Friday News Round-Up!


This week, we left another year behind and started anew! With the first week of 2013 behind us, we’d like to round out the events of the week.

  1. Today, the House of Representatives passed a $9.7 B bill to support homeowners that continue to battle with the aftermath of Sandy, with the primary goal is of helping homeowners and local governments recover from the unprecedented costs of the storm.  Specifically, the bill gives the National Flood Insurance Program the ability to utilize the allotted money to fill insurance claims stemming from the storm’s damage. The bill still needs to pass through the Senate (which is expected to happen later today.) With the detriment of Sandy still plaguing many New Yorkers and New Jersey-ers, we’re glad to see the federal government taking more initiative to further recovery efforts. This news comes after outrage directed at Speaker Boehner earlier this week for tabling a different measure.
  2. This week, The Atlantic Cities published an article advocating for the implementation of more effective rent control laws. Tatian illustrates that the rates of rental vacancies have dropped from 11.1 percent in 2009 to 8.6 percent in 2012. He attributes the decrease in vacancies to the current mortgage market, where homeowners are confronted with unstable mortgages as well as an inability to obtain new mortgages. As a result, there has been an influx of renters in the market. While he recognizes the importance of stricter rent control laws, he also understands they are vastly unpopular.  To better reflect the reality of renters (especially those seeking affordable housing) and he advocates for the creation of diverse housing with harsher affordability regulations and  better tenants protections.
  3. Delayed affordable housing construction in Williamsburg and Greenpoint has perpetuated gentrification.  Seven years ago, several high-rise high-rent buildings were commissioned to be constructed in these neighborhoods. At the time, the city and developers  associated with these projects agreed that 3,500 units would be preserved as affordable housing through various programs, including NYCHA.  As of now, expensive high-rises now line the East River, but the affordable housing units on the 12-acre Cooper Park House is non-existent.  The delayed construction is attributed to bureaucratic tendencies and, prioritization of other housing developments. With neighborhoods like Williamsburg and Greenpoint gentrifying rampantly, we hope that developments, like Cooper Park House, will become priority.
  4. With the culmination of 2012, Pete Souza, official White House photographer, posted his most intimate photographs of President Obama and other executive elected officials on Flickr. The pictures range from the moment President Obama was briefed on the Sandy Hook shooting to the moment he heard that Osama Bin Ladin was killed to time First Lady Michelle Obama competed in a potato-sac race with Jimmy Fallon. The photographs are heart-wrenching and zany. Souza’s series serves as a point of reflection as well as humanizes our leaders, acknowledging their fallibility and capacity for growth.

Have a great first weekend of 2013 and we look forward to an exciting year at UHAB!


The Inefficiency of the Mortgage Interest Deduction by Hannah Emple

Today’s blog post is written by Hannah Emple, and has been re-posted from The Ladder, New America Foundations‘s Asset Building Program’s blog. Enjoy!


Matthew O’Brien over at The Atlantic had a piece up yesterday with the bold headline: “Why the Mortgage Interest Deduction is Terrible.” What he means (and does a solid job at explaining in the piece) is that the mortgage interest tax deduction primarily benefits homeowners in the top fifth of income earners. O’Brien writes, “We spend $100 billion every year — that’s the annual cost of the deduction — subsidizing bigger houses for the upper middle class. This should be among the lowest of low-hanging fruit when it comes to tax reform. It would be nice to end welfare for the well-off.” He notes that the top 1% of earners (those making over half a million dollars a year) receive more benefit from the mortgage interest deduction than the entire bottom 56% of earners combined.

If you read our 2012 Assets Report, you’ll already be familiar with the skewed nature of the mortgage interest deduction and federal spending to promote homeownership more generally. As our infographic shows, people earning below $40,000 filed fewer than 2 million returns claiming the mortgage interest deduction (out of roughly 14 million taxable returns). Meanwhile, those earning above $100,000 filed over 18 million returns claiming the deduction (out of nearly 28 million taxable returns). This means only 14% of households who earned less than $40,000 and had taxable returns received the deduction, while over two-thirds of higher income households received it. The deduction is unfair both due to its take up rate and the dollar value of the benefit. The average value of the deductions was much higher for the wealthy and upper middle class. Households earning over $200,000 received an average deduction nearly ten times that of households in the $30-40,000 range ($6,370 vs.  $664). 

If policymakers view homeownership as a valuable goal, wouldn’t it make sense to shift the subsidization of home mortgages from high income to lower income people? Presently, we have a system that rewards behavior that would be happening anyways and subsidizes larger homes for the upper middle class and wealthy. Low- and middle-income homeowners are left with a tiny fraction of the benefits and renters are left out of the picture entirely.

Unfortunately, high-income people have a hefty financial stake in keeping the tax code exactly as it is. As Matt Yglesias pointed out, Mark Zuckerberg (the CEO of Facebook and the 40th wealthiest person in the world) recently refinanced his mortgage and now has a 1.05% interest rate (considerably lower than most average homeowners). Why would a billionaire even need or want a mortgage? As Yglesias explains, “[mortgage] interest payments are tax deductible, which is a very big deal if you have a very high income and live in a high-tax state like California. That of course raises the question of why we do this as a matter of public policy. The deductibility of mortgage interest is often described as a “middle class” tax break, and it’s of course true that middle-class people use it. But richer people have more expensive houses and pay higher tax rates, so the scale of the benefit is much larger to rich people.” Zuckerberg and his high income, high wealth counterparts are benefiting enormously from a feature of the tax code that rewards them for owning homes, while doing next to nothing for the bottom half of the income distribution. That’s a serious inequity that we’ve built into the tax code. Policymakers, advocates, and academics are all working on possible ways to address parts of this problem.

In a 2010 CNN editorialDorothy Brown* makes the case that the mortgage interest deduction unfairly penalizes renters for their personal housing choices. In doing so, the mortgage interest deduction places an undue burden on Americans of color because 1) they rent at higher rates than white Americans and 2) even when people of color do own homes, they are disproportionately represented among the low and middle income households who claim fewer and less valuable deductions. As our Aleta Sprague wrote recently federal housing policy is currently doing very little to mitigate the racial wealth gap. When we deliver billions of dollars in homeownership-oriented benefits through the tax code, we systematically exclude certain groups and perpetuate a structural inequality.

The Center on Budget and Policy Priorities’ recent paper “Renters’ Tax Credit Would Promote Equity and Advance Balanced Housing Policy” addresses some of the key concerns with the existing preferential treatment given to mortgage interest. The report explains: “Congress could further improve the effectiveness and fairness of the nation’s housing expenditures by directing a modest share of the savings from reform of homeownership subsidies to address part of the unmet need for housing assistance among lower income renters, in the form of a federal renters’ tax credit.” The devil is in the details of course (and the report does go into more depth) but this type of creative thinking is exactly what is necessary to move forward with sustainable reforms of homeownership tax subsidies and broadening access to savings and asset building for all Americans.

*Thanks to Professor William Darity from Duke University and PhD candidate Tressie McMillan Cottom from Emory University for pointing out via Twitter the great work Professor Dorothy Brown of Emory has done in this arena already.