Tax and Housing Policy
In his new book, EVICTED, Harvard sociologist Matt Desmond recounts the human cost of the frequent evictions that disrupt life in poor communities. Desmond doesn’t focus on the role of the tax code in housing policy, but his work suggests directions for further thought.
Desmond lived for months in a trailer park in a low-income neighborhood in Milwaukee. His book follows the stories of several families who suffer evictions, and he explores the multiple causes: job loss, drug addiction, disability, and the chaos of life when families live on the economic fringe. Notably, Desmond’s book also examines the seller’s side of the market — he also spent considerable time with the landlords who, paradoxically, make big profits from renting to the poorest tenants.
Evictions are costly for tenants, of course, but also for their children and society. What kind of policies might reduce evictions and help promote stability among renters?
We know that renters are second-class citizens in federal housing policy: taking into account tax expenditures and direct spending, the feds spend about $190 billion per year to subsidize housing, but as the Center for Budget and Policy Priorities demonstrates, the subsidies are poorly matched to housing need.
The upside-down distribution of federal housing subsidies isn’t news to tax folks, of course. Still, I think it’s worth looking beyond the home mortgage interest deduction and its glaring flaws. Instead, or addition, we might consider whether the federal government can — and should — redirect subsidy funds toward rental housing need and toward the goal of housing stability in particular. Just to take a few examples:
o What is the incidence of rental subsidies like Section 8 vouchers? We suspect that the home mortgage interest deduction is capitalized into housing prices, realtor’s fees, and the like, and in principal, Section 8 may be captured in the same way. If so, how can subsidy design reduce capitalization?
o Section 8 vouchers now serve only a fraction of the eligible low-income population, and so there are long waiting lists. If (and it’s a big if) it were desirable to make Section 8 vouchers more widely available, would tax-based vouchers be preferable to the current combination of HUD and local administration? It would take a tax expert to consider whether tax-based administration might ameliorate — or worsen — the problems of setting voucher amounts, enforcing quality, and minimizing capture by landlords.
o Desmond’s book suggests that low income certainly contributes to housing instability, but so do addiction, mental illness, and the presence of children (some landlords will not rent to families with children). What kinds of policies, tax and nontax, might help?
