Hillary Clinton is the only presidential candidate to have proposed a plan for alleviating the nation’s lack of housing, amid a national crisis in the affordability of renting.
The biggest strength of the plan that the Democratic presidential front-runner released this month in South Carolina is that it exists. All of the other presidential candidates have been silent on the issue.
Otherwise, housing analysts and housing affordability advocates are not overly impressed.
“There’s nothing objectionable in it, but it’s just completely inadequate for the problem,” said Sheila Crowley, president and CEO of the National Low Income Housing Coalition, which lobbies for federal aid for low-income housing.
The scale of the problem is enormous: Nearly 12 million households spend more than half their income on rent, according to Harvard’s Joint Center for Housing Studies. The problem is only going to get worse as baby boomers age and look for rentals while more lower-earning minority families look for housing.
The Department of Housing and Urban Development sets the affordability cutoff at 30 percent of income. HUD Secretary Julian Castro, often mentioned as a possible running mate for Clinton should she win the Democratic nomination, calls the situation a crisis.
Clinton’s plan for allaying the crisis is to dedicate $25 billion in federal spending to a mix of programs meant to aid poor neighborhoods and build affordable housing. The funding would be paid for with a Wall Street tax.
From the perspective of developers who build affordable housing, the most significant provision in Clinton’s blueprint is a promise to “defend” the low-income housing tax credit and expand it in areas of need. The $8 billion tax credit is given to developers who build rental units for lower-income housing, creating an average of more than 100,000 units a year.
“We’re thrilled,” said Rick Goldstein, counsel to the Affordable Housing Tax Credit Coalition, a group of low-income developers, noting that any favorable mention of the credit is a victory for developers.
“There’s a lot of unanswered questions” about how and by how much Clinton would boost the credit, Goldstein noted, but he said the bottom line is that more funding equals more housing.
But the benefits of the tax credit generally don’t accrue to the poorest renters, the people extremely strained to pay the rent and avoid homelessness, Crowley said.
She noted that Clinton mostly disregarded the housing voucher program run by HUD, which she said needs to be expanded to two or three times its current size. “The Clinton plan is a modest step forward in addressing the shortage of affordable rental housing, and it has nothing to offer very poor people,” she concluded. Her group, in contrast, has proposed curbing the mortgage interest tax deduction to provide revenue for $93 billion in spending on affordable housing, while allowing a tax credit for mortgage interest for lower-income homeowners who do not itemize deductions.
The other main feature of Clinton’s plan, in terms of spending, would be an initiative to match up to $10,000 in savings for a down payment on a house for families earning less than the median income in a given area.
Ed Pinto, a housing scholar at the American Enterprise Institute, a right-of-center think tank in Washington, praised the idea for targeting low earners and incentivizing families to build wealth. But he also criticized Clinton’s plan on the grounds that it would push up housing prices. Matching down-payment savings is “going to increase demand, but it’s not going to increase supply,” he said.
Pinto, with his colleagues, for several years has advocated a 15- to 20-year “wealth-building” home loan that would allow borrowers to more quickly build equity in their homes, rather than the typical 30-year fixed-rate mortgage backed by the Federal Housing Administration. By increasing demand for FHA-backed loans, Pinto warned, Clinton would increase risk in the housing finance system.
Clinton’s plan contains other proposals, including more federal funding for home loan counseling and grants to states or cities to fix blighted neighborhoods.
Overall, however, “there is a much bigger crisis out there” than Clinton’s plan suggests, said Pam Patenaude, president of the J. Ronald Terwilliger Foundation, a nonprofit that advocates affordable housing policies.
One glaring omission, she noted, is that Clinton does not mention Fannie Mae and Freddie Mac, the two bailed-out mortgage companies that have been in the federal government’s custody since failing in the financial crisis. While the housing finance system has not been overhauled, uncertainty clouds the future for builders and investors.
In that, however, Clinton is not alone. None of the other presidential candidates, Democrat or Republican, has proposed reforming Fannie and Freddie.
