President Trump is a housing hypocrite. He owes his wealth to government-subsidized housing programs. Since January 20, he’s been living in subsidized housing. Yet his proposed budget slashes housing aid to Americans who need it the most—seniors, veterans, people with disabilities, and families with children struggling to get by.
Trump is wealthy today because of government housing subsidies. While still a young man, he inherited his father Fred’s real-estate empire, worth tens of millions of dollars. The senior Trump made his fortune by building middle-class housing financed by the Federal Housing Administration (FHA). In the 1930s, Fred Trump built single-family homes for middle class families in Queens and Brooklyn, using mortgage subsidies from the newly created FHA in order to obtain construction loans. After his real-estate business fell on hard times, he revived his firm during World War II by constructing FHA-backed housing for U.S. naval personnel near major shipyards along the East Coast. After the war, he continued to rely on FHA financing to construct apartment buildings in New York’s outer boroughs.
One might think that his son would be grateful to the FHA (which is now part of the Department of Housing and Urban Development) for enabling his father to become a multi-millionaire. That would undermine Trump’s effort to portray himself as a self-made man, however. He constantly boasts that he built his real-estate empire on his own. When pushed, he acknowledges that his father loaned him what he’s called the “small amount” of $1 million. Even that claim was demolished by a recent Washington Post investigation. Not only did Trump’s father provide his son with a huge inheritance, and set up trust accounts to provide his Donald with a steady income, but he was also a silent partner in his son’s first real estate projects. As the Post disclosed, Trump’s father “was an essential silent partner in Trump’s initiative. In effect, the son was the front man, relying on his father’s connections and wealth, while his father stood silently in the background to avoid drawing attention to himself.” Trump’s father was also his safety net. In a 2007 deposition, Donald Trump admitted that he had borrowed at least $9 million from his future inheritance amid financial difficulties. In effect, the son was on welfare. The money came directly from his father, but indirectly from the government, which had financed Fred Trump’s real-estate business. Without that safety net, Donald wouldn’t have been able to expand the family’s real-estate empire by building hotels, casinos, and luxury housing for the very rich.
Trump’s budget, released on March 14, calls for drastic cuts to government housing subsidies for the poor and slashes other programs that help low-income Americans avoid hunger, homelessness, and disease.
The U.S. government runs two sets of housing subsidy programs. One of them is targeted to low-income renters. These funds, allocated by the Department of Housing and Urban Development (HUD), come to about $45 billion a year, chiefly to provide rent vouchers to low-income families to help them pay for private apartments. Most of the rest goes to public housing run by local governments (about 1 percent of the nation’s housing stock) and housing for people with special needs, especially the homeless. In addition, HUD provides about $4 billion in block grants to states, cities, and towns to help them address local housing and community development needs.
Federal housing subsidies for the poor are a lottery, not an entitlement. Only one-quarter of low-income households (about five million households) who qualify for federal housing aid get it, because Congress has not authorized sufficient funds. The other three-quarters (more than 18 million households) have to fend for themselves in the private housing market. Not surprisingly, most of them wind up paying over half their incomes for rent and often live in overcrowded and substandard apartments.
The second kind of federal housing subsidy program, and by far the larger, is run by the Internal Revenue Service, not HUD. It provides more than $136 billion annually in tax breaks for homeowners. Nearly half of these homeowner tax subsidies stem from tax deductions for mortgage interest payments. About one-quarter involve the deduction of property tax payments. An additional 30 percent come from excluding from capital-gains taxes a portion of the profit from the sale of people’s homes.
These tax breaks would be a useful investment if they primarily helped working-class and middle-class families purchase homes. But they don’t. About 35 million homeowners get these tax breaks but most of the subsidies go to wealthy people with very large homes. According to Congress’s Joint Committee on Taxation, taxpayers with incomes of $100,000 or higher account for more than 84 percent of the value of total mortgage interest and property tax deductions—a total of $82 billion. Their average tax subsidy is $3,760 a year. Those who earn $200,000 or higher accounted for 44 percent of homeowner tax deductions—$43.2 billion. They get an average of $6,498 a year in tax breaks.
Homeowners who earn less than $50,000, by contrast, receive less than 2 percent of the government subsidy. Their average tax break is only $747 a year. Of course renters—who, on average, have much lower incomes than homeowners—get none of these tax subsidies.
Not surprisingly, Trump’s budget calls for drastic cuts to federal housing subsidies for the poor but doesn’t touch the tax subsidies that mostly benefit the rich.
Trump’s proposed budget would slash HUD funding by $6 billion—an unprecedented decrease of 13.2 percent. These cuts include $2 billion from public housing, and $300 million from the rental voucher program. About 200,000 low-income families would lose their housing vouchers, while local governments would be forced to slash upkeep and renovation on public housing developments, putting developments at increased risk of demolition.
Trump also proposed to eliminate two programs altogether. One is Community Development Block Grants, which provide communities flexible funding to address local needs through programs as varied as Meals on Wheels; services for seniors, youth, and people with disabilities; home-repair programs; small-business assistance; programs that provide homeownership opportunities for lower income families; and construction of health-care centers and other neighborhood facilities. The other program slated for elimination is the HOME Investment Partnership Program, which provides financing for affordable homes. Trump also plans to do away with the U.S. Interagency Council on Homelessness, NeighborWorks America, and the Legal Services Corporation, which is often the only resource available to help low-income families avoid unwarranted evictions.
The United States faces a severe housing crisis. Nearly 19 million households spend more than half of their incomes on housing costs—leaving little for food, clothing, health care, and other necessities, and putting those families at risk of becoming homeless. Housing has become increasingly unaffordable, not only to the poor, but also to many middle-class households. Almost all the new rental housing built in the past decade has consisted of high-end units. In 2015, the median rent of newly constructed units was $1,381—about half the median renter’s monthly income. From 2001 to 2014, the number of households paying more than half of their income for housing jumped from 7.5 million to 11.4 million—an all-time high. More than one in four renters now spend over half their incomes on rent.
Having a job no longer guarantees the ability to make the rent. In order to afford a modest, two-bedroom apartment, a renter needs to earn a wage of $19.35 an hour, according to a report by the National Low-Income Housing Coalition, and this “housing wage” is much higher in some areas. Every city has long waiting lists of tenants trying to obtain HUD vouchers or get into public housing.
The Trump administration wrongly claims that its proposed HUD budget will find savings of over $3 billion through “reforms to reduce costs.” Trump obviously believes that federal housing programs are wasteful and perhaps even corrupt. Where would he get such an idea?
In 1954, when Donald was eight years old, his father was subpoenaed to testify before the Senate Banking Committee on allegations that he had ripped off the government to reap windfall profits through his FHA-insured housing developments in New York. At the hearings, Fred Trump was called on the carpet for profiteering off of public contracts, including overestimating the construction costs of his projects in order to get a larger mortgages from FHA. Under oath, he reluctantly admitted that he had wildly overstated the development costs of one of these projects, the Beach Haven apartment complex in Brooklyn, by at least $3.7 million.
Trump’s hostile feelings toward HUD may also be connected to his family’s long history of racial discrimination. Besides providing housing aid to low-income families, HUD is also responsible for enforcing the Fair Housing Act, which Congress passed in 1968 to outlaw racial discrimination against prospective tenants and homebuyers by banks, developers, and landlords.
Trump’s father, and then Trump himself, frequently ran afoul of that law. During the 1960s and 1970s, the New York City Commission on Human Rights and other fair housing organizations and activists documented Trump’s routine practice of turning away potential black tenants. One New York state investigation discovered that there were only seven black families living in the 3,700-unit Trump Village complex in Brooklyn. Black families in New York knew that they were unwelcome in Fred Trump’s apartment buildings. They were typically told that his buildings had no vacancies, even when they knew that white tenants had no problem finding apartments in the same properties. The senior Trump used a variety of tactics to keep blacks out of his buildings. If a black person applied for an apartment in one of his buildings, Trump would tell rental agent Stanley Leibowitz to “take the application and put it in a drawer and leave it there,” Leibowitz recalled in a recent interview with The New York Times. The Times also reported that “a former Trump superintendent named Thomas Miranda testified that multiple Trump Management employees had instructed him to attach a separate piece of paper with a big letter ‘C’ on it—for ‘colored’—to any application filed by a black apartment-seeker.”
In 1973 the Justice Department did its own investigation and sued Trump Management for violating the Fair Housing Act for discriminating against blacks. The government named both Fred Trump, the company’s chairman, and Donald Trump, its president, as defendants. Like the scandal surrounding his father’s FHA rip-off, the Justice probe embarrassed Donald, who was just then making his way into New York’s upper social circles and testing the waters of celebrity. Donald called the allegations “absolutely ridiculous,” and said the government was trying to force him to rent to “welfare recipients.”
Rather than settle the case, the junior Trump hired Roy Cohn, the high-powered attorney who had served as Senator Joseph McCarthy’s redbaiting counsel, to defend him. At Cohn’s suggestion, Trump sued the Justice Department, but the assigned judge dismissed the countersuit. Two years later, the Trumps reluctantly signed a consent decree that required them to desegregate their apartment buildings, including a mandate that Trump Management provide the New York Urban League, a civil-rights group, with a weekly list of all its vacancies.
In 1978, however, Justice accused the Trumps of violating the consent decree. “We believe that an underlying pattern of discrimination continues to exist in the Trump Management organization,” a DOJ lawyer wrote to Cohn. But the Trumps outlasted the government’s efforts. Before the DOJ could gather enough evidence to take Trump to court, the original consent decree had expired.
Small wonder, then, that the HUD and FHA are on Trump’s hit list. What better way to avoid dealing with the painful memories they bring up than to slash HUD’s budget and to appoint Dr. Ben Carson as HUD secretary—a man who has no experience running a large organization, much less a large government agency, who has no background or expertise in housing, and who has expressed his opposition to HUD’s mission?
Ironically, what’s needed today are not only more housing subsidies for the poor, but also a return to the kind of government-backed middle-class housing that Fred Trump and many other builders constructed in the two decades after World War II. Don’t count on Trump to push HUD to rise to that challenge.