Housing Policies Benefit Wealthy Americans Too
by Jean Taddie
The United States federal government spent $17.5 billion in 1990 on housing for people with limited incomes, according to a report in the 1993 Statistical Abstracts of the U.S. This figure seems very large and many people have the impression that our government spends a lot (too much?) on housing for low-income people. Since housing funds must be approved annureduced or cut from the federal budget. With a new conservative congress and pressure for welfare reforms, this year may be critical to the shape of our national housing policy. Before any decisions are made about our nation’s housing policies, we should first examine the situation from a broader perspective.
To people who manage the budget of a household, $17.5 billion seems like a huge amount of money. But when compared to the federal government’s 1990 outlays of $1,252.7 billion, the housing benefits paid to low-income households account for less than 1.5% of the total. Let’s take a look at what this money paid for.
The federal government spends much of its lower-income housing funds on rental subsidies through the Department of Housing and Urban Development (HUD). Funds were divided into categories: Section 8 lower-income housing assistance ($10.6 billion), low-rent public housing ($4 billion), and other benefits (rural housing loans, rural rental housing loans, and interest reduction payments for a combined amount of $2.5 billion).
Section 8 benefits help low-income tenants pay their rent in privately owned buildings. Recipients pay 30% of their income to the landlord and the government pays the difference. Low-rent housing includes funds that the federal government pays to local housing authorities who are responsible for managing the low-rent units. Unfortunately, these programs do not reach many who are needy. For example, according to a 1993 Congressional Quarterly Researcher report on public housing, while 4.3 million Americans lived in low-rent public housing in 1990, 13 million more families meet federal guidelines for housing assistance but do not receive housing aid.
Federal subsidies for low-income housing assistance is only one piece of the federal housing structure. The government also provides tax deductions for homeowners who pay mortgage interest and property taxes. The amount of this tax break is even more significant to the federal budget than are benefits for low-income rent subsidies. Whereas payment of low-income housing benefits increases federal expenditures, tax deductions decrease federal income. Either way, their is less money to be spent on other things.
A 1993 report compiled by the Low Income Housing Information Service shows that upper-income homeowners get much more subsidy from our housing policies than do lower-income homeowners or renters. While renters in 1989 (all figures are stated in 1992 dollars) received about $14.8 billion (in 1992 dollars) in aid, homeowners received $64.7 billion (in 1992 dollars) worth of benefits through tax deductions.
When these figures are analyzed by household income, the upper-income brackets received substantially more subsidy than did lower-income households. Rental households with less than $20,000 income received about 92% ($13.6 billion) of the direct housing subsidies. This $13.6 billion only helped 31% of the rental households with very low income (less than $10,000) and 12% of the rental households with income between $10,000 and $20,000. Homeowner households with less than $20,000 received less than 1% ($600 million) of the benefits from income tax deductions and fewer than 10% of these households received any benefit from the deductions.
On the other hand, upper-income households with income over $65,000 received the lion’s share — about 63% or $41 billion —of the tax benefit. More than 80% of the upper-income homeowner households benefited from these tax deductions. Thus, households with income over $65,000 receive more benefits from our housing policies. Furthermore, the percentage of households benefiting from subsidies was substantially greater in upper-income brackets than in lower-income brackets, according to the Low Income Housing report.
All in all, Americans subsidize housing in several ways, including direct subsidies and tax deductions. Direct subsidies accounted for much less money than did tax deductions. This is unfortunate for the low-income households because they receive most of the benefit from direct subsidies like Section 8 and public housing. On the other hand, upper-income groups receive most of their benefits from tax deductions. While pressure is building to reduce the amount invested in direct subsidies to the poor, little discussion is given to changing our tax deduction system so that it is more equitable for lower-income and rental households.
The American public continues to subsidize wealthy homeowners. Any change to housing policies should consider all of these factors. When debating our housing policies, we must decide: Should we cut direct subsidies to the poor or should we limit tax benefits to the wealthy?