The U.S. housing crisis is a ticking time bomb. Rising rents, massive evictions, increasing homelessness, and an ongoing wave of foreclosures are exploding into a political movement for housing justice. As with the healthcare crisis, the profit motive is at the root of the problem. The culprits are banks, developers, and landlords. Like the health crisis, too, the shortage of affordable housing is bad for the economy. People who spend more than one-third of their income just to keep a roof over their heads don’t have much discretionary income to spend in local businesses. People forced to move frequently or live far from their jobs are often late to work and exacerbate the pollution crisis due to long commutes.
The scale of the problem
The quest to provide what has come to be called “affordable housing” is hobbled by one fundamental reality: Too much housing is in the for-profit market sector, and too little is in a social sector permanently protected from rising prices.
The housing situation is terrible for the middle class, but even worse for the poor. According to the National Low Income Housing Coalition, there isn’t a single county in the entire country where a renter working 40 hours a week and earning minimum wage can afford a two-bedroom apartment. In order to afford a modest two-bedroom apartment, renters need to earn a wage of $23 an hour. This “housing wage” is much higher in some areas.
With their backs to the wall, renters around the country are mobilizing to protect and expand tenants’ rights. A growing number of cities and suburbs have adopted some form of rent control and prohibitions against arbitrary eviction. This year, both Oregon and California passed statewide annual rent caps and “just cause” eviction laws. More and more municipalities have also adopted “inclusionary zoning” laws that require housing developers to include some portion of their units—typically 10% to 20%—that are affordable to low- and moderate-income residents. The housing justice movement has not only won local victories around housing policy but also helped put progressives into public office.
Still, only the federal government has the resources to fix the housing crisis. But since Ronald Reagan took office in 1981, the federal government has abdicated its responsibility.
Things are different this year. Bernie Sanders and Elizabeth Warren, in particular, have put forward bold housing plans that get at the root causes of the serious housing mess the nation is in.
Solutions: social housing
For the almost two-thirds of Americans who own their own homes, it is their major asset and principal source of wealth. And home ownership is the biggest housing subsidy program in the country because of the mortgage interest deduction. This is a $70 billion tax write-off that primarily benefits higher income homeowners. In fact, the federal government spends more to help the 7 million households with incomes above $200,000 than to help the 55 million households with incomes below $50,000.
Homeowners view their home as an investment that will appreciate as housing prices rise. In the absence of a strong welfare state like those in Western Europe, they consider their homes a buffer for when they retire, face extraordinary medical bills, lose their job, or need to borrow money to pay for their children’s college education. But as we saw in the wake of the 2008 mortgage meltdown, prices can plummet.
Public policies can shift the relative attractiveness of owning and renting. U.S. homeowners take for granted that they can make a profit from the sale of their homes. Landlords assume that they can raise rents to any level if there are desperate consumers willing to pay.
Yet housing need not be a choice between homeownership and renting. In Western Europe, and even in Canada, a significant proportion of the housing stock is outside the traditional marketplace. It is called “social housing,” and it is very popular.
Even in the United States, there are embryonic variants of social housing—such as limited-equity cooperatives, mutual housing associations, and homes built as part of community land trusts—that eliminate or dramatically reduce profit-taking. Housing is viewed as a social provision rather than as a commodity. Residents trade secure tenure and affordable costs in exchange for giving up the opportunity to speculate on the value of their homes. Social housing involves long-term affordability; government subsidies; and, in the best-case scenarios, mixed-income projects. Several progressive organizations, including People’s Action and the People’s Policy Project, as well as Representative Alexandria Ocasio-Cortez, have put forward housing plans that incorporate key components of social housing.
Social housing should be permanently affordable and provide residents with security from eviction. It should be mixed-income, so that it does not ghettoize people based on race or class. It should be located in cities and suburbs alike, which requires changes in zoning laws. Only the federal government can mandate states and cities to revise their exclusionary zoning laws to accommodate social housing. And it should be well built and well designed, with public and community spaces for meetings and recreation. The federal government should establish a public bank to finance social housing and/or require private banks to make loans to social housing developments.
For that to happen, the political constituency for housing justice has to expand.
During most of the 20th century, organized labor was at the forefront of the progressive housing movement. In addition to sponsoring cooperative housing, several unions established banks, credit unions, and building-and-loan societies to offer members low-interest mortgages.
Unions were instrumental in expanding federal housing programs in the 1960s and early 1970s. Since then, a few unions have used a combination of union pension funds and government subsidies to create housing, but with some notable exceptions they have not been part of housing justice coalitions at the local and federal levels, even though rent increases often wipe out whatever gains unions make in raising wages.
Renters are the sleeping giant of American politics. They are less likely than homeowners to vote—just 49% of renters cast a ballot in 2016, compared to 67% of homeowners—and can make a big difference in election outcomes.
Among homeowners, Donald Trump beat Hillary Clinton by a margin of 6 percentage points, but Clinton won the renter vote by 30 percentage points. An analysis by Chris Salviati found that “if renter voter turnout had matched homeowner voter turnout in 2016, Hillary Clinton would have won four key swing states—Florida, Michigan, Pennsylvania, and Wisconsin—leading to an electoral college victory of 307-231.”
The underlying idea of any progressive policy is that housing should be a right, not a privilege. But for that slogan to be translated into policy, the housing justice movement needs to grow big enough to exercise political clout and shape the future.
Housing policy puts profits over people
More than any other affluent nation, the United States relies most heavily on private market forces to house its population. The federal role in housing began during the Great Depression, when reformers recognized that the private market and philanthropy could not solve the nation’s housing problems. The New Deal adopted policies to regulate banks and support mortgages in order to expand homeownership. It also created the first public housing program to stimulate jobs and provide subsidies to the working class. Housing reformers pushed for well-designed, mixed-income, government-subsidized housing projects, sponsored by unions, church groups, and other nonprofit organizations as well as government agencies.
During its first few years, the New Deal built a few model developments that reflected this vision. They included day-care centers and playgrounds, involved residents in cultural and educational activities, and were physically attractive enough that upwardly mobile working-class families wanted to live there.
But the reformers were soon outmaneuvered by the real estate industry. The landmark 1949 Housing Act established a national goal of “a decent home and a suitable living environment for every American family.”
But the country has never come close to delivering on that promise. Developers, real-estate agents, and bankers worried that well-designed and affordable government-sponsored housing would compete with the private sector for middle-class consumers. They warned about the specter of socialism. The real estate industry sabotaged public housing by pressuring Congress to restrict its funding and limit it to the very poor. Southern senators made sure that local governments had the authority to keep public housing racially segregated.
With limited budgets, many projects were poorly constructed and badly designed. The boards of local housing authorities—dominated by business and real-estate representatives—often sited public housing developments in areas without adequate stores, transportation, or schools. Few suburbs wanted public housing at all.
Today, public housing—1.1 million apartments that house about 2.1 million low-income people—constitutes less than 1% of the nation’s housing stock. The average annual income for a public-housing household is $14,753. The best-kept secret about public housing is that it actually provides decent, affordable housing for many people. Most today are garden apartments, low-rise walk-ups, and single-family homes or townhouses. In most cities, there are long waiting lists to get into public housing.
Starting in 1986, Congress invented a new way to bribe the rich to help house the poor—the Low-Income Housing Tax Credit, which gives corporations and wealthy individuals tax breaks to invest in low-income housing projects. The program has added about three million new units in roughly 46,000 projects, but the tax breaks end after 15 years.
Housing vouchers have become, by far, the largest federal subsidy program. The Department of Housing and Urban Development (HUD) now provides about 2.2 million vouchers to low-income families, who use them to find apartments in the private market. The families pay 30 percent of their income and HUD pays the rest. But HUD puts a ceiling on voucher payments, which leaves many decent apartments in better neighborhoods off-limits to voucher holders.
Federal housing programs tend to concentrate the poor in low-income ghettos in the nation’s cities, since most suburban governments have resisted efforts to spread low-income housing more evenly. Unlike food stamps, federal housing subsidies are not an entitlement program for the poor. They are a lottery. They help only five million low-income families—about one-fifth of families who are eligible for assistance.