COMMENTS: A Faded Dream: Housing in America
Appelbaum, Richard & Harrington, Michael & Dreier, Peter
When the War on Poverty began 20 years ago, housing was one of the major battlefields. The concern then was with the reality of slums in the midst of affluence. For middle-class Americans,...
...We then also propose a three-part program that will complement the private housing industry...
...The desperation Americans feel regarding their chance for homeownership is reflected in a contest recently held in Allentown, Pennsylvania, a declining industrial city...
...Couples are forced to take on several jobs to keep up payments—yet many are still unable to do so...
...Most Americans are aware that a revitalization of housing and construction would be a major job-creating factor...
...For this protection, recipients would agree that if the loan cannot be repaid in full, the property would be deeded to either a cooperative or a public-utility housing corporation...
...Indeed, it has become rather a nightmare: rising costs, shrinking space, an unprecedented epidemic of foreclosures, and a growing feeling of being trapped as long-term renters...
...The federal government would regulate private mortgage lenders, requiring them to set lower interest rates for nonprofit, low- and moderate-income housing construction...
...Public utility housing would be owned by either a municipal housing corporation or by nonprofit community-based groups, such as churches and trade unions...
...The way America provides housing has become a waste of resources second only to that of the Pentagon...
...In exchange for a government subsidy, these nonprofit landlords would be subject to strict controls regarding the sale of their units...
...In the name of slum clearance and urban renewal, the government bulldozed more housing down than it built...
...For several decades this policy seemed to work—at least for the increasing number of people who could afford to own their own homes...
...In addition, the regressive homeowner deduction, which mainly benefits the wealthy, should be replaced with a system of tax credits for renters and homeowners alike...
...In order to carry out that goal today, we need a fresh approach, a new plan...
...For middle-class Americans, it was a time of economic growth and buoyant optimism, symbolized by a dramatic boom in middleclass homeownership...
...THERE IS A GREAT NEED for a renewed government commitment to housing—for a commitment to fulfill the long-ignored 1949 Housing Act that promises "a decent home and suitable living environment" for all Americans regardless of income...
...Food had been sent to them by family and friends...
...Among those who make less than $10,000 a year, fully 73.6 percent spend more than one-quarter of their income just for shelter...
...League of Savings Associations notes that first21 time homebuyers made up 36 percent of all purchases in 1977, but only 13.5 percent four years later...
...THIS PROGRAM is not utopian...
...The poor, who are least able to cut corners on other items, suffer most from the housing crunch...
...These credits would provide adequate tax relief for the majority of homeowners, while eliminating the large deductions for the wealthy few...
...The proportion of homeowners rose from 44 percent of all U.S...
...Across the country, angry homeowners are demanding that banks give them more time to make mortgage payments while they are unemployed...
...In order to bring that about, major changes are needed...
...4) Residents should have a major voice in decisions that affect the cost and quality of their homes...
...According to the Mortgage Bankers Association of America, last year at least 5.5 percent of all mortgages were in arrears 30 days or more and 138,000 mortgages were in foreclosure—both postwar records...
...This was, they both said, the only way they could ever own their own homes...
...All of its strategies have been successful in Europe and, in a more limited way, in the United States...
...The generation of the postwar baby boom is now coming of age and looking for homes: some 42 million people will reach the age of 30 in the 1980s, 10 million more than in the previous decade...
...Many people will choose to rely on private homebuilders or landlords...
...If present trends continue, we will need 2 million new housing units per year over the next decade just to keep pace with population changes...
...This keeps housing costs low for the co-op's present and future members...
...We can continue to devise various tax and subsidy schemes to bribe banks and builders—or we can redefine housing as a basic right and find new ways to provide affordable homes...
...The housing crisis is both cause and symptom of the nation's economic woes...
...But only about half that many will have been built this year...
...Having long regarded a home of their own as a birthright, many Americans now face the prospect of becoming lifelong renters...
...These figures include long-term homeowners who had paid off their mortgages as well as recent buyers, who must pay a much steeper part of their income to purchase a home...
...By the mid-1970s, however, economic growth stagnated, wages and salaries leveled off, and the postwar strategy began to falter...
...2) We should extend to all who want it the security of tenure usually identified with homeownership— immunity from eviction or foreclosure, protection against unreasonable cost increases, and the sense of attachment to place embodied in the phrase, "one's home is one's castle...
...Yet this vast expenditure resulted in the production of only 705,400 new homes, a postwar low...
...But after nine months (including the cold winter) the radio station called it off, awarding the prize twice—to two men who had lived alone, each in a tent...
...Of course, this approach never worked for the poor...
...The current wave of foreclosures offers an immediate opportunity to provide emergency relief for many harried homeowners and, simultaneously, a nonmarket alternative to the present inefficient system...
...households in 1940 to 62 percent in 1960, and it leveled off at around 64 percent in the next two decades...
...By constructing buildings that most charitably can be described as resembling warehouses, the industry insured that "government housing" would carry a stigma of poverty and mismanagement—thus discouraging middle-class people from demanding such housing for themselves...
...But it is now also a problem for the middle class, which no longer can afford the American Dream...
...The average home buyer requires an income of $39,196—almost twice the median national income...
...A local radio station promised an $18,000 mobile home to the person who could remain the longest atop a billboard...
...In this way, a stock of affordable housing would be secured, and hard-hit homeowners would be protected against involuntary displacement...
...Indeed, housing programs have borne the biggest brunt of Reagan's budget axe...
...To reduce construction costs, municipalities would set up "land banks" to acquire and hold land for future development, thus preventing it from falling into the hands of speculators...
...These benefits are extremely regressive...
...The current program, called Section 8, serves only an additional 1.3 million households...
...To pay this bill, Americans went deeper and deeper into debt...
...The present housing crisis offers the nation an opportunity to rethink the way it provides (or fails to provide) shelter...
...11.4 percent pay more than half...
...With the middle class now facing the dismal reality of skyrocketing housing costs, the poor bearing the brunt of the housing crunch, and unprecedented unemployment within the housing industry sending ripples through the economy, the political basis for a new approach now exists...
...q 24...
...1 1 (3) Capital should be used productively to build new housing and maintain the existing stock rather than to promote wasteful trading for speculative profit...
...It should embody four principles: (1) It must state clearly once again that decent and affordable housing is a basic right of all Americans...
...Last year, for the first time in over 40 years, the homeownership rate declined...
...Fearing competition from public housing (which it claimed was an opening wedge for socialism), the real estate industry sabotaged the public housing program from the beginning, pressuring Congress to limit it to the very poor...
...Two decades after the War on Poverty, one-third (34.5 percent) of low-income Americans spend over half of their incomes just to put a roof over their heads...
...But now, despite growing waiting lists for both programs, the Reagan administration is instituting cutbacks that will dramatically reduce the programs' scope and effectiveness...
...This approach, now being debated by dozens of state legislatures, would treat symptoms rather than causes...
...1) The centerpiece of this approach is the replacement of the current mortgage system with a combination of selective credit controls and interestrate subsidies...
...they are not eligible...
...Whatever form they take, both will provide residents with the maximum opportunity to make decisions that affect their homes—decisions concerning maintenance, ongoing costs, and selection of fellow residents...
...Wasteful tax shelters must be eliminated, particularly depreciation allowances for rental property...
...Today, 37.2 percent of American households26.6 percent of homeowners and 52.9 percent of renters—pay more than one-quarter of their income for housing...
...And yet, despite the desperate shortage of affordable new housing, much of the country's existing rental housing is being senselessly depleted through undermaintenance, redlining, abandonment, condo conversions, and arson for profit—all based on "rational" economic incentives...
...The no-resale limitation would eliminate the major cause of housing inflation— mortgage payments that are hiked upward each time a house or unit is sold...
...The ranks of homeseekers will be further swollen by growing numbers of single, divorced, and elderly households...
...Most homeowners, how22 ever, benefit only minimally from such deductions, and 60 percent do not claim them at all...
...Since the late '40s, the housing industry, trade unions, poor people's advocates, and housing activists have joined in an uneasy alliance in support of a national housing policy based on subsidies and tax breaks for bankers and homebuilders...
...And this situation will worsen...
...With the average price of a single-family home nearing $80,000 (compared with $23,400 in 1970), almost the only people who can afford to buy a house are those who already own one...
...23 Instead, the federal government (perhaps through a newly created Housing Bank) should offer two- or three-year loans to the hundreds of thousands of low- and moderate-income homeowners in danger of being foreclosed...
...It is a major source of unemployment—not only among construction workers but also in related industries...
...Both cooperative and public utility housing can consist of apartmentlike structures as well as detached single-family homes...
...To the extent that these lowered interest rates require additional subsidies to assure affordability, the government would make such subsidies available, giving preference to nonprofit cooperative or public housing...
...About 30 percent of them go to taxpayers with incomes over $50,000, who make up less than 5 percent of the population...
...3) Finally, to end speculation and guarantee continued long-term affordability, this program would foster two nonmarket forms of housing ownership: limited-equity cooperatives and public-utility housing...
...These two government programs—subsidies and public housing—have been at best a small safety valve to relieve some of the pressure of a private housing market that cannot provide adequate housing for the poor...
...For those most in need, it interceded with two half-hearted programs—public housing and rent subsidies...
...Tenants get none...
...Both still had no intention of giving up...
...2) Tax policy should be used to steer investment productively, rather than encourage speculation...
...It signals the abandonment of even this minimal public commitment to house the poor...
...In exchange, the current owners would be guaranteed lifetime tenure...
...The .report of his Commission on Housing, dominated by builders and bankers, calls for "free and deregulated markets" in place of government intervention...
...This is the situation for many Americans...
...Today, only 1.2 million American households (1.9 percent) live in public housing— the lowest percentage of any industrialized nation...
...Today, the growing plague of homelessness across the nation reminds us that housing still is a major problem for the poor...
...Yet the government's largest housing subsidy— benefiting the affluent rather than the poor—is in no danger of falling to the Reagan axe...
...Residents would enjoy all the benefits of ownership, except the right to sell their homes for unrestricted profit, and they would be free from the threat of eviction and foreclosure...
...A recent study by the U.S...
...But even a full-employment economy would not make housing affordable, even for all middle-class Americans...
...In limited equity co-ops, owner-residents hold a share of a nonprofit housing corporation, which repurchases their share at a fixed rate of interest when they leave...
...Rent subsidies, which came in response to the '60s ghetto revolts, have never been sufficient to accommodate more than a small fraction of those who qualify...
...But for the growing number of those who are ill-served in the marketplace, we offer an approach that attacks our wasteful housing system at its sources: high interest rates, inefficient tax policies, and speculation...
...IN THE '60s, just 20 years ago, affording to buy a house was no problem—except, of course, for the poor...
...This subsidy, allowing homeowners to deduct all property taxes and mortgage interest payments from federal income taxes, will cost the government $39 billion in lost revenues this year alone, which is more than two and one-half times the entire annual budget of the Department of Housing and Urban Development...
...In 1981, sales of new and existing homes totaled $227.9 billion...
...The largest part-81 percent—was used to trade existing homes for more suitable ones for their owners—at greatly inflated prices—a tremendous misallocation of resources...
...Such goals and principles would commit the government to take bold steps to provide housing for all...
Vol. 31 • January 1984 • No. 1
