The Federal View: Affordable Housing for Low and Moderate Incomes

As America enjoys its enviable record as the best-housed people in history, the promise of “a decent home and a suitable living environment” from the Housing Act of 1949

is still unrealized for millions of low and moderate income Americans. There is an ever-increasing number of homeless families on our nation’s streets, more than 6 million low-income renters pay over half their income for rent and today’s young wage-earning parents cannot even dream of future homeownership.

The challenge to meet the 1949 commitment “for every American family” has received considerable attention over the last several years. Congress created a National Housing Task Force, co-chaired by Jim Rouse, Chairman and Chief Executive Officer of the Enterprise Foundation and David Maxwell, Chairman and Executive Officer of the Federal National Mortgage Association. In March 1988, they released a report entitled “A Decent Place to Live.”

In an “American Agenda,” a report to President Bush upon his election by former Presidents Gerald Ford and Jimmy Carter, improving housing opportunities for low income households and the homeless was one of only three domestic problems requiring immediate action. The nation’s Mayors and Governors have released major housing reports through their national associations in the last several years.

In response to these growing housing concerns, President Bush recently unveiled the Administration's housing initiative. While debate continues on the specific solutions and relative funding levels a consensus has been reached. A national housing policy must encompass our public, private and non-profit resources, be characterized by a new sense of urgency, creatively and entrepreneurship, and include a multi-faceted program response. The problem far exceeds a single solution, the resources of the federal government or the capacity of the private sector alone.

First, a renewed federal commitment must replace the past decade of federal neglect. A national housing policy must be forged using as its centerpiece all three major weapons in the federal arsenal—direct expenditures, tax policy and the housing finance system—in a coordinated and complementary fashion to reduce the housing affordability problem. Specifically, a dual strategy should be adopted combining income supplements to the very poor with a new construction and rehabilitation multi-family rental production program for a broader income range.

Tenant income assistance should be the responsibility of the federal government and may ultimately require inclusion into the welfare reform debate. Today, the cost of implementing such an initiative across the board for all very low income people must be reconciled with scarce budget resources. Yet, it must be acknowledged as a long term priority if the housing affordability crisis is to be solved.

While the two-pronged strategy represents the key ingredients to a national housing policy, several other elements are critical to a comprehensive approach and present opportunities for immediate impact. Existing public housing is the nation’s greatest low-income housing resource; it should be restored and revitalized. Current federal restrictions and subsidy contracts on the inventory of nearly two million units of privately-owned, subsidized housing stock must not be allowed to expire.

The cost to replace this housing far exceeds any preservation strategy. In a similar vein, the federally-held residential property which has increased dramatically due to the recent thrift crises should be viewed as a resource for meeting affordable housing goals.

These initiatives require various forms of financial assistance. Direct federal assistance for tenant income support and the modernization of the public housing inventory is critical. Likewise, the Tax Code can encourage private capital investment to stimulate the production and preservation of low income rental housing through a combination of tax-exempt bonds, low-income housing tax credits and the use of depreciation and losses.

Lastly, the fragile and resilient nature of our housing finance system has come to the public's attention as a result of the thrift crises. The federal government must continue to support affordable housing through the primary lenders, the federally insured programs, the secondary markets and state and local housing finance agencies.

Broad parameters can be defined for key players. Given the local, dynamic condition of housing, the proper role for state and local governments is to define their housing needs, the proper role for state and local governments is to define their housing needs, determine programs which best address their priorities and establish the necessary delivery system. They can promote housing efforts in a manner similar to the federal government by setting aside revenues, developing pro-active tax policies, coordinating the policies and programs of the numerous agencies impacting the housing community and economic development, and establishing intelligent regulatory codes, infrastructure requirements and fee schedules.

In return for financial resources, the federal government should require states and local governments to develop housing strategies which clearly prioritize their problems, incorporate the use of their own resources and coordinate the divergent community interests of the varied housing providers.

Private-for-profit developers and non­profit entities rightfully share primary responsibility for producing, financing, owning and managing low and moderate income housing. The capacity, technical skills and sophistication of the private sector have a major role in addressing this problem.

The more localized activities of the non­profits must be increased. Wherever possible, joint ventures should be encouraged to harness each other’s skills and accelerate the capacity-building process. Fundamental to the successful partnership is mutual respect of responsibility.

The capacity, tools and resources do exist to begin major progress in providing the American dream to every citizen. The comprehensiveness of the housing policy and speed with which it is implemented will come as the public creates an outspoken demand for action since it is the citizenry that determines local, state and federal priorities.