Later this month, The Urban Institute, the MacArthur Foundation, and other philanthropic organizations are hosting a half-day workshop to discuss and debate what Chicago and Cook County should do to optimally utilize the new federal Opportunity Zones incentives established by the Tax Reform Act. The official announcement can be found here. Read More
On July 10, the Bipartisan Policy Center hosted a panel on the evidence-based evaluation of tax expenditure programs, such as LIHTC and Investment Tax Credits. It coincided with the release of a new report entitled “Evaluating Tax Expenditures: Introducing Oversight Into Spending Through the Tax Code”.
The event discussed the necessity of evaluating tax expenditures with a cost-benefit analysis as well as the political challenges and technical difficulties of doing so. Eugene Steuerle, one of the paper’s authors, offered suggestions to the IRS to re-organize and devote more resources to collecting data for tax expenditure policy analysis. Thomas Barthold, the Chief of Staff of the Joint Committee of Taxation (JCT) since 2009, reflected that Congress has placed some time and energy to evaluate costs and benefits of all the major affordable housing programs, including tax expenditures such as the LIHTC and other spending programs such as Section 8. He defends the current evaluations of these programs, but still perceives the utility of a more rigorous cost-benefit analysis.
Other challenges described by the panel include the complexities in quantifying social benefits of tax expenditure programs, political compromises made in Congress that occasionally yield ineffective policy, and the necessity to find policy solutions involving tax credits that will prevent additional growth of economic inequality.
A key theme from the panel is that collaboration and communication between politicians, developers, nonprofits and other businesses is essential for implementing optimal housing policy. A full recording of this engaging, politically diverse panel can be found on the Bipartisan Policy Center’s website.
On June 19, the Harvard University Joint Center for Housing Studies (JCHS) held an address and panel discussion at the National Press Club in Washington D.C. to formally present its 30th annual State of the Nation’s Housing report. Since 1988, the report has offered invaluable, applicable information on the housing industry for policymakers, investors, and developers. A webcast of the event and a PDF of the report can be found here.
An address from Senior Research Associate Daniel McCue touched on the report’s main themes and significant housing industry trends. On a positive note, the overall home ownership rate increased for the first time in several years, which parallels the recent decrease in the number of rent-paying households. But, besides these statistics, the report also finds some dirt. Home ownership rates for young adults and African-Americans are at historic lows. There are also other points of concern in line with the housing industry’s challenges of the last thirty years. The report points out the lack of necessary for-sale inventory to meet the rising demand from new households headed by millennials and immigrants. A further challenge to meeting this supply is within rising costs of labor supply and materials. The Center estimated that from 2016-2017, overall input prices rose 4%, softwood lumber prices rose by 13%. In addition, the rise of mortgage payment and rent prices are outpacing wage growth at an alarming rate, leaving many renters cost-burdened. More people are even paying over 50% of their monthly income on housing. Home prices are close to pre-recession levels, but this increase is pressuring the slowly growing incomes of consumers and perpetuating a need to develop more affordable housing.
In regards to developing this need, the report contains some interesting details. The amount of starts fell 9.7% from 2016 to 354,100 units, and this decrease was especially apparent in the Midwest, with starts falling by over 20%. On a more positive note, the amount of completed units rose by 11% to 357,600, and the amount of units under construction is at a similar level to that of 2016, the highest level of units under construction since the 1970’s. A majority of these Multifamily units are being built within urban centers, but there is still a great need for more units specifically built as affordable housing. In fact, the center measures a shortage in housing of 7.2 million units for Very Low Income renters, who earn less than 50% of an area median income. These troubling signs of a lower level of starts and this demand are symbols of a nationwide crisis that requires a great amount of focus and insight to solve.
A panel consisting of Former HUD Secretary Shaun Donovan, the Federal Reserve Community Affairs Director, the President of the Lincoln Institute of Land Policy, and the Director of the JCHS built off from the address with an insightful discussion. Highlights from the panel included observations on the rise of urban gentrification crowding out affordable housing to the outskirts of metropolitan areas, the tendency of baby boomers to age-in-place yielding a greater need to provide ADA-accessible housing, the need to concentrate on absolving zoning and land issues as a solution to provide more urban housing supply, and the stark contrast between the undeveloped market for necessary shelter and the saturated housing market centered on high-value investment.
The rigor and insight of the session exemplified the utility and importance of conducting empirical research to evaluate the housing market and related public policy. If policymakers and developers apply the findings of the Report into their work, it is much more likely that findings of the report published thirty years from now will be more optimistic.