America is in the grips of one of the worst housing crises in its history, with 1 in 3 households spending more than 30% of their income on mortgage or rent payments; the US government has two kinds of housing subsidy, one for poor renters and the other intended for middle-income mortgage payers, but guess who gets most of the money?
First compare the two programs. The US spends $51B on all rent subsidies — Section 8 housing, Homeless Assistance Grants, and public housing projects. But the price-tag from the two largest home ownership subsidies is $90B, just for Mortgage Interest Deductions and Property Tax Deductions.
Who gets the mortgage deductions? Because of the way they work, the bigger your mortgage is, the bigger your deduction is. 90% of the $90B goes to households earning $100K/year or more; households earning less than $50K/year get less than 1% of that money.
But the numbers get more skewed as you climb America's steep wealth-inequality ladder. By the time you get to the richest 0.1% of earners, the tax credit is worth $1236/month on average — while the rental subsidy delivers $0.08/month per household to the nation's low-income renters.
The rubric for Mortgage Interest Deduction programs is that it increases home ownership, but empirical research shows that it does nothing of the sort — it just makes rich people richer.
A campaign called Turn It Right-Side Up seeks to reverse these upside-down tax subsidies. They're planning to make this a key issue in the 2016 elections.
So why are these tax programs so out of whack? It's no accident—it's how the programs are designed. Most low-income families don't even qualify, because they don't itemize deductions. Even among those that do qualify, every dollar they deduct is worth less than a dollar that a high-income earner deducts. As nonsensical as it sounds, the value of homeownership tax support goes up as your income goes up. In addition, higher-income households get bigger deductions when they buy bigger houses (or bigger yachts, which qualify for the same tax benefits).
If we ran the food stamp (SNAP) program the same way we run our housing-tax programs, low-income parents buying a simple, nutritious meal for their kids would get somewhere around zero dollars in federal support. Millionaires charging their MasterCard with a $5,000 FleurBurger, seared foie gras, truffle sauce, and bottle of 1995 Château Petrus would get a few thousand dollars in federal benefits.
Who Benefits Most From Housing Subsidies? The Wealthy.
[David Meni and Ezra Levin/The Nation]
(via Naked Capitalism)