Wednesday, December 25, 2013

Study: Government Gives More Housing Aid To Rich Than Poor Households

The Center on Budget and Policy Priorities reports that, in terms of housing expenditures, the federal government favors high- over low-income households, as well as renters over homeowners–regardless of the fact that the wealthy have little if any need for subsidies to purchase a home:

Federal housing expenditures favor higher-income households. The bulk of homeownership expenditures go to the top fifth of households by income, who typically could afford to purchase a home without subsidies. According to estimates by the congressional Joint Committee on Taxation, more than three-fourths of the value of the mortgage interest and property tax deductions goes to households with incomes of more than $100,000, and close to a third goes to families with incomes above $200,000.

Overall, more than half of federal housing spending for which income data are available benefits households with incomes above $100,000. The 5 million households with incomes of $200,000 or more receive a larger share of such spending than the more than 20 million households with incomes of $20,000 or less, even though lower-income families are far more likely to struggle to afford housing.

In 2010, the most recent year for which complete data are available, households with incomes of $200,000 or more received an average benefit of $7,014 — more than four times the average benefit of $1,471 received by households with incomes below $20,000. It is difficult to see the policy purpose served by providing such large benefits to higher-income households, who in most cases could afford to purchase a home without subsidies.

...more than three-quarters of federal housing spending in 2012 (counting both federal outlays and the costs of tax expenditures) went to homeowners. Renters received less than one-fourth of federal housing subsidies despite making up more than a third of households.


Michael J. Mand said...

This study really doesn't tell the entire picture and I find its arguments simplistic and unrealistic. It only deals with the first level. In the ideal world, the tax breaks enjoyed by homeowners is also enjoyed by building owners and the interest deductions should translate into lower rents. In this way, those who rent because they are not wealthy enough should benefit from the direct subsidies enjoyed by the owners. Does this form of "trickle-down" actually exist in the real world? I don't know. I can only speak for my own little slice of the real estate pie. The real estate tax increases incurred by my building in Brooklyn were negiligable, until recently, that is, so for a few years - five, in some cases, I didn't feel the need to raise the rents I collected and we re-wrote many of the leases. This included the little grocery store that serves the community, so that it could keep its price increases to a minimum as well. (I was able to keep some very good tenants by being fair. There has been no turnover in my building in the last four years.)

BTW, if the mortgage deduction were removed it could, and probably would, be severly harmful to the housing market upon which much of the wealth of this country depends. Beware the law of unintended consequences. If removing this subsidy is what you are advocating then you must change the foundation of our economic system first - not the other way around. How you do this, I have no idea!

Jeff Tone said...

I still don't know why those who are wealthy enough to purchase a home with little or no subsidies received them at four times the rate of those who are poorer. If this is the way to encourage home ownership, something is terribly wrong.

Michael J. Mand said...

On this point we disagree. Those who are wealthy enough don't need the subsidy, of course. But there are many, and I might consider myself to be among them, who are able to afford their homes because of the tax incentives. There would certainly be fewer private home owners without the tax breaks and this would certainly slow the economy. Think of all the ancillary employment that is dependent on home ownership. We are a consumption driven economy and home equity is the backbone. Don't put the cart before the horse. As I said, change the system first, then change the particulars.