Exploring the ‘fairness’ of housing recovery

The discussions with industry officials in the hallways at the recent National Association of Home Builders gathering in Las Vegas echoed the conversations at the National Association of Realtors annual convention in Orlando, Fla. They now have become a common consumer topic: Where does “fair” fit in the various economic stimulus plans?

Should banks receive money before the long line of consumers hurting from house payments? Should consumers who knowingly borrowed too much be bailed out at all? How do you determine clear greed from genuine desperation?

What group should really come first? Sheila Crowley believes we should always start at the bottom of the housing ladder and then work our way up. She was not enthused that the first proposed amendment to the American Recovery and Reinvestment Act of 2009 would give every homebuyer this year, no matter his or her income, a $15,000 tax credit.

“If the country can afford to subsidize over a million families no matter what their income to buy new houses, surely we can afford to prevent a huge increase in the number of people who lose their homes altogether and become homeless,” Crowley said.

As the president of the National Low Income Housing Coalition (NLIHC), Crowley constantly is seeking creative ways to fund basic shelter. Extras simply don’t compute, especially when more low-income people are heading to default and foreclosure due to upwardly adjusting mortgages and an increasingly dwindling job market.

While the final language to the American Recovery and Reinvestment Act of 2009 includes more help for the bottom rung of the housing ladder, the NLIHC was stunned by the lack of a household income ceiling to the amendment. The amendment passed by voice vote without a single senator raising an objection. The cost of the amendment is about $18.5 billion and did not include an “offset,” so the cost is added to the total cost of the bill.

Crowley estimates 13 million households have severe housing-related problems, and that doesn’t count the roughly 1 million homeless individuals for whom there is no housing. “Severe” means more than 50 percent of their monthly income heads to housing expenses.

“If you redirected the mortgage interest deduction from homes over $300,000, you could end homelessness tomorrow,” Crowley said. “How much of a home do people really need and to what extent should the government go to subsidize that home?

“But people believe the mortgage interest deduction is their birthright. It’s an untouchable – just like Social Security. Suggest getting rid of the mortgage interest deduction and you’d better leave the room.”

And don’t even try to remind Crowley that mortgage interest on second homes can be deductible, in most instances, on federal income tax. In fact, she’d like to see a surtax on getaways, just like the luxury tax discussed for other items of significant value.

“Second homes would have to be classified as a luxury,” Crowley said. “I mean, does anybody really need one? So, why not have a surtax on them? Can you image how quickly the homebuilders would move to get that notion turned around?”

While the American Recovery and Reinvestment Act does include $1.5 billion for emergency housing assistance for people facing homelessness, it does not provide any funding that will produce a single new unit of permanent housing that is affordable to the poorest families in the country.

The Senate bill does not capitalize the National Housing Trust Fund to build and rehabilitate rental homes that are affordable to low wage workers, the unemployed, the disabled, and the elderly. Nor does the Senate bill provide funding for housing vouchers that would help low-income families afford to rent existing housing in the market.

Both items have been sought by advocates for low-income people to prevent a surge in homelessness due to the foreclosure crisis and the recession. The two items together would cost $13.6 billion, and provide 400,000 to 500,000 poor families with decent homes they could afford, according to NLIHC.

“We want to call attention to what we mean by housing,” Crowley said. “We mean enough homes renting at affordable prices so that our nation’s lowest income families and individuals are assured of safe and decent places to live.

“It is simple fairness.”