Goodbye to the era of homeownership as the powerful, pervasive symbol of the American Dream. Who believes any longer that owning your own house is a sure ticket to building wealth and assuring yourself an easy retirement?
So, welcome back to renting — the plain vanilla, easy-to-grasp idea that you pay methodically, month by month, for the roof over your head. Renting will never make you a fortune, but it won’t get you into the peril of toxic mortgage products, ill-advised homeowner loans, the prospect of foreclosure or “underwater” mortgages.
If there were ever a time to balance the scales of government housing policy, federal and local, it’s right now.
The federal imbalance is the most egregious. Congress has showered trillions of tax breaks — currently $67 billion a year — on holders of home mortgages. The benefits are wildly regressive, escalating upward to holders of homes as expensive as $1 million. This is a sacred cow, respected economist Edward Glaeser suggests, “long in need of a good stockyard.”
Yet what federal tax benefit goes to renters? The answer, unless you’re quite poor: zero.
The time for radical change has come — and not just because of the ghastly mortgage market abuses. Married couples, historically the backbone of the market for mortgages, now represent just 25 percent of households. And by 2015, there’ll be 67 million Americans aged 20-34 — the prime years for renting.
As Americans increasingly select more compact, in-town residences — opting for the attractions of urban living in place of the “drive-till-you-qualify” suburban fringes — we’ll actually need millions of new apartment units.
But there’s an immediate problem. The supply of available rental units has shrunk dramatically, partly because of foreclosures, abandonment and demolitions of older complexes.
In time, the natural dynamics of the market will trigger new construction and likely correct the most serious shortages. But that leaves a huge equity issue, posed by Sheila Crowley, president of the National Low Income Housing Coalition:
“Affordable housing for the lowest income people has been in short supply for a long time; the housing bust and the recession have only made it worse.”
The situation has been exacerbated, housing expert John Kromer reports for Planetizen, by the last two decades’ unprecedented decline in units subsidized by the federal government.Plus, the recession has forced a big squeeze in the federal government’s so-called “Section 8” program of housing vouchers that help local agencies provide very low-income families with leasing assistance in the private market. The vouchers generally fill the gap between 30 percent of a family’s income and the rent they have to pay.
But Washington appropriates a finite number of dollars for the vouchers. With unemployment and poverty rising in the recession, there’s a severe pinch. Examples: Cutbacks by the Monterey, Calif., Housing Authority mean some tenants will have to pay up to 60 percent of their income for housing. The Birmingham, Ala., authority has canceled 300 recent vouchers, threatening many families with evictions.
Last year Congress did pass a long-sought National Housing Trust Fund bill to benefit very low-income renters. But it’s failed to fund it yet. The new monies are needed immediately, says Crowley, to avert rapid expansion of homelessness.
And she asks the right question: How come we’re appropriating $15 billion for homeowner tax credits but holding back on far smaller outlays to help shelter the poorest among us?
A new rental era in America makes sense, but so, too, does adding fundamental equity.
