U.S. Should Assure That Full-Time Workers Have Decent Housing

Bruce Katz and
Bruce Katz Founding Director of the Nowak Metro Finance Lab - Drexel University
Nicolas Retsinas

August 23, 2000

No full-time worker should be poor. It?s hard to disagree with that simple statement?both presidential candidates seem to support it. But many Americans, even those with a full-time job struggle to afford life?s basics, specifically a decent place to live.

Housing is by far the most expensive item in American households? budgets, taking up about a third of the average household?s income. But in many places, housing is rapidly eating up more of the family budget.

Overall, 13.7 million U.S. households have critical housing needs, meaning that they spend more than half their income on housing, or live in a dilapidated unit. These are not just the poorest families, or those on welfare. Nationwide, about three million households who have critical housing needs are moderate- income working families.

What does this mean? It means that many full time minimum wage workers, people who work forty-hour weeks in factories, offices and stores, cannot put a decent roof over their families heads. It means that, in some areas, teachers and police officers cannot live among the people whose children they teach and whose safety they secure. Even companies in the hot spots of the new economy struggle to retain employees who earn $50,000 and less.

Despite laudable efforts in Silicon Valley and elsewhere, solving the affordable housing crisis is beyond the capacity of local corporate and political leaders. This is a national challenge, requiring federal investments. We spend $73 billion a year on federal tax deductions for middle and upper income homeowners. Surely we can afford more help for those who are still striving.

We should declare as a national objective, a goal that both parties and elected officials at all levels can work towards, that anyone who works full time should be able to afford a decent place to live.

The first step in realizing this goal is closing the gap between low-wage incomes and market-rate rents. Increasing the minimum wage, expanding the earned income tax credit, and increasing the number of new housing vouchers-all of which are included in the White House?s 2001 budget proposal-are a start.

Second, the federal government needs to expand the supply of affordable rental housing. The best way to do this is through intelligent tax incentives. The low-income housing tax credit has helped create over 900,000 units of rental housing since 1986. Congress and the Administration have agreed to a 40 percent increase in the program. Why not double it, adding $3 billion a year to the federal budget for a program that works? An extra $3 billion a year is a lot of money, but it should be put in perspective: the federal government has budgeted $214 billion over five years for the nation?s highways.

Because housing is a regional, not just a local, issue, the federal government should also use tax incentives to help create new regional housing trust funds. These trust funds would enable cities and suburbs to work together on expanding the supply of affordable rental housing, particularly in areas where jobs are growing fast. A $1.5 billion federal investment could help create a $10 billion pool of housing trust funds, which could leverage tens of billions more in private sector investment.

Finally, the federal government needs to grow the ranks of homeowners, particularly among minorities and residents of cities and older suburbs. Homeownership gives working families a chance to accumulate wealth and contributes to the stability of neighborhoods. George W. Bush has a plan to encourage homeownership among low- income families, through a tax credit for the production of housing, and a downpayment assistance program for low-income families. Similar legislation has already been introduced by Senator Jack Reed (D-RI).

Incentives to increase the supply of affordable housing and make more Americans into homeowners will cost about $41 billion in federal tax expenditures over the next ten years. But supporting working families and giving people who work full time the hope of a good home seems to us to be an excellent way to spend this money.

Low and moderate-income workers should not pay the price for the nation?s prosperity. Both George W. Bush and Al Gore have talked about the need to support and reward work. If we truly want to reward work, we need to support real housing solutions.