Hillary’s Housing Policy Prescription

Yesterday, Hillary announced her latest policy prescription to increase low-cost housing: don’t hold your breath, it’s anything but original. The basic prescription is simply to double down on tax subsidies for housing developers. 

To that end, Hillary proposes enlarging the Low Income Housing Tax Credit (LIHTC) program and shifting the tax burden from housing developers and financial institutions back to taxpayers.

Here are a few reasons she should reconsider:

  1. The Low Income Housing Tax Credit program (hereafter “the subsidy”) crowds out market-provided low-cost housing. That means taxpayers are paying for low-cost housing that would otherwise be provided by the market for free.
  2. The IRS has proven entirely inept in its role as administrator of the subsidy. This is not a controversial point (the Government Accountability Office agrees).
  3. The subsidy has a highly fragmented, complex system of delivery, which means it is inefficient, and by extension, expensive.
  4. As a consequence, the subsidy doesn’t even stack up well against comparable housing subsidies: research describes the subsidy as 19-44% more expensive than comparable housing subsidies.
  5. To make matters worse, the subsidy is often not viable as a stand-alone. Forty percent or more of housing units receiving this subsidy end up utilizing other subsidies, while they’re at it.
  6. The subsidy is a tax expenditure and as such does not appear as an outlay on the federal budget. This means that Congress never has to confront any of the problems noted to this point.

Still unconvinced? Here are a few more reasons why expansions of the Low Income Housing Tax Credit program should be opposed.