2
How We Abandoned Affordable Housing
How would it look for the US to make and keep a commitment to treating housing as a human right, not just a commodity? We don’t have to rely on our imagination to come up with an answer. In chapter 9, we will look at wonderful current examples in places like Vienna, Singapore, and Helsinki, where communities ensure housing for all. But we don’t have to leave the shores of the United States for proof that we can do much, much better than we do now. That is because the US once made a highly effective commitment to housing all our people.
After the Great Depression and through the 1970s, very few people in our country were homeless. Those who were homeless mostly were older men living in cheap hotels, so-called flophouses. Many experts predicted that even that level of homelessness would be eliminated by the end of the 1970s.1
Why did we not have the housing problem then that we see now? Simple: we sincerely tried to address it. Back in 1949, the American Housing Act set out the goal of ensuring a “decent home in a suitable living environment for every American family.” That language echoed the Universal Declaration of Human Rights, signed by the US the year before. For a few decades, we took that goal seriously. Recognizing that affordable housing cannot be left to the for-profit market, we made the required significant government investment. In the mid-1970s, the US devoted 1.4 percent of our gross domestic product to federal interventions in affordable housing. Today, our commitment is less than a fifth of that, only 0.25 percent.2
During the Great Depression, the US created the Home Owners Loan Corporation (HOLC) and the Federal Housing Administration (FHA). These agencies and the Veterans Administration purchased, insured, and issued mortgages to protect at-risk homeowners. They also provided millions of others with opportunities to buy houses through significantly lower down payments and interest rates—often with monthly payments that were less expensive than renting.3
Many historians consider the FHA to be our nation’s most impactful government agency for the half-century between 1930 and 1980.4 (At least, it made a profound impact on white people: as we will see in chapter 3, these transformative homeownership programs were largely off-limits to Americans of color.) In the 1960s and 1970s, home purchase support was buttressed by rent support programs, along with the creation of the Department of Housing and Urban Development (HUD).5
Then … we abandoned those commitments. In the early 1980s, President Ronald Reagan and a compliant US Congress slashed funding for affordable housing by nearly 80 percent.6 At the same time, persons living in state hospitals were deinstitutionalized, benefits for persons living with disabilities were cut, and eligibility for those benefits was so tightly restricted that hundreds of thousands of people lost the only income they had.7
A dark era had begun. As Western Regional Advocacy Project director Paul Boden said, “Racism, poverty, and addiction all existed before 1982. What did not exist was a homeless shelter.”8 While Reagan famously claimed that many people are “homeless by choice,” the choice was his, not theirs.9 Urban policy scholar Peter Dreier puts it bluntly: “Every park bench in America—everywhere a homeless person sleeps—should have Ronald Reagan’s name on it.”10
A review of US housing policy over the past four decades is frustrating and depressing. Opportunities were missed, backward steps were taken. People suffer as a result. Where did we go wrong?
The Slashing of Affordable Housing Investment
As we discuss more in chapter 8, public housing is a necessary, proven response to the needs of our clients and millions of other Americans who cannot afford market-rate housing. But since 1996 there have been zero dollars spent in HUD funding for new public housing.11 That neglect has been piled on top of the flawed foundation of US public housing created by the 1937 Housing Act. That legislation provided too little funding for high-quality housing construction, especially in the segregated units built for Black renters. And it included no support for necessary maintenance costs.12
Hawaii state senator Stanley Chang, a supporter of public and social housing, calls the 1937 Housing Act the “original sin” of federal involvement in housing. “That is when private developers forced income restrictions for every unit to make sure that the middle class and the upper middle class would never be able to live in public housing,” Chang told me in an interview.
“Eighty-seven years later, public housing is still restricted to the poor. The old saying in Washington is that a program for the poor is a poor program. And that is indeed what has happened. You don’t have large scale buy-in from the public at large on public housing the way that you do for programs like Medicare and Social Security, which benefit everybody and therefore receive support from everybody.”13
The fiscal starvation of public housing led to severe maintenance problems and an inevitable decline in available units.14 Opponents of public housing have cynically used the deterioration of public housing stock to claim public housing in the US has failed, and then to justify their attempts to destroy it.15 They succeeded in passing severely damaging legislation like the 1998 Quality Housing and Work Responsibility Act, which was part of the Clinton administration’s “end welfare as we know it” cuts to federal antipoverty programs. The result: there are only 958,000 public housing units today, compared to more than 1.3 million a quarter century ago.16
Victor Bach, senior housing policy analyst at the Community Service Society in New York City, told Human Rights Watch that the current support for public housing is merely “starvation funding.”17 That underfunding has led to an estimated $70 billion in repair needs for public housing in the US.18 As conditions deteriorate, demolitions follow, with ten-thousand-plus desperately needed public housing units being demolished each year.19
These policy choices did not occur in a vacuum. From its very beginning, public housing in the US was hamstrung by political compromises forced by real estate lobbyists who wanted public housing to fail, teaming up with southern senators determined to maintain segregation.20 Then, throughout the second half of the twentieth century, the real estate industry lobbied against more public housing being created, pushed for inferior design and construction materials, supported the demolition of existing public housing, and joined with white communities to oppose the placement of public housing anywhere except neighborhoods that mostly included people of color.21
Sociologist Daniel Aldana Cohen and economist Mark Paul have chronicled the real estate industry’s successful lobbying effort. Their account mirrors Hawaii state senator Chang’s conclusion. “Back in 1937, the real estate industry successfully repelled the efforts of the Labor Housing Conference and the New Deal’s Public Works Administration to create social housing in the United States that would look much like the successful model still used today in Vienna—mixed-use, mixed-income, and high quality,” Cohen and Paul have written. “This, after all, was the real estate industry’s nightmare: A viable public housing option that could undermine the private sector’s ability to rake in massive profits.”22
Housing researchers Gianpaolo Baiocchi and H. Jacob Carlson have summed it up: “The failures of public housing can be traced to early sabotage, chronic under-funding, and segregationist logic.”23 The influence of the for-profit real estate industry continues to this day. Pointing out that global real estate is a $200-trillion-plus industry constituting 60 percent of the world’s assets, urban planner Samuel Stein refers to the US and other countries as “real estate states.”24
The success of the private real estate industry and the accompanying struggles of public housing were not inevitable. As will be described in chapters 8 and 9, there are several public housing success stories in US, thriving communities that have managed to survive institutional neglect. And public housing is both prevalent and successful in other nations where it enjoys both adequate funding and political support.
Yet, in the eviction courts where we work, the human cost of the abandonment of US public housing is on full display. Virtually all our clients are low-income and thus technically eligible for a federal housing subsidy that would cap their housing costs at 30 percent of their income.25 It is hard to overstate how impactful this subsidy is. Consider that households with a low-wage or disability income of $1,200 per month would pay less than $400 for a public housing apartment, compared to the $1,000 or more they pay in the private market now. A federal housing subsidy also comes with a guarantee of substantially more renter protections from arbitrary evictions and rent spikes than tenants have in the private housing market.26
But our clients almost never have a federal housing subsidy. They are among the unfortunate 75 percent of Americans eligible for the subsidy but unable to get it because the program is so underfunded.27 In class, we describe this quest for a housing subsidy as the cruelest musical chairs game: three of every four people lose out.
If they could, our clients would eagerly join a waiting list for a subsidized unit. But the average family waits two and a half years on subsidized-housing waiting lists.28 A recent survey of forty-four housing agencies revealed more than 737,000 households on waiting lists, with some lists closed for more than a decade.29 The New York City Housing Authority last opened its waiting list in 2006.30 The delay can reach the point of absurdity: one Chicago woman recently had her name come to the top of the waiting list—twenty-nine years after applying.31
The Privatization of Affordable Housing
As we will see in chapter 4, wealthy individuals and corporations reap a bounty of government-provided benefits from high-end or market-rate housing. Sometimes they receive the benefits for living in the housing, often by investing in it and renting it out. Remarkably, our current US affordable housing programs direct many of their investments not directly to persons in need of housing but to private landlords and investors seeking to maximize profit off housing for the poor.
During the Nixon administration in the 1970s, the US began to switch our affordable housing dollars away from public housing. Instead, the plan was to subsidize for-profit landlords via direct payments and tax breaks in return for providing some housing to low-income renters.32 This diversion of affordable housing dollars to for-profit entities is virtually unheard of anywhere else in the world. Most nations take the logical, efficient approach of directing their affordable housing investments to government or nonprofit organizations.33
This practice, and the broader dismantling of affordable housing programs, began during the Nixon administration and then accelerated in earnest under Ronald Reagan. But Democrat presidents inflicted grievous damage, too. When Bill Clinton enabled public housing agencies to tear down developments without replacing units, he was fulfilling the destiny envisioned by President Jimmy Carter’s HUD secretary, Patricia Harris, in 1976: “I would rather have people in the marketplace purchasing their own shelter—with the encouragement that this would give to private development at all levels—than have the government put up the kind of public housing monstrosities … that we’ve had in the past. We should make it clear that we are abandoning the whole notion of public housing.”34
Powerful forces may have wanted to abolish public housing, but they never abandoned the use of affordable housing tax dollars to enrich the wealthy. While public housing has been undermined and scaled back, there remains a robust pipeline of affordable housing subsidies to for-profit landlords, chiefly through the Section 8 voucher and project-based programs. In the voucher program, technically called housing choice vouchers but widely known as Section 8 vouchers, low-income renters are provided with vouchers they can use to find housing in the private rental market.35 If a landlord agrees to the arrangement, the federal government will pay the difference between market rent and 30 percent of the renter’s income—the same rent obligation that a public housing resident has.36
But the voucher program relies on the self-interest of for-profit landlords, which often makes the promise of vouchers an empty one. As many as 30 percent of households who receive vouchers end up forfeiting them because private landlords will refuse to accept “Section 8” tenants.37 Sometimes the landlord refusal is due to discrimination. Sometimes they say no because the HUD determination of fair market rate is lower than what landlords believe they can collect from nonsubsidized tenants.38 In those situations, desperate tenants sometimes agree to pay rents higher than the HUD fair market amount, causing nearly half of all voucher holders to still be in the “rent-burdened” category.39
When we first saw our client Belinda, her years on a waiting list had finally led to her receiving one of the coveted vouchers. But Belinda was still sleeping on a friend’s floor because she could not find a landlord to accept her voucher. Most states, including ours, do not prohibit a landlord from simply refusing to accept tenants with housing vouchers: in those states, 77 percent of landlords reject voucher-holders.40 Belinda never did find a landlord willing to accept her, so her voucher expired. The last time we connected with her, Belinda was homeless.
HUD does not maintain data on the landlords who benefit from the $19 billion per year spent on vouchers, but analysis by the Poverty and Race Research and Action Council suggests that many of those vouchers directly fund large, for-profit landlords.41 Similar direct payments to for-profit landlords occur in the Project-Based Section 8 program, where the subsidy is connected to the unit, not the tenant. Most of these property owners are for-profit entities who can convert to market-rate housing at the end of their HUD contracts. They often do so, leaving nearly half of the tenants without their previous subsidy.42 Just north of Indianapolis, a senior living complex refused to renew its Section 8 contract, forcing out more than one hundred seniors.43
The Emergency Rental Assistance program, $47 billion allotted in 2020 and 2021 in response to the COVID pandemic, mimicked the process of the HUD programs, delivering most of its benefits to for-profit landlords.44 The money was delivered with no strings attached, not even the promise of decent living conditions for renters. Time and again in court, we saw some of the most notorious slumlords in our community raking in tens of thousands of dollars in government rent dollars.
“The chief benefactors of public capital are private capitalists,” California Assembly member Alex Lee told me in an interview. “They are the ones who try to delude policy makers and the public that housing is fueled by the private market. But by and large, when it comes to suburban sprawl or affordable housing, so much of housing is supported by public financing. And it’s not efficient public financing. We basically send money off to private entities, then kiss it goodbye.”45
A “Better-Than-Nothing Gimmick”
The congressionally mandated freeze on public housing development has been in effect since 1998. That has left the Low-Income Housing Tax Credit (LIHTC) program as the one program remaining that funds the creation of new, so-called affordable housing (more on the meaning of “so-called” affordable housing below). A full 90 percent of new affordable housing is built via the LIHTC program.46 That makes LIHTC the US government’s chief tool for creating new affordable housing.47
But this affordable housing tool is a dull and ineffective one. As housing researcher Alyssa Katz has written, LIHTC is “a better-than-nothing gimmick that helps the poor by rewarding the rich.”48 Unfortunately, the reward for the rich is far more impressive than the help provided to the poor.
Here is how LIHTC works: The program offers developers a ten-year tax credit if they invest in the development of housing that guarantees a certain number of affordable units.49 The credit is allocated by the federal government to the states, which administer the programs. Most LIHTC properties, including 78 percent of the LIHTC apartments built between 1987 and 2013, were developed by for-profit companies.50 Even when the developers are nonprofit, the LIHTC model pushes them into funding arrangements with for-profit investors, who buy the credits to reduce their tax liability. Simply put, LIHTC is a tax shelter scheme for wealthy corporations.
Those LIHTC investors include the notorious Blackstone Group, a multinational private equity corporation that is the US’s largest landlord.51 The United Nations’ special rapporteur for housing has accused Blackstone of “wreaking havoc” on the global housing market with aggressive evictions, inflated rents, and unreasonably high fees for ordinary maintenance.52 In 2018, Blackstone spent more than $6 million fighting a California ballot initiative to permit rent control.53 This is who is receiving our government housing dollars.
No matter who is benefiting from the tax credits, LIHTC is a poor substitute for public housing. I call the affordable housing reference in LIHTC’s name “so-called” because the program often leads to rents much higher than other subsidized housing. Federally subsidized housing via public housing, vouchers, or Section 8 tie maximum allowable rents to the tenants’ income: if a tenant makes only $967 in a Supplemental Security Income check, that tenant’s rent is less than $300.
But LIHTC rents, tied to area median income, are significantly more expensive, which means less than half of LIHTC households are extremely low-income.54 And among the few poor renters in LIHTC buildings, many can only afford to live there because they are using housing choice vouchers or other assistance to help pay their rent.55
Not only is LIHTC support for affordable housing units limited in its immediate impact, but it often is quite temporary. Affordability requirements on LIHTC developments expire after thirty years, and some owners can opt out of affordability restrictions after just fifteen years.56 Many of those developments are switched to market-rate housing after the restrictions end, an ominous sign, since more than 138,000 LIHTC units will come to the end of their affordability periods by 2025.57
For taxpayers, who lose $10 billion in forgone tax revenue annually due to LIHTC, this is an expensive way to produce housing.58 For example, the cost of developing each LIHTC housing unit in California is a whopping $480,000.59 The overall return on US taxpayer investment is unjustifiable.
In fact, even LIHTC’s “better-than-nothing” label may be an overstatement: one study published in the Journal of Housing Economics concluded that at least some of LIHTC-funded housing would have been created even without the government subsidy.60 LIHTC housing can even make the situation worse for low-income households by fueling housing price inflation and further spurring the speculation that makes housing scarce and expensive.61 Frustrated legislators like Stanley Chang and Alex Lee call LIHTC “legalized theft of government assets.”62 Even the Congressional Budget Office has admitted that the LIHTC program is “more suited to the needs of investors than poor renters.”63
So much for the American Housing Act’s 1949 commitment to ensuring a “decent home in a suitable living environment for every American family.” But it is important not to paint too rosy a picture of the old days in affordable housing. Even when US government dollars were flowing much more freely to meet housing needs, there was a dam of racism blocking most of that support from reaching persons of color. That is the topic of chapter 3.