America’s housing crisis reaches across income levels and geography, but the further one goes down the socioeconomic ladder, the more dire it becomes: Currently, the U.S. is short 7.2 million homes for the 11 million residents living on very low incomes. The affordable rental market is so constrained that 71% of low-income families spend over half their income on rent. Absent any meaningful federal investment in affordable housing in the last few decades, local governments, nonprofits, and in some cases, private companies, have tried to step up, but still, the affordable housing gap persists.
The solution to this crisis–like many of America’s crises–is more and better funding toward affordable housing construction and preservation, but to date, leaders have lacked the political will to demand it, says Diane Yentel, president and CEO of the National Low Income Housing Coalition. Senator Elizabeth Warren of Massachusetts is breaking this pattern. On September 26, she introduced the American Housing and Economic Mobility Act of 2018 to call for a $450 billion investment, spread out over the next decade, toward building and preserving affordable housing, and boosting rates of homeownership among low-income people. “Senator Warren’s bill would reverse decades of chronic underinvestment by the federal government,” Yentel tells Fast Company.
Warren’s proposal would funnel $45 billion every year into the Housing Trust Fund, a new federal program, rolled out in 2016, that provides block grants to states to build, rehabilitate, or preserve affordable housing for people living on incomes less than 30% of the area median income, or below the federal poverty line. While the existence of the HTF is cause for optimism, its funding is currently anemic: In 2018, it made just $266.8 million available to states. As the NLIHC reports, bringing the supply of affordable housing up to speed with demand is a project that will require billions of dollars in federal investment.
Which is why Warren’s bill is so promising: Not only would it provide substantial financial resources for ending the housing crisis, but it also includes measures designed to break down discrimination in the housing market, and the entrenched racism that has prevented many people of color from accessing homeownership resources.
Part of the funding through the Housing and Economic Mobility Act, for instance, would be made available to local governments in the form of competitive grants, for which cities could apply. In order to qualify for the funding, however, communities have to prove that they will reconfigure their zoning laws–one of the most pervasive ways of keeping people of color and low-income residents locked out of more prosperous neighborhoods–to promote equity and fairer distribution of resources. These grants could be spent on parks or public transit, proving the point that investment in housing must also extend to investment in community health overall.
On the equity front, Warren is calling for a down payment assistance program to help primarily low-income people of color purchase property, reversing decades of racism and redlining that have kept this population locked out of the benefits of homeownership. Among black Americans, homeownership rates hover around 41%, around 25 percentage points behind that of white Americans. On Native American tribal lands, where the housing crisis is perhaps most acute and overlooked, Warren proposes a $2 billion investment to build or rehabilitate 200,000 homes. The bill also would expand the Fair Housing Act of 1968 to outlaw discrimination on the basis of sexual orientation, marital status, gender identity, and income source.
To raise the necessary funding, Warren proposes raising the federal estate tax (often called the “death tax”) back to pre-recession levels. In 2009, any estate value above $3.5 million was taxed at a rate of 45% when it was passed down; the following year, the threshold was raised to $5 million, with anything in excess taxed at 35%. Reverting back to 2009 levels–and adding steeper taxes on estates valued over $10 million–will cover the entire cost of the program without impacting jobs or the economy, according to an independent analysis by Moody’s Analytics, which notes that “the wealthy households that will pay more in estate taxes have substantial financial resources and will not significantly change their spending and saving behavior.” And it would produce benefits for lower-income Americans, and people across the socioeconomic spectrum: Moody’s estimates that Warren’s bill could spur the creation of at least 3.2 million deeply affordable homes, and lower rents across the board by 10%.
Warren’s bill has secured the backing of the NLIHC, Matthew Desmond, the author of the Pulitzer Prize winning book Evicted and founder of Just Shelter, The National Alliance to End Homelessness, the National LGBTQ Task Force Action Fund, and the National Community Reinvestment Coalition, among others.
Along with a bill she introduced last month calling for greater corporate accountability and a fundamental restructuring of large companies so that wealth will be spread more evenly across executives and workers, Warren has not been hesitating to advance more progressive policies in Congress. (This, or course, has helped fuel rumors that she’s considering a presidential run in 2020, which she has not confirmed). While the Housing and Economic Mobility Act, with its heavy lean on an elevated estate tax, stands no chance of passing through the current Republican-controlled Congress, it may if the Democrats take the House (and maybe the Senate) in November. What’s incontrovertible is that the housing crisis is already at a breaking point, and this bill represents a necessarily wide-ranging and potentially viable solution to it.