This week, Frontline released a documentary focusing on the affordable housing crisis. Specifically, reporter Laura Sullivan examined Section 8 and the Low Income Housing Tax Credit (LIHTC) - the two main federal policy tools tasked with providing affordable housing - to see why these programs are not making an impact on the crisis. The doc suggests the reason is a combination of local resistance, lack of oversight, and outright fraud. Though these do play a role and must be addressed, the larger issue is that the US does not see housing as a right. Without focusing federal policy around this principle, the current, weak federal intervention in rental housing will never solve the affordable housing crisis.
The documentary is at once heartbreaking and hopeful. We see individuals and families that are trapped in a cycle of poverty utterly beyond their control. But we see individuals who have benefited from low-income housing programs, who now have a stable home for the first time in their lives. Though the documentary does not make a value claim, it shows how decisive an affordable home is in the outcomes of Americans, and how important it is that we provide one as a society.
As the doc points out, however, only 1 in 4 Americans who qualify for housing assistance receive any. That there are so many Americans who need housing assistance (approx. 12 million) and that they do not receive it are equally scathing indictments on our nation’s priorities.
The Americans that do receive aid do so mostly through Section 8 vouchers, which allow an individual to rent a home (that accepts the program and has a certain cap) and to pay no more than 30% of their monthly income for it. The federal government, administered through the states, covers the difference. The program costs about $30 billion a year (less than half the cost of the annual mortgage interest deduction) and houses 2.1 million Americans . It was started in 1974 as a correction to the mistakes of concentrating large public housing blocks in poor urban neighborhoods, but more on that later.
Part in parcel with Section 8 is housing built through the LIHTC that generally requires a percentage of units be put aside for residents with those vouchers. As I explained here, LIHTC was part of the landmark 1986 tax reform and created tax incentives for affordable housing construction. The idea was/is to create affordable housing by allowing developers to sell IRS-issued tax credits to private investors for cash towards their projects. A given community gets nice new affordable housing, the investors (usually banks) get a significant tax credit, and the developers make a small profit.
It’s the ultimate public-private partnership and a lot of people across the political spectrum support this premise. LIHTC has built 2.7 million affordable housing units over 30 years and represents 90% of all affordable housing construction in the country.
To recap, the federal government’s answer to the affordable housing crisis is to incentivize the private sector to create affordable housing and to then help subsidize some residents into those units. But as Frontline shows, this premise is deeply flawed at almost every point in this cycle because the federal government is basically absent.
Beyond the fact that so few receive Section 8 vouchers, those that do often face incredible odds against finding a home anyway. Many landlords simply refuse to rent to people with Section 8 vouchers. Few wealthy communities, which are closer to better jobs and schools, offer Section 8 housing at all. And, as witnessed in the doc and elsewhere, those individuals that get a home in those communities often face a disgusting level of communal and institutional discrimination.
Section 8 was not designed with enough understanding or acknowledgement of how race and class define that geography of our nation and how that geography provides opportunity. As a result, the program is incapable of overcoming this aforementioned type of local resistance and discrimination. “Section 8” is often a shorthand for a racial slur in many places and existing residents don’t want them in their communities.
Luckily for those residents, cities and towns have many ways around providing Section 8 housing, whether explicitly through zoning or implicitly through delay tactics, as the doc points out. Even though the Supreme Court has intervened to acknowledge and try to prevent this, decades of institutional discrimination have limited the ability of any current federal programs to overcome local governments. Additionally, the current administration is unlikely to enforce any real changes at the local level.
As for the other end of the cycle, the LIHTC is a deeply flawed policy tool. I have discussed why it only works in relation to other bad tax policy that might not last, why its focus on market principles limits individual developments’ effectiveness in size and location, and why its complexity actually drives up the cost per unit.
However, Frontline focused on two elements that I did not cover: corruption and lack of oversight. Because LIHTC funds are administered by the states and cities have significant local discretion on development, there is a lot of ambiguity to how developers proceed through this regulatory complexity. The result, at least in some cases, has been kickbacks or pay-to-play schemes that have led to several high-profile federal corruption convictions.
Any big dollar programs are going to attract bad actors and I’m not convinced that fraud is a systemic issue with LIHTC, but the point is, we really don’t know. There is basically no federal auditing. Most state housing agencies simply don’t have the resources to audit the program either. In many cases compliance and cost estimates are done pro forma which means, outside of the small sample of investigations, it’s difficult to tell if there is a bigger problem at hand. However, given the widespread corruption in the mortgage industry leading to the crash in 2008, it’s not hard to imagine that a lot of federal tax dollars are getting sucked out of affordable housing.
Section 8 and LIHTC were programs that evolved after the New Deal/Great Society eras of mass public housing development funded by the federal government. The popular consensus is that those years were a failure of public policy. No doubt many Jacobisan neighborhoods were destroyed by Urban Renewal projects and in their wake highways and lifeless towers concentrated poverty around isolated pockets of cities. Public housing became synonymous with crime and anti-social behavior that crippled those communities for decades. There were absolutely many terrible failures with this approach.
But the truth is more complex and more sinister. The failures with the era’s specific approach to public housing undermined the premise of public intervention in housing overall. Public housing was neglected almost as quickly as it was built, while the federal government intervened massively to create suburban America and its twin pillars of car ownership and home ownership. It wasn’t that the premise of public housing failed, it was the commitment to it that failed. Intentionally.
By the 1970s, the idea that the federal government can, let alone should, intervene in the rental housing market died along with the liberal consensus that controlled domestic politics for 40 years. But the problem of providing affordable housing didn’t go away. Section 8 and LIHTC were follow up neoliberal admissions that the affordable housing problem could not be fixed by the market alone.
However, they were built on a flawed premise that failed to acknowledge how much the federal government intervened in homeownership and how much that intervention fell along racial lines. Under that premise, there is no way these programs could possibly tackle the structures that created the affordable housing crisis to begin with.
In fact, they have made the crisis worse by calcifying the national policy conversation on housing. Both parties (for the most part) continue to point to the two programs as evidence that the federal government is doing all that it can — and that it’s working. This is a politically convenient fantasy for both sides.
The death of public housing as national policy after the 1960s proves two related points: first, the federal government can decide how it wants to house Americans and, second, it can make it a reality. The US decided that post-war economic growth would be based on cars and homes and built policies to guarantee that outcome. It worked.
If the federal government (or more accountably, we as Americans) wants to end the affordable housing crisis, we can. It will never end through Section 8 or LIHTC. It will never end by addressing the flaws in those programs raised by the Frontline documentary. It will never end by subsiding homeownership. It will only end if we commit to the simple concept that housing is a right and start re-imaging our country from there.