Disclaimer: Posts are solely the views of the author and do not represent the views of Brandeis University or The Institute on Assets and Social Policy.
As the world is struggling to respond to the COVID-19 pandemic that triggered rapid economic declines at levels rarely seen before, this pandemic also underscores the vital link between housing and health. Stay-at-home advisories continue to be core to government interventions, and with these regulations urging everyone to stay home, housing stability has become even more critical.
The long-term economic impacts of the pandemic are unclear. What we already know, however, is the rapid increase in people’s challenges to pay for their housing. According to the Mortgage Bankers Association, mortgage forbearances have increased to 1 in 13. Analysts predict that the delinquency numbers may be as high as at the height of the Great Recession before summer ends. About 20% of renters were not able to pay their rent in April and May; 30% missed their payment in June.
Across the country, shortages of affordable rental housing are widespread: there are fewer than 4 affordable rental homes available for every 10 extremely low-income renters, disproportionately affecting Black and Latinx renters.
Yet even before the COVID-19 pandemic, too many US households struggled to maintain their homes, with 10.8 million renters and 7.3 million homeowners severely housing cost-burdened, spending more than half of their income on housing. Across the country, shortages of affordable rental housing are widespread: there are fewer than 4 affordable rental homes available for every 10 extremely low-income renters, disproportionately affecting Black and Latinx renters. Homelessness has increased for the 3rd straight year.
As the recent protests have brought to the forefront for all of us to see, systematic racism sorts people into castes, separates communities by their skin color, and discriminates on housing access, affordability, and costs. Homeownership for people of color has always been low, foremost a result of state-sanctioned segregation through redlining and other discriminatory policies. Predatory lending to low-income households and households of color ahead of the Great Recession a good decade ago, has produced the greatest black-white homeownership gap since the 1960s. Gentrification and displacement of Black and Latinx people happen widely. White supremacy dictates who can afford stable housing and who can’t. As a result, housing affordability is lowest for Black and Latinx households.
In support of homes for the affluent, the MID redirects critical resources from communities of color where homeownership is low and difficult to attain.
At the same time, while we exclude low-income families and people of color from stable housing and homeownership, we subsidize affluent and mostly white homeowners through our tax code. The Mortgage Interest Deduction (MID), embedded in the tax code, allows for taxpayers to deduct the interest portion of their mortgage payments from their tax liabilities, thereby reducing tax liabilities. This tax subsidy to mostly affluent homeowners via their federal tax returns is a loss in income to the federal government, currently amounting to $30 billion per year. Not surprisingly, 90 percent of the MID go to taxpayers with annual incomes over $100,00,[i] and 46 percent of the benefits go taxpayers with incomes greater than $319,100.[ii] IASP research shows how the MID contributes to economic and racial inequities. Those who benefit the most from this tax deduction are more affluent and white households. Our estimates show that the MID took away about $9 billion per year from communities of color in support of White communities. Even after reducing the benefit levels in the 2017 Tax Cuts and Jobs Act, the MID remains the largest federal government housing subsidy, benefiting affluent homeowners while millions of low-income people struggle to pay their rent or mortgage.
In support of homes for the affluent, the MID redirects critical resources from communities of color where homeownership is low and difficult to attain. As the largest federal housing investment, the MID does nothing to help people maintain their homes, access financing, or secure safe, healthy, affordable, and stable housing—all ingredients of good social policy to further equity and justice. To achieve just that, government investments like the MID must demonstrate that benefits are distributed in ways that do not further racial disparities in housing. To that end, we need fundamental changes to our existing racially inequitable and unjust policies that advantage whites and exclude people of color from the same opportunities.
Hitting an already volatile housing market, the current COVID-19 pandemic further highlights the cracks of our inequitable housing systems.
These housing subsidies provided by the MID for wealthy, mostly white homeowners would go a long way to help low-income homebuyers overcome financial challenges and to meet our nation’s shortage of affordable rental housing that disproportionately impacts people of color. Equitable housing policy would eliminate the MID in its current form and reinvest the savings into homeownership opportunities for low-to-moderate income households and into affordable rental housing for low-income renters.
Hitting an already volatile housing market, the current COVID-19 pandemic further highlights the cracks of our inequitable housing systems. While evictions and foreclosures are temporarily on hold, lenders and landlords are still expecting monthly payments. And when these temporary forbearances are lifted, low-income families are likely to owe several months’ housing costs at once. Skyrocketing unemployment rates put families in desperate positions to afford their housing without access to income. Worse, the MID in the federal tax code adds another injury to Black and Latinx households. With billions of tax dollars each year directed to those in secure homeownership, mostly white households, others, mostly Blacks and Latinx households struggle to maintain stable housing. A place to call home that provides safe refuge from a pandemic needs to be provided to all.
[i] Joint Committee on Taxation. (2019). Estimates of Federal Tax Expenditures for Fiscal Years 2019-2023 (JCT Publication No. JCX-55-19). https://www.jct.gov/publications.html?func=startdown&id=5238
[ii] Tax Policy Center. (2018). Individual Income Tax Expenditures, Tables T18-0171 and T180169. https://www.taxpolicycenter.org/simulations/individual-income-tax-expenditures-october-2018