Matthew Desmond, author of the award-winning book Evicted, about rental housing and poverty in Milwaukee, Wisconsin, was in town last week to discuss his work. He gave a lecture sponsored by the University of Minnesota School of Nursing, and here’s a chart from his presentation.
The point of the chart is pretty clear. Through programs like the Mortgage Interest Tax Deduction, Federal assistance props up homeowners far more than it does renters, who are almost always much worse off economically. It’s a terrible set of policy priorities that comes at a huge cost for people struggling to get by.
Speaking personally, I can vouch that Desmond’s book is very well written and lovingly captures the desperate struggle for housing that exists in Milwaukee and any city with huge racial equity gaps. It’s definitely worth a read!
Or if you prefer, just watch this lecture. Desmond connects his work to public health conversations, and all the lessons here apply almost as well to cities like Minneapolis, Saint Paul, Duluth, or many other places in Minnesota.
That’s a great chart.
I’m not sure I’d characterize as a “terrible set of policy priorities”. I’d argue that owner-occupied housing is something we want to encourage and if we didn’t have these tax deductions we’d have a lot more people being involuntary renters.
Fair enough. I meant that they are terrible from an equity standpoint, if the goal is to help poor people afford housing.
The mortgage interest deduction doesn’t incentivize homeownership (for those who might otherwise be renters) as much as many assume it does. As it is currently structured, the deduction primarily benefits people wealthy enough to buy homes with large mortgages and take large deductions on their tax returns. In fact, many homeowners don’t/can’t claim it (often because they do not have enough tax liability to itemize their deductions).
Desmond did a deeper-dive piece on this topic: https://www.nytimes.com/2017/05/09/magazine/how-homeownership-became-the-engine-of-american-inequality.html?
Here’s an article with a few useful charts showing the distribution of the benefit: http://www.taxpolicycenter.org/taxvox/who-benefits-tax-subsidies-home-ownership
An alternative proposed by Minnesota’s own Rep. Ellison would replace the deduction with a refundable credit and phase out benefits for second homes and for mortgages over $500,000. http://nlihc.org/article/congressman-ellison-and-author-matthew-desmond-discuss-mortgage-interest-deduction-reform
It’s my understanding that other western industrial democracies do not have a mortgage interest deduction, and their rates of home ownership are similar to ours.
If we indeed wish to encourage home ownership through the tax code, it may make sense to allow a deduction for the purchase of one’s first home. But to allow one to continually sell their current home and buy a more expensive home doesn’t accomplish that.
As far as the mortgage deduction for second homes or homes over a million dollars, don’t get me started.
Shouldn’t these aggregate $ figures be put in context of the number of people affected?
About 37% of the US households rent their home, and 63% own. From the chart above, it looks like expenditures benefiting homeowners are at least three times the size of the expenditures benefiting renters.
Here’s a statistic I think is more relevant: The median homeowner’s net worth is about $200,000, and the median renter’s is about $2,000.