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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsNYT didn't pull any punches: How Homeownership Became the Engine of American Inequality
A longform article on how mortgage deductions are a HUGE entitlement program for the wealthiest of Americans. Which I knew in my logical mind already. But this article does a great job putting the narrative pieces of the puzzle together by profiling a bunch of different families on various rungs of the housing and economic ladder. And there is a deep dive into the GI Bill and the history of redlining that entrench inequality along racial lines.
Once your family gets on the escalator of homeownership, it's much easier to move up in the world. I know people who work hard but CANNOT catch a break, moving from eviction to couch surfing to slum housing. We need to stop the huge entitlements paid out to the wealthiest by capping MIDs and divert some of that money toward solving our affordable housing crisis. And yeah, that means I would be voting against my own economic self interest, but this is the right thing for everyone.
An enormous entitlement in the tax code props up home prices and overwhelmingly benefits the wealthy and the upper middle class.
Almost a decade removed from the foreclosure crisis that began in 2008, the nation is facing one of the worst affordable-housing shortages in generations. The standard of affordable housing is that which costs roughly 30 percent or less of a familys income. Because of rising housing costs and stagnant wages, slightly more than half of all poor renting families in the country spend more than 50 percent of their income on housing costs, and at least one in four spends more than 70 percent. Yet Americas national housing policy gives affluent homeowners large benefits; middle-class homeowners, smaller benefits; and most renters, who are disproportionately poor, nothing. It is difficult to think of another social policy that more successfully multiplies Americas inequality in such a sweeping fashion.
snip....
The owner-renter divide is as salient as any other in this nation, and this divide is a historical result of statecraft designed to protect and promote inequality. Ours was not always a nation of homeowners; the New Deal fashioned it so, particularly through the G.I. Bill of Rights. The G.I. Bill was enormous, consuming 15 percent of the federal budget in 1948, and remains unmatched by any other single social policy in the scope and depth of its provisions, which included things like college tuition benefits and small-business loans. The G.I. Bill brought a rollout of veterans mortgages, padded with modest interest rates and down payments waived for loans up to 30 years. Returning soldiers lined up and bought new homes by the millions. In the years immediately following World War II, veterans mortgages accounted for over 40 percent of all home loans.
But both in its design and its application, the G.I. Bill excluded a large number of citizens. To get the New Deal through Congress, Franklin Roosevelt needed to appease the Southern arm of the Democratic Party. So he acquiesced when Congress blocked many nonwhites, particularly African-Americans, from accessing his newly created ladders of opportunity. Farm work, housekeeping and other jobs disproportionately staffed by African-Americans were omitted from programs like Social Security and unemployment insurance. Local Veterans Affairs centers and other entities loyal to Jim Crow did their parts as well, systematically denying nonwhite veterans access to the G.I. Bill. If those veterans got past the V.A., they still had to contend with the banks, which denied loan applications in nonwhite neighborhoods because the Federal Housing Administration refused to insure mortgages there. From 1934 to 1968, the official F.H.A. policy of redlining made homeownership virtually impossible in black communities. The consequences proved profound, writes the historian Ira Katznelson in his perfectly titled book, When Affirmative Action Was White. By 1984, when G.I. Bill mortgages had mainly matured, the median white household had a net worth of $39,135; the comparable figure for black households was only $3,397, or just 9 percent of white holdings. Most of this difference was accounted for by the absence of homeownership.
snip...
And yet we continue to give the most help to those who least need it affluent homeowners while providing nothing to most rent-burdened tenants. If this is our design, our social contract, then we should at least own up to it; we should at least stand up and profess, Yes, this is the kind of nation we want. Before us, there are two honest choices: We can endorse this inequality-maximizing arrangement, or we can reject it. What we cannot do is look a mother like Diaz in the face and say, Wed love to help you, but we just cant afford to. Because that is, quite simply, a lie.
Link
bettyellen
(47,209 posts)wildeyed
(11,243 posts)Ouch. I knew all of this already, and my face is flushed with shame.
bettyellen
(47,209 posts)and the reason I never bought a house? One third of my career I did not have adequate healthcare insurance. Didn't want to lose what I could barely afford.
wildeyed
(11,243 posts)say that only people who own property should be allowed to vote since they are the only ones who have skin in the game. Out loud. Where people could hear him Me and the only other Dem started inching away from him after that. What a crazy ass. His candidate (Robert Pittenger, who else) showed up later and I trash talked him pretty good about how all the Republican women I knew were voting for the female Dem
Good times, good times....
bettyellen
(47,209 posts)men more- guys "gotta pay the bills"... literally one said that of course all my meals and entertainment was paid for by men! The New Deal was great in theory, but in practice many of us were shut out. We have to confront the truth that many wanted it to do just that. We're still seeing this today. That DT's people would even feel safe quoting the court allowing those pools t be closed instead of segregated is horrendous. But it's all out in the open now, I guess.
ismnotwasm
(41,976 posts)muntrv
(14,505 posts)frankieallen
(583 posts)Last edited Tue May 9, 2017, 05:48 PM - Edit history (1)
"mortgage deductions are a HUGE entitlement program for the wealthiest of Americans"
Without the MID, many young families that are living week to week and just getting by could not afford to purchase a home without the deduction. 30 year mortgages are so front end loaded with interest that the deduction allows for affordability of first homes, I know it was the case for me.
The solution is to help poorer families realize home ownership, not make the cost more prohibitive.
bettyellen
(47,209 posts)putting them out of reach for the working lower class in urban areas. Did you read the article? It explains it pretty well.
frankieallen
(583 posts)things. I have not problem with capping the deduction, none at all, but I would not want to see it go away.
What proof is there that by eliminating the MID, home prices would suddenly drop and become within the reach of the working lower class in urban areas??
I call bullshit on that "theory"
Just like when we have a sales tax holiday in Mass, and prices suddenly rise by %6 for that weekend. ( I tried to buy a new couch last time we had a tax holiday, the "always available" %10 discount became %5 for the weekend)
We are talking about a tax deduction here to make mortgages more affordable to working families, the fact that rents are going up, and there is no assistance available for low income to pay these rents is not the fault of MID. You could as easily blame the government for building another air craft carrier we don't need, or providing taxpayer provided
cadillac health insurance FOR LIFE to elected officials while the rest of us pound sand.
Cap it, by all means, but do not eliminate it.
bettyellen
(47,209 posts)It helped cause the big divide in wealth in this country by shutting out so many. Unless the benefit programs are reshaped so that 80% of the tax money is going to people who already have economic stability, I have amoral problem with it.
frankieallen
(583 posts)of mortgage payments more affordable for working families. How the hell is this all of a sudden some kind of windfall for the wealthiest people in the country??
Cap it then, I am totally on board with that.
So you are saying a husband and wife a few years out of college, with 2 young children, who both have $60,000 a year jobs are somehow not a "working family" ?
bettyellen
(47,209 posts)less money. You seem to be leaving out the vast majority of American workers to favor the well off. I'm guessing it because you benefit from it.
frankieallen
(583 posts)not easy in the beginning, when i was paying all the interest and very little principle, the MID was critical to my wife and I purchasing a home.
The hardest part of home ownership is the initial purchase, and coming up with the payments.
You are throwing around the %80 percent like it means something to what i'm talking about.
Care to explain, in detail, what you mean by my example get's %80 of more something? I seriously doubt you can.
bettyellen
(47,209 posts)because 80% of thos tax breaks go to people earning over 100K. The working poor is not "given the boost" that you got.
Did you read the article?
frankieallen
(583 posts)I owned it. by the time I hit that kind of income I was getting no benefit from MID, as the bulk of the interest was already paid on my mortgage.
So I guess I was the working poor, you should be happy i got a tax break.
Thanks!
bettyellen
(47,209 posts)frankieallen
(583 posts)The difference here, with this pointless conversation, is I am sharing from personal experience, you are just quoting from an article you read. It's quite clear you can read and parrot someone else's thoughts.
I read the article, unlike some people, I don't take everything i read as gospel because i have nothing to compare it to.
bettyellen
(47,209 posts)dumbcat
(2,120 posts)Where do you get this? You don't think wealthy people finance their multi-million dollar homes with a mortgage? What is your basis for that belief?
bettyellen
(47,209 posts)making over 100,000. a year- so its doing jack shit for the poor- except raising the cost of all housing. You didn't read the article? Wealthy is relative, but they tend to itemize and benfit more from this.
dumbcat
(2,120 posts)which is why I asked the poster why he thinks the wealthy don't pay mortgage interest.
bettyellen
(47,209 posts)taught_me_patience
(5,477 posts)so that the "effective" payment is the same.
Mortgage interest deduction disproportionately benefits the rich. My wife and I write off $30k in mortgage interest... a huge tax break for us.
wildeyed
(11,243 posts)Why not if it appreciates madly and is a write-off? We should let people write off investments in affordable rental units instead. It would encourage people to purchase smaller homes while growing the rental home market. But of course someone would figure out how to game that system too. Sigh.
frankieallen
(583 posts)NCTraveler
(30,481 posts)That is highly inaccurate.
frankieallen
(583 posts)NCTraveler
(30,481 posts)wildeyed
(11,243 posts)I thought that was obvious in the article.
Would we be O.K. with that? Would we support reform that provided desperately needed housing relief to millions of low-income Americans if it meant that the net worth of those who owned expensive homes took a hit? The answer is almost certainly no, at least for owners of houses valued north of $500,000. Wealth granted by a bizarre government subsidy is still wealth, and once people have it, theyd prefer to keep it. When it comes to public housing for the rich, it becomes hard to break the cycle of welfare dependency. Its why some Democratic leaders who represent districts with high housing prices, like Representative Nancy Pelosi (San Francisco) and Senator Chuck Schumer (New York), have been outspoken critics of MID reform, even if they are consistent backers of other equality-promoting initiatives.
frankieallen
(583 posts)wildeyed
(11,243 posts)It's a long, complicated article and I was going fast. I thought it was obvious FROM THE ARTICLE that capping or some sort of alternative tax credit that gave more benefits to low and medium income owners was preferable. The entire gist of the article is that rich people buy extravagant houses and the federal government underwrites that while ignoring the GLARING need at the bottom of the ladder. I was expressing support for that idea.
radius777
(3,635 posts)even in middle and working class neighborhoods, so Schumer and Pelosi are correct that eliminating such tax breaks would hurt many regular (including immigrant and PoC) families struggling to make it.
Democrats will never win by moving socialist/far left on these issues, because many actual Democrats are home owners, business owners, etc who also don't want too many taxes/regs/govt - it's why center-left Clinton/Obama style Dems are the best type, as they seek to strike a balance that works for the the middle class.
wildeyed
(11,243 posts)I would like the government to stop subsidizing extravagant homes while half our population is close to homeless. There are only a few metropolitan areas where costs are over 600k, San Fran and NYC.
There is nothing 'socialist' about this. Did you read the article? The subsidies are the antithesis of free market.
radius777
(3,635 posts)homeowners have, such as mortgage interest, property taxes, school taxes, water, heating, etc - which themselves can be exorbitant in metro/surrounding areas, the voting base of the modern Dem party.
radius777
(3,635 posts)who are much more center-left/Clinton/Obama style Dems than far-left.
The Dem party in America (unlike socialist parties in Europe) has always been about helping families achieve the middle-class American dream, i.e. the 'house with the white picket fence', or modern day equivalents (including condo/apt ownership), iow, home/business/capital ownership, which has all types of positive effects on stabilizing and growing communities.
And as anyone who has ever lived in an around metro areas (the vote-getting base of the modern Dem party, which includes all types of neighborhoods, from working/middle class neighborhoods, to immigrant enclaves, to the trendier areas to the near suburbs) home ownership is expensive, and families rely upon tax breaks to survive. 500k-1m is not that much for a home, especially multi-family homes that are common in many working class neighborhoods.
NCTraveler
(30,481 posts)haele
(12,649 posts)True, you're stuck during the year paying your taxes, but most renters in the lower to middle incomes will typically get all their income tax back at the end of the year for being renters.
Helps a little, at least.
I've rented for most of my life. I expect the rent I paid was equivalent to a mortgage; sometimes, it seems as if it was even higher than a mortgage would be for the place I was living in. I certainly wouldn't be able to save to buy a house while I was renting; we were living in an ever-narrowing paycheck to paycheck spiral, and it took a windfall for us to be able to purchase the double-wide we live in with the lot rental that is 1/2 the average rent of a 1 bedroom apartment.
Haele