Housing Insecurity: A Light at the End of the Tunnel?

3/10/21

Whenever the topic of “affordable housing” comes up, I get queasy. It’s not that I don’t see the legitimacy of the concern. I do. My discomfort comes because I generally find the political remedies offered to address this problem to be woefully inadequate. It may be, however, that the passage of the Covid Relief Plan charts a new course, offering some promise in this area.

As laudable as it is to address housing insecurity for those in need, doing so by increasing the stock of specifically designated affordable units is the wrong solution on at least four counts:

1. Historically, the appetite to fund these initiatives has been insufficient to address the scale of the need.

2. Some portion of newly constructed subsidized housing units — something on the order of a half — would likely have been built in the absence of the financial incentives provided to the suppliers.

3. The financial incentives underlying the construction of these projects diverts the federal or state resources to developers and builders, as opposed to going directly to households in need.

4. Providing subsidized housing is an inequitable solution that satisfies the requirements of the limited number of households lucky enough to secure a coveted unit, but it leaves out larger numbers of equally eligible families that are forced to do without.

Money spent to incentivize construction of these specifically designated units would be better used to provide income supplements to all eligible households. This alternate policy orientation recognizes that poverty is the true problem — as opposed to housing, per se — and it would address each of the above criticisms. This approach may not concentrate its effect on alleviating housing insecurity exclusively, but evidence from a host of income supplement experiments both in the US and abroad strongly suggests that income supplements upgrade housing outcomes and objectively improve metrics relating to health, education, and crime in meaningful ways. Further, they give recipients the agency to determine for themselves the best use of the funds while avoiding the dehumanizing aspects of navigating alternative bureaucracies.

The new Covid Relief Plan offers an opportunity to apply this approach by providing income supplements through four avenues: (1) continuance of the $300 per month for supplemental unemployment benefits; (2) a one-time personal stimulus check for $1,400; (3) an expansion of the Child Tax Credit; and (4) an expansion of the Earned Income Tax Credit. Under the expanded Child Tax Credit program, families will receive $3,000 per child for children between the ages of 6 to 17 and $3,600 for each younger child (per year). The Earned Income Tax Credit has offered benefit amounts that were dependent on family income, marital status, and number and ages of children; but the new rules raise benefit amounts for adult-only filers.

[With respect to the two tax credit adjustments, it’s useful to realize that the terminology “tax credit” is a misdirection. Historically, tax credits have been structured as offsets to tax liabilities. In the latest legislation, however, the credits are said to be “refundable,” meaning that the filer receives the full credit amount, regardless of the level of his or her tax liability. This design is more appropriately described as an income supplement benefit, as opposed to a tax credit.]

Critics of the Covid Relief bill charge that it transcends the boundaries of Covid-related concerns. I agree; but I say, “thank goodness.” To my mind, these new policy initiatives were appropriate and justified, independent of Covid-related considerations; and I laud the Democrats for using the reconciliation process to affect these changes. I’m glad to see a reinforcement of safety net provisions that will undoubtedly enhance the quality of life for our nation’s most vulnerable; and frankly, I find it hard to understand the counterargument that implicitly judges our current safety net to be just fine, as is. Arguably, the distributions could have been tilted to deliver more aid to those in the more precarious circumstances at the expense of those who stand higher on the economic ladder, but we can’t let perfection be the enemy of good.

My only real gripe about the new legislation has to do with its termination features. That is, the personal stimulus checks are a one-time phenomenon, and the two tax credit extensions are slated to end after one year. An ongoing commitment to support financially distressed households genuinely offers the possibility of changing the trajectories of the lives of the beneficiaries. On the other hand, a policy that offers relief that won’t be ongoing leaves open the prospect that meaningful structural change won’t happen and that we will revert to the status quo ex ante. This outcome seems especially likely given the incremental debt burden from unpaid rents and mortgages realized by those who’ve been unable to maintain their pre-Covid incomes.

Much of the spending under this bill will no longer be required or relevant after the Covid pandemic fades into the background, but the financial insecurity at which these various income supplements are directed will, unfortunately, be a continuing need. It would be a lost opportunity if these income supplements end up being discontinued prematurely.