Some Good Things That Happened This Month … and Some Bad

December 22, 2014

Well, you know the big good thing, of course. We didn’t have another government shutdown. And we’ve got a budget that will defer further Republican efforts to gut domestic spending until work on next year’s budget begins. Only a brief respite, however, from efforts to block the President’s recently-announced immigration enforcement policies.

You know some of the big bad things too, I suppose. Banks will again be allowed to invest federally-insured deposits — your savings and mine — in some risky derivatives, e.g., bets on the creditworthiness of borrowers.

And very wealthy people will be allowed to donate a whole lot more to the national political parties — a far less risky investment in election results and policy decisions that serve their interest.

For us who live in the District of Columbia, the override of our vote to legalize small-scale marijuana possession and production is a big bad thing too — if not in itself, then because it’s a grating reminder that Congress can meddle in our local affairs whenever it chooses.

Other good and bad things happened this month that didn’t get as much media attention. Here are four that follow through on issues I’ve been blogging about.

Funding for the National Housing Trust Fund

The National Housing Trust Fund will, at long last, have some money for grants to support the development and preservation of affordable housing — mostly rental housing for the very lowest-income households.

Brief review of the history for those who’ve lost track.

When Congress created the Fund, in 2008, it designated a certain percent of Fannie Mae and Freddie Mac’s new business as the main revenue stream. Well, you know what happened to them when the housing market tanked at about the same time.

Despite the recovery, the Federal Housing Finance Agency, which took over their affairs, preserved its freeze on their contributions to the Fund.

We’ve had a series of legislative proposals to create another revenue stream. Nothing’s come of any of them — or of the one-time financing the President has included in his proposed budgets.

Earlier this month, FHFA told Fannie and Freddie to begin transferring money to the Fund, as the law that created it envisioned. Hardly the be-all and end-all for the acute shortage of housing that affordable for extremely low-income people, but every bit helps.

A Boost for High-Quality, Affordable Child Care

The budget package Congress just passed includes an additional $75 million for the recently updated and improved Child Care and Development Block Grant. The increase will surely help, though, as CLASP says, far more will be needed.

States will have to spend more to carry out their mandated responsibilities, as my overview of the new block grant law noted. They’ll need even more funds to reverse the downward trend in the number of children with CCDBG-subsidized child care — fewer in 2012 than in any year since 1998.

But again, every bit helps. And it’s encouraging to see continuing bipartisan support for high-quality child care that’s affordable for low-income families, as it surely isn’t without a subsidy.

Another Funding Cut for the IRS

The just-passed budget package cut funding for the Internal Revenue Services by $346 million, leaving the agency with less, in real dollars, than in any year since 2000, when it had fewer tax returns to process and fewer responsibilities as well.

This is a good thing if you’re anxious about having your tax returns audited. Not a good thing if you want an IRS representative to answer questions so you can file an accurate return.

And a very bad thing indeed if you’re worried about insufficient funding for non-defense programs, including those intended to provide both opportunities and a safety net for low-income individuals and families.

Or, for that matter, if you’re worried about the deficit. And we who care about these programs should be, since it’s been used to justify harmful spending cuts, including, but not limited to those Congress has already passed.

Because less money for the IRS means less money to offset spending. The Treasury Department estimates that every $1 spent on enforcement yields a $6 return in revenues collected. Citizens for Tax Justice cites considerably higher ROI figures.

The latest funding cut seems likely to further reduce the number of audits the IRS conducts — especially the potentially high-yielding, complex audits of high-income individuals and big businesses.

Thus, says sharp-witted economist/blogger Jared Bernstein, the budget cut is “a way to cut taxes without explicit tax cuts.” And tax cuts without offsetting revenue-raisers mean a shrinking pot of money for the already-squeezed non-defense share of the budget.

Another Victory for the White Potato

Buried deep in the budget package, we find a provision that requires the U.S. Department of Agriculture to add white potatoes to the list of foods that states must and can include in their own WIC packages, i.e., what low-income mothers of young children can buy with their WIC coupons or the equivalent.

The coupons are supposed to supplement the family’s diet with nutrients it might otherwise not get enough of. So the list includes foods like whole-grain bread, low-fat dairy products and fruits and vegetables. These reflect recommendations by experts at the Institute of Medicine.

The IOM panel did not recommend white potatoes because, in its view, mothers and their young children already ate quite enough of them. The potato industry loudly protested. And Congress members from potato-growing states swiftly launched a series of maneuvers to insert white potatoes into the WIC list.

Now they’ve succeeded — a first-time-ever successful effort to override the scientific judgment the WIC list reflects. Not, however, the first time Congressional potato champions have successfully interfered with dietary guidelines for federally-subsidized meals.

Further proof, were any needed, that bipartisan isn’t always better.

NOTE: I’m painfully conscious that I’ve left out some noteworthy good things — and some bad as well. What would you add?

 


Two Ideas for Harnessing Tax Reform to Affordable Housing Expansion

December 10, 2012

The Presidential campaigns primed us (again) for comprehensive tax reform. And now it’s reportedly on the table as negotiators try to forge a “grand bargain” that will pull us back from the so-called fiscal cliff.

Some key differences between Republicans and Democrats, as you undoubtedly know. But cross-party agreement on broadening the base — an oblique term for getting rid of tax breaks.

As I’ve mentioned before, the second largest tax break for individual filers is the home mortgage interest deduction. It cost the federal government an estimated $140.5 billion last year alone.

Chances Congress will get rid of this homeownership preference altogether are somewhere close to zero, I think.

But two organizations have ideas for changing it to address the affordable housing needs of low and moderate-income people.

Creating a Revenue Stream for the National Housing Trust Fund

The National Low-Income Housing Coalition would convert the mortgage interest deduction to a tax credit — thus making it available to all homeowners instead of only those who itemize.

The Coalition would also drop the cap on the mortgage value subject to the benefit from $1 million to $500,000. Same for the interest paid on home equity loans.

These changes, it says, would save the federal government at least $20 billion a year — maybe as much as $40 billion.

NLIHC wants at least some of the savings — actually additional revenues collected — to provide a funding stream for the National Housing Trust Fund.

Brief summary of my earlier post on why that’s needed.

Congress created the Trust Fund in 2008 to provide federal financial support for affordable housing construction and preservation — mainly rental housing that extremely low-income households can afford, i.e., those with incomes no greater than 30% of the median for their area.

To finance the Fund, Congress allocated a percent of the value of new business generated by Fannie Mae and Freddie Mac.

Then the housing bubble burst. The agency that regulates Fannie and Freddie effectively declared itself their legal guardian because the risky loans they’d made put them at risk of insolvency.

And it told them to indefinitely suspend what, in ordinary times, they would have contributed to the Trust Fund.

So the Fund has remained one of those good ideas on paper only.

The NLIHC proposal is the latest of several to put some money into it — and so far as I know, the only one that would give it an ongoing revenue stream.

Creating a Renters’ Credit

The Center on Budget and Policy Priorities also begins with a revenue-raising conversion of the mortgage interest deduction to a tax credit.

In its proposal, some share of the savings would go to states in the form of tax credits they would then distribute to reduce rental costs for low-income families — mainly those classified as extremely low-income.

The credits would work somewhat like housing vouchers, though the way they’d compensate rental housing owners is different.

They’d generally ensure that beneficiaries paid no more than 30% of their income for rent — the usual standard for affordability. And state agencies administering the credits could do this in several different ways.

They could give the credits — or some of the credits — directly to renters, who’d then find suitable apartments (and willing owners).

The owners would then claim the credits on their tax returns, based on the difference between what the tenants paid and the units’ market rates.

Or they could pass the credits through to their mortgage holders, who’d claim the credits and lower mortgage payments accordingly. This, of course, only if the mortgage holders agree to such an arrangement.

States could also allocate some credits to specific affordable housing projects. In this case also, the owners would claim the credits or pass them through.

Finally, states could allocate credits directly to financial institutions, with the understanding that they’d reduce mortgage payments for owners who agree to rent at affordable rates.

If, as the Center suggests, the total cost of the credits were capped at $5 billion a year, about 1.2 million more very low-income renter households would have affordable places to live.

And the number who are now paying at least half their income for rent would be cut in half. An estimated 700,000 low-income families would no longer have to choose between a roof over their heads and other basic needs.

Like the NLIHC proposal, the Center’s is an innovative approach to our nationwide affordable housing problem — and the disproportionate financial assistance our system now provides to homeowners in the top fifth of the income scale.

As Will Fischer at the Center notes, Congress doesn’t have to choose one or the other. The two could work nicely together.

And with a proper cap on the mortgage interest tax credit, there’d still be money left over to help reduce the deficit that’s apparently top-of-mind for our federal policymakers.


National Housing Trust Fund Needs Funds

November 19, 2009

In 2008, the Congress established a National Housing Trust Fund as part of a large bill intended to address the emerging housing crisis.

The Fund was to provide grants to states, which they were to use to increase and preserve the supply of rental housing for extremely low and very low income households* and to help them become homeowners.

Ninety percent of the funds had to be used for rental housing, and at least 75% had to benefit extremely low income households. The initial goal was to fund construction and/or preservation of 1.5 million affordable rental units. The National Low Income Housing Coalition estimates the shortage at about 2.8 million units. So the Trust Fund could make quite a dent.

However, the Trust Fund was to be financed principally by a percentage of the value of new business generated by Fannie Mae and Freddie Mac. Their contributions were indefinitely suspended when they fell into financial distress. So we’ve got a partial solution to the affordable housing crisis on paper only.

President Obama’s proposed Fiscal Year 2010 budget for the Department of Housing and Urban Development included $1 billion for the Trust Fund. Now two bills have been introduced that would give the Fund working capital in different ways.

Both would use funds in the Troubled Asset Relief Program (TARP)–the program that’s been buying up mortgage-backed securities and other “troubled assets” to stabilize financial institutions.

The Main Street TARP Act (H.R. 3766), introduced by Congressman Barney Frank (D-MA), would simply transfer $1 billion from the TARP account to the Trust Fund. It would limit what families have to pay for rent on units funded with Trust Fund money to no more than 30% of their adjusted income. This would ensure that the units remain affordable for the long term.

The Preserving Homes and Community Act (S. 1731), introduced by Senator Jack Reed (D-RI), would transfer $1 billion of the revenues produced by the government’s sale of warrants, i.e., rights to purchase stock in the financial institutions it bailed out. NLICH says that sales of warrants have already brought in $2.9 million. So the funds to transfer should be available.

Neither of these bills would give the Trust Fund the long-term, assured revenue stream it will need to achieve the 1.5 million unit goal. But both could jump-start construction and renovation at a critical time.

The House bill current has twelve cosponsors. The Senate bill has seven. Both will need more to get them on the action agenda. NLICH has e-mails we can customized to help build support.

* Extremely low income households are those with incomes at or below 30% of the applicable area median income. The upper income limit for very low income households if 50% of the AMI. AMIs vary widely, both from state to state and within some states.


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