Topic: Poverty & Social Welfare

Pregnancy Discrimination? Don’t Rely on Government for Additional Protection

A couple of recent New York Times articles discuss pregnancy discrimination in the workplace. In its most recent spread, the Times outlines a variety of stories of expectant mothers losing jobs or job responsibilities and cites the growing number of pregnancy-related Equal Employment Opportunity complaints to imply rates of pregnancy discrimination may be increasing.[1]

As a solution, the article’s authors propose pregnant women would be better off with additional government protection, perhaps similar to the protection afforded to Americans with disabilities. The Times should be careful what it wishes for.

While arguing for added protections for pregnant women, the Times forgets to mention that rights to accommodation for people with disabilities didn’t work out as planned. One study finds the Americans with Disabilities Act (ADA) of 1990 reduced “employment of disabled men of all working ages and disabled women under age 40.”

Other evidence finds the ADA reduced employment rates for men with disabilities by 7.2 percentage points and was “associated with lower relative earnings” and “slightly lower labor force participation rates” for people with disabilities.

Indeed, when ADA took effect in 1990, 28.4 percent of people with disabilities were employed (compared with 78.4 percent of non-disabled persons). In 2014, the employment rate for people with disabilities had fallen to 12.9, or less than half of the 1990 figure. The employment rate didn’t changed much for non-disabled persons, so the employment gap between disabled and non-disabled widened considerably during this period.

Figure 1: Employment Rate Through Time for Persons with and Without Disabilities, Ages 21-64

ADA Over Time Graph
Data Source: Census Bureau’s Current Population Survey
 

Mortgage Interest Deduction Reform Worked; Sky Isn’t Falling

Last year, Republican legislators stood up to the behemoth of housing lobbying groups which exert heavy pressure on the public process by curtailing the so-called third rail of tax policy, the mortgage interest deduction.

Last week’s Joint Committee on Taxation (JCT) tax expenditure estimates are a reminder last year’s tax reform effectively reduced the deduction. According to JCT, the mortgage interest deduction will decline 38 percent this year. By 2019 the deduction will fall almost 50 percent from its 2017 levels.

The reformed deduction applies to $750K in mortgage debt for loans. This is a change from its former configuration, where the deduction applied to $1.1 million in mortgage debt. The act grandfathers in existing homeowners who bought under the assumption they would be able to use the deduction before mid-December. 

Though industry lobbyists predicted the sky would fall, it hasn’t happened. That’s unsurprising if you follow economic research on the mortgage interest deduction.

For one thing, research suggests the mortgage interest deduction has no impact on homeownership rates. Last year Nobel Prize-winning economist and co-founder of the Case-Shiller housing index Robert Shiller argued capping the deduction would have a “rather small effect” on homeownership rates and the housing market.

Indeed, since tax reform U.S. homeownership rates have stayed flat and the number of houses sold this year is greater than the number sold during the same season last year. Meanwhile, “home-price growth showed no sign of slowing down” despite predictions by some economists home prices would fall as a result of reform. It makes sense housing market indicators haven’t changed, given very few homes are sold in excess of $750K and housing supply is tight even at the top of the market.

The sky isn’t falling, and JCT estimates show the mortgage interest deduction is on its way out. That’s good news for the housing market and prospective homeowners.

Alexandria, Virginia Gets Housing Affordability Wrong

Alexandria, Virginia’s city council successfully increased the meals tax on restaurants in its jurisdiction on May 10th. The Council’s plan is to dedicate the meals tax revenue to building affordable housing.

There are a variety of issues with the city council’s plan to increase taxes and provide affordable housing.

First, the tax is supposed to help low and moderate income Alexandria residents, but restaurant taxes are regressive: the shares of after-tax income spent on meals away from home by households in the lowest, second-lowest, second-highest, and highest income deciles are 20.4 percent, 7.9 percent, 4.4 percent, and 3.8 percent, respectively.

That means the meals tax would likely collect five times the share of after-tax income from low-income households as high-income families, as Michael F. Cannon points out in a recent Alexandria Times letter to the editor. In short, the meals tax is a regressive tax parading as a progressive measure.

Furthermore, the meals tax signals Alexandria believes it can tax and spend its way out of housing affordability problems. With as high as Alexandria housing prices are, Alexandria has no practical hope of doing that.

The median Alexandria, Virginia sale price in 2017 was over half a million dollars, and in certain neighborhoods like Potomac Yard / Potomac Greens, the median sale price is greater than three-quarters of a million dollars. The meals tax raises less than $5 million annually, which could provide 10 median Alexandria homes annually.

But Alexandria has more serious housing affordability problems than limited tax revenue. Like other cities, the cost of housing is driven by restrictive regulation. If residents wonder why the supply of affordable housing in Alexandria is dwindling, they need look no further than the city zoning map and the associated zoning ordinance.

Figure I: City of Alexandria Zoning Map

 Alexandria Zoning Map

A substantial portion of Alexandria property is zoned for single family residential, shown in pale yellow above. In a high demand place like Alexandria, just outside restrictively zoned Washington, D.C. this land would likely voluntarily be put to a higher use (e.g. multi-family residential) in the absence of the regulation.

It is true that portions of Old Town are zoned for townhomes, shown in dark yellow. But most of Old Town falls within a historic district, which means that substantial change is nearly impossible and redevelopment is subject to extensive regulation and oversight from city boards and commissions. In fact, the city has a 200 page design guideline guidebook on the special considerations associated with development in this historic downtown area alone.

The review process isn’t only heavy-handed in the historic district. In Alexandria, there are around 25 citizen boards managing architectural, archaeological, environmental, historical, urban design and related planning considerations for proposed development. This number excludes task forces with other specific planning functions, like determining parking standards for new development.

In general, multi-family residential is only allowed on Alexandria’s fringe, shown in orange. These implicit limits on housing supply and affordable housing design contained in Alexandria’s zoning code matter more than a meals tax garnering around $5 million annually ever will.

That’s because density limits, design guidelines, and historic districts substantially inflate housing costs. Academic research estimates zoning increases the cost of housing by 30-50% in some restrictively regulated coastal cities.

Developers will build new housing units if given the opportunity. And when housing supply meets the demand for housing, housing affordability will improve as outlined in detail in Zoning, Land-Use Planning, and Housing Affordability, a recent Cato policy analysis paper.

Alexandria’s city council doesn’t understand housing affordability. This feature makes them similar to other local and state governments in the U.S.  But if Alexandria genuinely wants to solve the affordability problem it will need a new strategy that prioritizes relaxing regulation and streamlines the development process.

A modified version of the article was originally published in the Alexandria Times

Immigrant Welfare Consumption: A Response to Richwine

Jason Richwine recently published a short criticism of a new brief that Robert Orr and I wrote about immigrant and native benefit levels and use rates for means-tested welfare and entitlement programs.  This is another in a long series of blog post responses between those who support different methods for measuring native and immigrant welfare consumption so the response is wonky and does not revolve around a central question.  The title of Richwine’s criticism is “Obfuscating the Immigrant-Welfare Debate.”  Below, Richwine’s comments will be in quotes and my responses will follow.

“A few years ago I noted that ‘the amnesty movement has turned the political numbers game into an art form, systematically obscuring the trade-offs inherent in immigration policy.’ The movement has reached new heights of obfuscation with Alex Nowrasteh and Robert Orr’s Cato Institute study, ‘Immigration and the Welfare State.’”

Richwine hid half of our title: “Immigration and the Welfare State: Immigrant and Native Use Rates and Benefit Levels for Means-Tested Welfare and Entitlement Programs.”  Our entire title is important to defusing many of Richwine’s other complaints later in his piece.  The charge of obfuscation is serious but cutting off three-quarters of the words in our title does not enhance clarity.

“The Nowrasteh-Orr study says that’s all wrong. In fact, immigrants receive 39 percent less in welfare benefits than natives on a per capita basis. How is this possible? By including Social Security and Medicare as ‘welfare,’ for starters.”

As the title of our brief states, we included entitlement programs as part of the welfare state.  As we further explained in the first two sentences in our brief, we included them because they accounted for about 65 percent of all federal benefits outlays in 2016.  It is impossible to discuss the welfare state or the impact that immigrants have on it without including entitlement programs because they comprise its largest share.

What Secretary Carson Should Know about Affirmatively Furthering Fair Housing (AFFH)

This week, housing activists sued Secretary Carson and the Department of Housing and Urban Development (HUD) for delaying implementation of Affirmatively Furthering Fair Housing (AFFH), a controversial Obama-era HUD rule. The suit claims AFFH “was of great importance to Congress in enacting the [Fair Housing] Act.”

But as I’ve outlined previously, there isn’t a linear relationship between the Fair Housing Act and AFFH. The Fair Housing Act is focused on discrimination in the housing market and AFFH is focused on segregation.

There are other problems with AFFH. For example, AFFH requires federal and local government to spend up to $55 million annually collecting information, a good deal of which is unhelpful to its objective of understanding why racial segregation occurs. AFFH requires local governments to provide information on racial and ethnic concentrations, but that information doesn’t really tell policymakers what they want to know.

If policymakers are interested in determining the cause of racial segregation in cities, they don’t have to collect data and guess at it. A major cause of racial segregation is already known: zoning regulation. Zoning regulation segregates by race because race is frequently correlated with income.

The “Success Sequence” - What Does It Tell Us?

One story about poverty in the United States goes like this: Poverty is simple to escape. Finish high school. Get a job, even a menial one. Do not have kids until you’re married. And if you do all these things, you’re pretty unlikely to be poor.

Conservatives like this story because it suggests that no significant social changes are needed to end poverty. On this view, poverty may even be just a personal choice. It’s largely up to you whether you follow the so-called “success sequence” or not.

Critics, though, are quick to point out that the success sequence is much easier described than followed, and that following it is much easier for some people than for others. Failing or dangerous schools offer little reason for students to remain. Getting a job is easier in some places than others, and easier for some types of people than others. In some communities, marriage partners are all too few. And avoiding having children is a lot to ask, because it’s a natural human desire to want to have them.

If the success sequence doesn’t hold up so well, what do we do about it? And what specifically libertarian steps remain to be done to fight poverty?

This month at Cato Unbound, we’re debating the usefulness of the success sequence as a tool for thinking about American poverty. Cato Senior Fellow Michael Tanner has written the lead essay, which I encourage you to read. Comments are open, and we welcome readers’ feedback. Discussion with a panel of diverse outside experts will continue through the end of the month.

A Fair Look at Possible Changes to Rental Assistance

Last week Secretary Carson’s Department of Housing and Urban Development (HUD) proposed changes to federal rental assistance programs. There were a variety of changes in the HUD proposal, but so far reactions have focused mainly on tenant rents. This narrow focus on a single element of the proposal doesn’t do the full proposal justice.

The three major changes are the ability to institute work requirements, the changes to tenant rents, and reductions in paperwork and monitoring. A few words on each, below.

1) Work Requirements

The proposal allows housing authorities to institute work requirements. Despite concerns from activist groups like the National Low-Income Housing Coalition (NLIHC), the proposal does not allow housing authorities to apply work requirements to the elderly, disabled, or minors.

According to the Center for Budget and Policy Priorities, 60 percent of households on public assistance are elderly or disabled. These households would be exempt. Of the remaining households, some are already working and so ostensibly they would not need to change their behavior.

In short, if all housing authorities adopted strong work requirements a minority of HUD households would be impacted, perhaps 13 - 18 percent. Work requirements are likely more of a symbolic change that expands the universe of what’s possible under government rental assistance than a provision that would dramatically change rental assistance.

2) Rent Changes

This change has drawn a lot of attention. The increase from 30 to 35% of income for rent is not ideal from a policy standpoint, because it reduces tenant incentives to earn additional dollars (or to report additional dollars if they are earned).

If rents need to be raised, the change from $50 to $150 for minimum rent is superior to the increase from 30 to 35% of income for rent. In fact, HUD would likely be better off moving all of their units to flat rate rents, similar to how minimum rents are structured.

HUD’s view is that rent changes must be made as a result of budgetary constraints. Indeed, changes in rent due to budget constraints are not unprecedented in HUD housing. In 1981, Congress increased rent from 25 to 30% of income for HUD rental assistance programs for this reason.

One important point: where the rent changes result in a financial hardship, tenants are exempt under the proposal. Examples of financial hardship include A) risk of being evicted, B) financial issues (like lose their job, a death in the family, a change in circumstances) C) tenants have lost eligibility for other welfare benefits, or are waiting to find out if they’re eligible for them, etc. Despite activists’ concerns the proposed reform would put people out on the street, it looks as though it’s designed not to.

3) Less Paperwork, Less Monitoring

There are a couple of changes related to reducing paperwork and bureaucracy in the program. The first is changing the rent calculation from adjusted income to gross income. Determining what counts as income for tenants is a very complicated process which leads tenants of similar economic circumstances to be treated differently. That’s a fairness issue, one among many in the provision of housing benefits. It’s nice to see an attempt to simplify and treat tenants similarly.

Finally, HUD rental assistance recipients currently have to recertify their income annually. The proposal changes the certification to be less frequent, from annually to once every three years. The idea is to give low-income tenants greater ability to grow their income while eliminating paperwork. Both libertarians and liberals should find this element of the proposal at least somewhat appealing.

In short, a fair analysis of the proposal requires greater nuance than what’s being offered.