More About Will Fischer

Will Fischer

Fischer is a Senior Policy Analyst, focusing on federal low-income housing programs, including Section 8 vouchers, public housing, and the Low-Income Housing Tax Credit.

Full bio and recent public appearances | Research archive at CBPP.org


Ryan Backs Reform to Mortgage Interest Deduction — But Bigger Changes Needed

August 27, 2014 at 1:34 pm

Endorsing House Ways and Means Chairman Dave Camp’s proposal to limit the mortgage interest deduction recently, Budget Chairman Paul Ryan explained that it “ought to be a middle class tax break, not something for higher-income earners.”  He’s right to criticize the deduction for favoring those at the top but, while Camp’s proposal moves in the right direction, policymakers should go further.

The deduction, which Camp would limit to mortgages up to $500,000 (cutting the current $1 million limit in half), is ripe for reform (see graph).  Some 42 percent of its benefits go to households with incomes above $200,000, the Joint Tax Committee estimates, while only 8 percent go to households with incomes below $75,000.  Close to half of homeowners with mortgages don’t benefit at all because they either don’t owe federal income taxes (though they typically pay substantial payroll taxes and/or state and local taxes) or don’t itemize deductions.

Federal housing spending as a whole is poorly matched to need, and policymakers could do more to rebalance it if they not only capped the deduction for the largest mortgages but also converted the deduction to a credit worth a fixed percentage of a household’s mortgage interest.

Several bipartisan plans — including those from President George W. Bush’s tax reform panel and the chairs of President Obama’s fiscal commission, Erskine Bowles and Alan Simpson — have backed this approach, which would trim benefits for higher-income households while expanding them for many middle- and lower-income households.

Policymakers should redirect part of the savings from reforming the mortgage interest deduction (after deficit-reduction goals are met) to help low-income renters, for example by creating a renters’ tax credit.  Low-income renters — including elderly people, people with disabilities, and working-poor families with children — are more likely than other groups to struggle to keep a roof over their heads, but federal housing policy provides far more help to homeowners and higher-income households.

Why the Ryan Plan Should Worry Those Concerned About the Affordable Housing Crisis, Part 2

August 5, 2014 at 11:52 am

House Budget Committee Chairman Paul Ryan’s proposal to consolidate 11 safety net and related programs, including the four largest federal rental assistance programs, into a single block grant to  states risks significant funding cuts to housing assistance that helps 4.7 million low-income families, as we explained last week.  Today, we’ll describe how the combination of those cuts, and the possible elimination under Ryan’s plan of program rules that ensure housing stability and affordable rents, could undercut rental assistance programs’ effectiveness and put substantial numbers of vulnerable families at risk for homelessness.

Federal rental assistance programs are effective.  They sharply reduce housing instability and homelessness and lift 2.8 million people out of poverty (with the bulk of these impacts coming from the programs included in the Ryan plan).  These effects, in turn, are linked to educational, developmental, and health benefits that can improve children’s long-term life chances.

But Chairman Ryan’s proposal, which would give states broad latitude in spending block grant funds, could enable states to jettison federal rules that are essential to the rental assistance programs’ success, or even to eliminate one or more programs.  The drops in funding that likely would occur over time would increase the risks that states would make damaging changes to housing assistance programs.  The following actions are among those states could take:

  • They could cut the number of families receiving rental assistance.  Such cuts would cause the long waiting lists to grow longer and could occur despite Ryan’s promise that his plan would honor existing rental assistance contracts. Most assistance included in the proposed Opportunity Grant is provided through the Housing Choice Voucher and Public Housing programs, which are typically funded annually (with assistance provided through annual contracts).  Most contracts with private owners under the other two rental assistance programs that Ryan would fold into the block grant also are short term, so this protection would not last long.  Moreover, if states seek to shift some funds from housing programs to other uses and don’t renew a substantial share of these contracts or maintain public housing properties, cities and towns — which may have little say in state decisions on how to use the Opportunity Grant funds — could see housing developments become unaffordable for many low-income households.  And if there is a perception that a state could fail to renew contracts or maintain rental subsidies, that almost certainly would make it more difficult and costly to attract private investment for affordable housing.
  • They could reduce per-unit subsidy levels, since the rules that set those levels in existing rental assistance programs would no longer apply.  In the Housing Choice Voucher program (which allows most participants to rent modest units of their choice in the private market), such cuts could force families to rent lower-priced units in higher-poverty neighborhoods with high crime rates and poor schools.  The other three programs that Ryan would include in the Opportunity Grant (Public Housing, Section 8 Project-Based Rental Assistance, and rural rental assistance, which the U.S. Agriculture Department administers) tie subsidies to particular developments; in those programs, subsidy cuts could make it difficult to pay for adequate building maintenance — already a major problem among Public Housing developments — or for owners to make units available to poor families at an affordable rent.
  • They could shift costs to participating families by raising rents.  Rent rules currently require most assisted families to contribute 30 percent of their income for housing, a share consistent with commonly accepted standards of affordability.  Rental assistance fills the gap between this contribution and actual costs, within reasonable limits that the federal and local agencies set.  Some poor families who may not be able to pay higher rents might find they could no longer afford their apartments if their rents rose substantially.

Helping Renters Afford Their Homes

July 16, 2014 at 4:31 pm

Today’s New York Times “Room for Debate” forum asks “Should Housing Policy Support Renters More?”  It’s an important discussion since, as we explain in this chart book, federal housing policy is imbalanced in two ways.  It favors homeowners over renters, and it targets a disproportionate share of subsidies on higher-income households (see chart).

This is the case even though, as Henry Cisneros, former Secretary of the Department of Housing and Urban Development, points out, “the primary focus of federal housing policy should be to help those most in need.”  Need among renters is rising.  As MacArthur Foundation president Julia Stasch notes, “increasing rents, stagnant wages and inadequate federal support have made rental housing less affordable for more people.”  Low-income renters — including veterans, seniors, people with disabilities, and working families — are far likelier than homeowners and higher income households to need assistance to keep a roof over their heads and make ends meet.

Three ongoing policy debates offer opportunities to move in this direction:

  • Most immediately, Congress should provide more resources in 2015 funding bills to restore Housing Choice Vouchers and other low-income rental assistance that was cut as a result of sequestration in 2013.  Those cuts prevented thousands of low-income Americans from receiving the assistance they need to escape homelessness and housing instability, both of which have been linked to developmental, health, and education problems in children.
  • If tax reform moves forward, Congress should replace the mortgage interest deduction with a less-expensive, better-targeted credit that would trim subsidies for higher-income families while expanding them for middle- and low-income homeowners.  It should also use some of the savings from this reform to fund a new renters’ tax credit that would address part of the unmet need for housing assistance among the lowest-income renters.
  • If Congress reforms the housing finance system, it should use new financing fees for robust funding — like that provided in the reform bill that the Senate Banking Committee approved in May 2014 — to develop and rehabilitate affordable rental housing through the National Housing Trust Fund.

House Restriction on Housing Vouchers Would Harm Low-Income Residents of Oil and Gas Boomtowns

June 19, 2014 at 8:23 am

The House adopted an amendment offered by Rep. Aaron Schock (R-IL) to limit subsidies in the Housing Choice Voucher program.  The amendment, attached to the House 2015 funding bill for the Departments of Transportation and Housing and Urban Development (HUD), would weaken state and local housing agencies’ ability to adapt to rental markets in individual communities.  Some of its worst effects would be felt in places with rapidly growing oil and gas industries, where families, elderly people, and people with disabilities could face displacement or other serious hardship.  The Senate, which is considering its version of the bill this week, should reject any effort to add such a restriction.

In the voucher program, families pay 30 percent of their income toward rent for a modest unit of their choice, and the voucher covers the rest up to a cap called a payment standard.  HUD generally sets the “fair market rent” (FMR) based on market rents for an entire county or metropolitan area, even though these areas may contain many rental submarkets, and it must rely on data that’s often several years old.  As a result, FMRs are typically above or below market rents in parts of the areas they cover and are slow to adjust to rapid shifts in the housing market.

Recognizing this, Congress long allowed agencies to set payment standards from 90 to 110 percent of the FMR.  Agencies can also apply to set area-wide payment standards above 110 percent, but they must submit rigorous data showing that a higher standard is needed to cover local rents and that, without it, families couldn’t use their vouchers or would have to use them in high-poverty areas.  (Research shows that living in high-poverty neighborhoods can adversely affect children’s health, education, and long-term economic prospects.)

The Schock amendment would revoke HUD’s authority to approve state and local agencies’ requests to set area-wide payment standards above 120 percent of the FMR during 2015 and would suspend existing standards above that level.  In recent years, HUD has approved new payment standards under this authority in 13 counties, 12 of which are in parts of North Dakota and Pennsylvania with booming energy industries.

When oil and gas activity surges, workers fill rental units and drive up rents.  In the core of North Dakota’s oil and gas region, rents rose quickly to as much as double their pre-boom level.  If housing agencies in these areas could not adjust payment standards adequately, low-income people with vouchers would struggle to use them.  And households already relying on vouchers could be forced out of their homes when their leases expire.  Seniors and people with disabilities on fixed incomes would be particularly vulnerable.

In proposing his amendment, Rep. Schock expressed concern about high payment standards in Chicago.  But those standards are permitted under HUD’s “Moving to Work” demonstration and would likely be unaffected by Schock’s amendment.  His amendment would, however, do considerable harm in other parts of the country.

The voucher program cannot function effectively without flexibility to set adequate, market-based payment standards.  Congress and HUD have wisely set some limits on this flexibility, requiring strong evidence to support large payment standard increases.  Congress should leave those carefully designed rules in place rather than replacing them with the Schock amendment’s arbitrary cap.

Tax-Credit Bill Would Help Low-Income Families Facing Higher Rents

April 17, 2014 at 2:48 pm

House Ways and Means Committee member Charles Rangel (D-NY) has introduced legislation to establish a new federal tax credit to help low-income renters afford housing.  As we’ve explained, a renters’ credit along these lines would be a valuable tool to address low-income families’ mounting housing needs.

As the graph shows, the typical or median rent has risen much faster than inflation over the last decade, while renters’ median income has fallen in inflation-adjusted terms.

In fact, in 90 cities around the country, a median-income resident would have to pay more than 30 percent of his or her income to afford the median rent, the New York Times reports.  (The federal government and many private-sector landlords and lenders consider housing unaffordable if it exceeds 30 percent of household income.)

As a result, families with incomes well below the median must pay high and growing shares of their income for rent or live in substandard, overcrowded, or unstable housing arrangements.  In 2011, 8.5 million families with incomes under half of the local median received no rental assistance and either paid more than half of their income for housing or lived in severely substandard conditions, according to the Department of Housing and Urban Development — an increase of more than 40 percent since 2007.

And Department of Education data show that 1.17 million school-age children were homeless during the 2011-2012 school year.

Despite these needs, the federal government provides much more help to higher-income homeowners, through tax subsidies like the mortgage interest deduction, than to low-income renters.  Due to funding limitations, Housing Choice Vouchers and other low-income rental assistance programs reach fewer than one in four eligible families.

The Rangel proposal would help address that imbalance by giving states about $5.8 billion in annual tax credits to distribute among low-income renters based on federal income eligibility rules and state policy priorities.  We estimated last year that a credit similar to the Rangel proposal (but with added provisions to ensure that most of its benefits go to the neediest families), capped at $5 billion, would help 1.2 million households, reducing their rent by an average of $400 a month.

The renters’ credit would complement the Low-Income Housing Tax Credit (LIHTC), which Representative Rangel helped enact in 1986.  LIHTC is an effective subsidy for building and rehabilitating affordable housing but doesn’t typically make housing affordable to the poorest Americans by itself.  A renters’ credit could help these households afford rents in developments subsidized through LIHTC and in other buildings.

If the President and Congress move forward on tax reform, they should use savings from scaling back other tax expenditures to establish a renters’ credit along the lines that Representative Rangel proposes.