Best Chance to Fund the National Housing Trust Fund
Minnesota and the nation need more affordable housing, especially rental units. The National Low Income Housing Coalition (NLHC) calculates that 109,480 additional units are necessary in Minnesota to meet housing affordability demands for extremely low income households.
Nationally, the NLIHC calculates that for every 100 households making 50% of the median income for their area, only 57 affordable and available housing units exist. For every 100 households making 30% of median area income, only 30 affordable and available units exist.
Inability to find affordable housing is a leading driver of continued poverty. Families in this situation have to make impossible choices between food and rent. When illness, job loss or other misfortune strikes, they often become homeless. As a result, addressing this shortage is a critical step in reducing poverty and homelessness.
Funding the National Housing Trust Fund (NHTF) is a key step in increasing America’s affordable housing stock. The National Housing Trust Fund was established as a provision of the Housing and Economic Recovery Act of 2008, but has yet to be funded despite President Obama calling for up to $1 billion in capitalization each of the last four fiscal years. Once funded, the NHTF will be a single dedicated source of funding explicitly targeting rental housing affordable to low income and extremely low income households. Such a dedicated source of funding, 90% of which will be aimed at production, preservation, rehabilitation, or operation of rental housing, is necessary to close the gap between supply and demand for affordable rental housing. The National Low Income Housing Coalition has identified the capitalization of the NHTF as a top priority for affordable housing advocates.
Since its 2008 passage, the combination of gridlock and anti-spending sentiment in Congress has result in very few viable opportunities to fund the NHTF. However, the recent decision by Senate Finance Committee Chairman Max Baucus and ranking member Orin Hatch to overall the US tax code via a “blank slate” approach presents unique opportunity to fund the NHTF. Sen. Baucus explained that the “blank slate” approach means everything will be taken out of the tax code and individual provisions will be added back only if they can be defended as:
- Helping grow the economy.
- Helping make the tax code fairer.
- Helping promote other policy objectives.
United for Homes, a campaign to fund the NHTF, has a proposal which meets all three criterions and would result in in the capitalization of the NHTF. Currently, homeowners who itemize on their tax return can deduct the interest paid on mortgages up to $1 million. While we're already overhauling the tax code, the United for Homes campaign proposes reducing the size of a mortgage eligible for tax break to $500,000 and convert the deduction to a 15% non-refundable tax credit. These changes would raise an estimated $197 billion in revenue, which, under the United for Homes proposal, would be used to fund the NHTF.
Congressman Keith Ellison introduced this proposal in the U.S. House, but it's made no significant progress.
These changes would help the economy in two ways. First, funding the NHTF will create jobs via increased housing construction and rental housing management. Second, it will increase the amount of money millions of consumers have to spend by extending the benefits of mortgage interest tax deduction to the 16 million taxpayers who do not itemize their tax return (an effect of converting the deduction to a tax credit).
The proposal will also make the tax code fairer. The revised mortgage interest plan would expand benefits to 16 million households, including middle-income households because 99% of all recipients make under $100,000.
Finally, the proposal promotes important policy objectives. Without the increase in affordable housing resources from the NHTF states will continue to lose ground on their ability to provide stable and affordable housing to the lowest income households.
Along with meeting Sen. Baucus’ requirements for instatement into the tax code, public opinion research shows 60% of Americans support the two changes to the mortgage interest deduction. Americans also support expanding federal resources for affordable housing in order to end homelessness. More than two-thirds (68%) of Americans would support using some or all of the revenue raised by the proposed changes to the mortgage interest deduction to expand the supply of affordable housing in order to end homelessness.
Sen. Baucus has asked that all Senators send proposals for which tax expenditures they would keep, amend, or add by July 26. Immediate action is necessary to ensure the funding of the NHTF is included in these changes. The National Low Income Housing Coalition has created a page with resources for those interested in this issue. Such changes are essential for reversing the increasing shortage of affordable housing and alleviating the hardship it causes for millions of Americans.