The Leave It To Beaver-style single family home, complete with a yard and picket fence, was long a favored image of American prosperity. It’s also an increasingly irrelevant one. More and more people need housing in city centers, where apartments or condos are usually a better option. Though a manicured yard is lovely, many would prefer to live closer to work and cut their commute. But you wouldn’t know there’d been any significant shifts from federal policy on real estate. Turns out, the U.S. government is still watching reruns.
A patchwork of dozens of programs, some nearly a century old, has left us with an incoherent set of intentions and goals. A new report from Smart Growth America, a national coalition that fights sprawl, looks at 50 federal programs that deal with housing and real estate. In total, the federal government spends around $450 billion each year on such programs, counting tax breaks, loans and loan guarantees, and direct investment in real-estate projects. But as the report makes clear, many of these programs no longer serve the functions they were created for, and others focus on outdated priorities—in particular, the single-family home. In the meantime, we’re not investing in some of the smartest strategies for growth, like buildings that can offer space for both residences and businesses, or providing help for those looking to live in multi-family spaces like apartment or condominium buildings.
Who benefits the most from the messiness? Surprise: the rich. For instance, the biggest tax-expenditure program for housing is the Mortgage Interest Deduction, which allows people to deduct payments on their mortgage interest on their taxes. Created in 1913, the MID costs an average of $80 billion annually, and it’s supposed to help families buy a primary home. But 30 percent of the households claiming the deduction claim it on a second home—like, say, a vacation home. Lower-income families have a harder time claiming the deduction, because it requires itemized taxes.
The rich also get a hand when it comes to housing subsidies. Those who make more than $200,000 get, on average, $6,300. For those who make between $30,000 and $40,000, the number drops to only $265.
For the many Americans who aren’t living in '50s-style suburbia, the feds have little to offer. Eighty-four percent of government spending goes to help families procure single-family homes, even though only 65 percent of households own homes. Medium-sized multi-family buildings, like small-apartment buildings, are among the most popular dwellings, but according to the report are “among the most difficult to finance and do not receive any focused federal support.” The federal government actually makes it harder to promote the growing trend of mixed-use buildings that offer both residential and commercial space, like apartments and businesses on sharing a building. The Federal Housing Authority requires those applying for a loan or loan guarantee to limit the amount of commercial space—regardless of market demand.
Renters are particularly ill-served by the current set of policies. The median income for renters is only $30,934, less than half that of homeowners. Yet there are no equivalent tax deductions for renters, even though increasing rent costs and a lack of affordable rental housing units for low-income people indicate there’s a clear need.
Ilana Preuss, chief of staff for Smart Growth America, called the report "a first step in getting a handle" on national policy—a rather depressing but useful overview of programs currently in place. "We're not giving an assessment or thumb's up or thumb's down on a specific program," she said. But it’s not hard to guess the kinds of changes the group and its allies will recommend. Smart Growth America and other anti-sprawl community-planning groups focus primarily on issues like public transportation, reinvigorating city centers, and creating more housing options closer to employment and schools. Helping rich people buy vacation houses? Apparently, we can leave that to the feds.