabilized at record highs, but rents paid by the poor continue to rise, says the Center's Denise DiPasquale.

The problem affects not only the poor. There's been a collapse of housing affordability for all but high-income Americans and the generation lucky enough to have bought homes in the '60s or earlier, before prices and interest rates took off.

Across America, millions of hard-working, often dual-income middle-class families are being left out in the cold. For most of these families, even accumulating a down payment is a daunting task.

So who is cleaning up on the feds' $113-billion-a-year housing benefits?

Well, 69 percent of the total goes to people who already own houses. They pick up about $40 billion a year from mortgage-interest deductions, $14 billion from deferred capital gains on home sales, $11.5 billion from property-tax deductions, and more than $12 billion in other federal subsidies for homeowners.

The federal government's total outlay for subsidized rental housing for the poor, by contrast, is just $16 billion (down from $35 billion in 1980). Public housing adds another $2 billion.


Look at the housing subsidies flowing out of the Treasury, and you discover it's welfare for the wealthy first. Cushing Dolbeare of the Low Income Housing Information Service calculates that families earning above $53,000 -- the top fifth -- receive 58 percent of combined federal housing benefits. Our country's poorest families, by contrast, receive just 13 percent.

People struggling along on adjusted gross incomes of over $200,000 clean up some $5 billion on homeowner deductions.

"Middle-class families can't buy a house because they're too busy paying for people to live in mansions in Chevy Chase, second homes in Malibu and for empty office buildings everywhere," says the former federal housing commissioner, C. Austin Fitts.

The mortgage-interest deduction has always been seen as a political sacred cow, guarded by the National Association of Realtors, the National Association of Home Builders and Mortgage Bankers Association.

But many mainstream housing professionals, not just pointy-headed liberals, are now asking if the system isn't on the verge of self-destruction. Another recent report from the Twentieth Century Fund blows the whistle on gross maldistribution of government housing aid as shrilly as any establishment group ever has: "The poorest members of our society have not been getting a fair share."

Think equity, just a second. What if everyone agreed federal housing aid and subsidies should be divided 50-50 -- equal parts to families earning below and above $35,000? That would still be skewed to people with less need. But it could divert a flood of fresh resources -- perhaps as much as $25 billion a year -- to shelter the homeless, subsidize the cost of private low-income rental housing and assist struggling would-be home buyers with down payments.


By the holiday seasons of the mid-1990s, the homeless crisis could be withering away.

Neal R. Peirce writes a column on state and urban issues.