People paying a mortgage on a home like this get twice as much federal assistance as low-income households.

By Peter White

NASHVILLE, TN — The new Republican tax reform caps the home mortgage interest deduction at $750,000. That will increase federal revenues by around $100 million a year. But rather than put that money into affordable housing and rental assistance, where it is most needed, Trump’s tax plan gives it back to the rich.

“The significant deficits produced by the tax bill may trigger automatic funding cuts to the national Housing Trust Fund—a program that helps build and preserve rental homes affordable to people with the lowest incomes,” said CEO Diane Yentel of the National Low Income Housing Coalition.

Those cuts will hurt farm-workers and other low-wage earners. Yentel called the tax bill a reverse Robin Hood scheme that “will harm efforts to end homelessness and housing poverty”.

Business taxes will be cut by 15%, the estate tax will end and fewer people will pay the alternative minimum tax. Many itemized deductions will no longer be allowed. The net result, according the Urban-Brookings Tax Policy Center, would cut taxes to low and middle-income households modestly “while focusing most of its benefits on the highest-income 1 percent”.

A disabled resident of this boarding house in North Nashville lives on $755 a month. His rent is $500.

Low and middle-income households will pay less tax, saving an average of $660 or about 1.2 percent of after-tax income, but the top 1 percent, who make $730,000 or more, will get to keep an average of $130,000, 8 percent of their after-tax income.

By 2027, the report concludes the top 1 percent will get 80 percent of Trump’s tax cuts and the middle-income household share would drop to just 5 percent.  It will increase the deficit by $1 trillion. The Republican tax reforms disproportionately feed the rich and widen the gap between rich and poor in the U.S.

Racial Disparities in Wealth and Home Ownership

Unequal rates of home ownership between whites and blacks reflect long-standing disparities in wealth and income between the races. Census data show that in 2017 seventy-two percent of whites owned their homes while forty-two percent of blacks and forty-five percent of Latinos were homeowners.

The Survey of Consumer Finances compiled by the Federal Reserve in 2016 found median income was $61,200 for whites, $35,400 for blacks, and $38,500 for Latinos.

Another Federal Reserve report noted wide disparities between races in net worth and housing wealth. White families had a median net worth of $171,000; Black families had $17,600 and Latino families had $20,700.

Housing wealth, defined as home value minus mortgage debt, was $215,800 for Whites, $94,400 for Blacks, and $129,800 for Latinos.

Federal Housing Assistance: MID vs. Rental Vouchers 

Federal housing assistance is of two kinds: the mortgage interest deduction (MID) for homeowners and rental assistance. Affordable housing advocates say there is too much of the first kind and not enough of the second.

IRS figures show the MID totaled $71 billion in 2015. Total rental housing assistance was $29.9 billion. Like the tax reform package, the MID benefits high-income families most and you have to itemize deductions on the federal 1040 tax form in order to claim it.

Higher-income households have a higher marginal tax rate, are more likely to itemize, buy more expensive homes and sometimes buy more than one home. Eighty-five percent of MID benefits went to high-income households in 2015; six percent went to low-income households.

According to the rental research firm, Apartment List, federal spending on the MID for high-income households was $1,549 in 2015 while combined MID and rental assistance to low-income households was just $416.  If those figures were reversed, cost-burdened low-income households would get more and more homelessness could be housed.

“Only 34 percent of total federal housing expenditure goes to low-income households, while 60 percent goes to high-income households,” wrote researchers Andrew Woo and Chris Salviati.

One reason for that is because lower-income households are more likely to take the standard deduction than to itemize. While the rich take more than their share of the MID, renters are ineligible and they are much more likely to be burdened by housing costs. Congress perpetually skimps on rental assistance funding.

Trump’s proposed 2018 budget cuts $2.8 billion from HUD’s housing programs–

$947 million in tenant vouchers and $465 million in public housing funds. It also cuts $950 million to help build low-income housing.

Cost-Burdened Nashville 

HUD defines cost-burdened as paying 30 percent or more of monthly income on housing.

According to a recent study by Economic Planning Systems (EPS), 55,388 renter households in Nashville are cost-burdened and in critical need of housing assistance. Nashville needs 19,000 affordable housing units now and will need 31,000 by 2025.

The Mayor’s 2016-2017 Housing Report is based on EPS findings. David Schwartz, the study’s author, divided Metro’s population into five groups based on income.

What he found was consistent with national trends.

One quarter of all homeowners and more than half of low-income homeowners in Nashville are cost-burdened. The total number of homeowners who pay more than 30% on housing equals 34,862.

Seventy percent of low-income renters are cost-burdened and 44 percent of all renters spend too much on rent in Nashville. Overall, 30 percent of Metro’s population, or 203,700 people, are unable to afford the cost of housing.

Paying so much for the roof over your head has a large impact on the local economy.

Schwartz found that $345 million doesn’t recirculate because so many residents overspend on housing and can’t buy other things they need.

Few Low-income Households Get Rental Assistance

Two pots of federal dollars help low-income renters: one is project-based rental assistance (PBRA) and the other is Housing Choice Vouchers (HCVs), formerly known as Section 8 vouchers.

HCV and PBRA renters receive an average yearly subsidy of $9,073 while high-income households get an average of $2,940 from the MID. Many more people are eligible than actually get rental assistance, however. According to IRS and HUD data, combined federal housing expenditures per household (MID and rental assistance) was $596 in Davidson County in 2015, the latest year of available data.

Because rental vouchers are rationed, waiting lists are long and enrollment periods are short. Last September, 15,657 people applied to be put on the HCV waiting list in Nashville. It is now closed. The Metropolitan Development Housing Authority has distributed 7,051 vouchers in Davidson County. The long waiting list indicates a critical lack of affordable housing in Nashville.

Next: What Metro is doing to build permanent low-income housing for the poor.

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