All housing is subsidized -- and the poor get the smallest subsidy

by TallSkinny
If I give you $10, no strings attached, you just got a hand-out.
If I tell you to forget about $10 you owe me, you just got a hand-out.
Economically, the handouts are identical -- debt-forgiveness is the same as payment.
But change the payor, or the payee, and everybody thinks differently.
When the government subsidizes housing for the poor, it writes them a check, or gives them a voucher, and everybody else gets to look down their noses, or worse, at "those people taking handouts from the government."
But those people looking down their noses at the poor actually get a bigger housing subsidy from the government, in the form of tax deductions and other favorable tax consequences which attach exclusively to individual home ownership. The mortgage interest deduction, the property tax deduction, housing tax credits, capital gains exclusions on profits from home sales -- all these things are federal housing subsidies.
A tax break is a subsidy -- remember, if you owe it, but don't have to pay it, it's the same as getting paid.
Federal housing subsidies take two basic forms: (1) direct assistance in the form of cash and vouchers, and (2) debt forgiveness in the form of tax credits, deductions, and exclusions.
Type One goes to the poor, and they know it, because with the payment comes the stigma.
Type Two goes to the rich and the middle class, so, of course, the government is very careful to avoid the stigma, because these folks vote. You can't tell voters they're getting a federal handout (anyway, they think it's their god-given right not to pay taxes they owe).
Wikipedia actually has a nice little treatment on the subject: Don't miss section four, "Housing Subsidies."
I do not lightly compliment those Libertarians at Wikipedia, but they did a pretty good job on this.
There's a good chart: 80% of federal housing subsidies take the form of tax breaks. That is, the middle class and rich get most of the gold, and the poor get the shaft.
President Bush's commission on tax reform issued a report earlier this month, calling for a substantial reduction in feder tax subsidies for housing.
Since Bush has tried to repeal every New Deal program -- programs that created the middle class -- you'd think he'd love the idea.
I predict this is what Tony Snow would call a "non-starter."
So, okay, rich and middle-class folks, by all means protect your federal housing subsidy. But, next time you start to shoot your mouths off about folks living in "subsidized housing," look in the mirror -- you're getting the bigger subsidy. Better yet, save the words and try to make the "handout" for the poor as big as the handout you get. It's only fair.
By the way, the Wikipedia article doesn't get everything right. It correctly includes cash and tax subsidies for the construction of low-income housing, but it does not include the implicit cost of federal guarantees for the secondary mortgage market (FNMA, GNMA, FHLMC, etc.) and for deposits in federally-chartered financial institutions (which issue many mortgages with their subsidized deposits). Most of those implicit benefits accrue to homeowners, so, if anything, the federal subsidy for the rich and the middle class is understated.

Tags: Housing, housing subsidies, law, policy, tax law, subsidized housing, libertarian, libertarians, libertarianism, capitalism, classism, skepticism.

Comments

[CV Rick]

very nice post.

I'm going to forward this to a finance guru friend of mine.

[Belstaff leather]

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