Resurrecting Henry George: The Case for National Housing Assistance

In Economics, Housing, New Deal, Politics of Policy, Social Democracy, Taxes on June 30, 2009 at 10:47 am

“The savage beasts in Italy have their particular dens, they have their places of repose and refuge; but the men who bear arms, and expose their lives for the safety of their country, enjoy in the meantime nothing more in it but the air and the light.They fought indeed and were slain, but it was to maintain the luxury and wealth of other men.They were styled the masters of the world, but in the meantime had not one foot of ground which they could call their own.” (Tiberius Sempronius Gracchus, 133 BCE)

“The equal right of all men to the use of land is as clear as their equal right to breathe the air–it is a right proclaimed by the fact of their existence. For we cannot suppose that some men have a right to be in this world, and others no right.” (Henry George, 1879)

 

One of the truisms of studying social policy is the phrase “programs for poor people make poor programs.” Programs targeted at poor people (Aid to Families with Dependent Children (AFDC) or “welfare” being the best example) tend to be underfunded, provide inadequate levels of benefits, have onerous application requirements, are socially stigmatizing, and are politically vulnerable to assault from the right. By contrast, programs that are universal in nature, including both the poor, the working class, the middle class, and maybe even the affluent, (here, the best examples are Social Security and Medicare) tend to well-funded, provide decent benefits, where eligibility is on the basis of tights, are socially approved of, and are politically inviolate from the right.

That’s one of the reasons why I’ve argued that the premium subsidy is actually one of the most politically important parts of the current health care reform legislation. By creating a national and universal benefit that everyone shares in by right, the current legislation would create a “community of interest” that includes the poor, the working class, and the middle class – which would no doubt approve of the bill, and in the future vote for people who promise to improve and extend universal health care and vote against people who want to decrease or eliminate their premium subsidy.

The History:

Arguably housing is one of the greatest social policy failures in American history, especially on the issue of targeted vs. universal benefits. Housing policy in the U.S, in addition to having a long history of enforcing and reinforcing racial segregation, is extremely bifurcated between those programs aimed at helping the middle class (Federal Housing Administration (FHA) loans and guarantees, Fannie Mae/Freddie Mac/HOLC previous to that, tax exemptions for mortgage payments) and those programs aimed at helping the poor (Section 8 and public housing, mainly). And the difference in quality is immediately obvious to anyone who studies housing policy for any length of time – middle-class programs get lots of funding and are relatively generous, programs for the poor…well, turn into “the projects.”

One curious thing, however, is the way in which current policy favors home ownership to such an extent that it’s caused dramatic shifts in economic behavior. I would argue that one of the reasons why the housing bubble and the credit bubble took the form they did (with people being encouraged en masse to think of housing not just as their homes but also as stocks for speculation or credit cards for borrowing on) was that housing was and is the most ubiquitous form of property in the United States. Yet despite the fact that national housing policy seems to associate homeowners as middle class and renters as poor, it’s odd that very little policy exists that serves the interests of the growing one-third of a nation who rents. Renters occupy a strange political space as a potentially quite large constituency, whose tax dollars go to fund housing programs that don’t benefit them, and whose particular vulnerabilities during the housing crisis have gone unaddressed (to give one example, think about what happens to tenants who’ve regularly been paying their rent if their landlord should default on their mortgage – they get kicked out despite not having done anything wrong).

In 1965, Lyndon Johnson included as part of his Great Society the Housing and Urban Development Act of 1965. In additions to provisions outlining national minimum code standards for housing, extending FHA loan insurance, providing Federal funds for redevelopment and “slum clearance,” the Act included a rental subsidy program that would later become Section 8, a program which provides subsidies for poor renters (such that renters paid 25% of their income in rent and Section 8 paid the difference between that and the full rent). What few people know is that LBJ’s initial proposal was that the rental supplement program should cover the working poor, working class, and middle class who didn’t qualify for public housing.¬† Naturally, this part of the proposed bill was attacked for “encouraging socialism,” and LBJ accepted an amendment that restricted the program to people who qualified for public housing (but who couldn’t find an opening in public housing, or were trying to move out of the projects), and a huge opportunity to bridge the gap between housing policy for the middle class and for the poor was lost.

The Present:

It is no accident that while conservatives are most effective in attacking targeted programs for poor people, what they most fear are universal programs. It’s easy to get voters to vote against programs that give money to other people, especially if they’re the easy-to-demonize poor. But it’s almost impossible to get voters to vote against programs that benefit themselves. It turns out that Americans like socialism, as long as they get some of it.

Beyond the immediate housing crisis, we need a universal program for helping people with the cost of housing, one that not only brings together the interests of the poor, the working class, and the middle class (and maybe even the affluent), but also the interests of homeowners and renters. My proposal is to combine the original vision for rental supplements with the broader sensibilities of Obama’s and Congress’ plan for a premium subsidy:

The National Home and Hearth Program

  • Program: a sliding-scale benefit to offset the costs of housing, to help make up the difference between rent (or mortgage) and 30% of income.
    • capped at a certain $ amount per month to prevent abuse, and limited to primary residences to prevent the owners of multiple homes from trying to claim multiple mortgage payments.
  • Eligibility: open to individuals or families making from $0-250k a year
    • although obviously the benefit would be quite small at the high end.
  • Finance: paid for by a tax on real-estate capital gains, rate to be tied to the rate of increase in rents and mortgages.

This program could potentially achieve multiple progressive goals.

First, similar to the establishment of national health insurance (or national child care or higher education, etc.), it would help to make one more of FDR’s Second Bill of Rights, “the right of every family to a decent home,” a legal reality. I would argue, and I will argue in future posts, that the longer-term mission of the progressive movement in America is (and has unconsciously been) the realization of the Second Bill of Rights.

Second, by breaking down the political barriers between the poor, the working class, and the middle class, as well as between renters and home owners, it would begin to loosen the structure of what Henry George might have called “political rent-seeking,” where the various interests who benefit from federal guarantees of home-ownership for the middle class and the affluent (realtors, banks, developers, contractors, etc.) use their political clout to abuse the system and, not coincidentally, block programs for renters or the poor.¬† In a broader sense, the Home and Hearth program would (like the premium subsidy) forge a political alliance, and possibly even a recognition of common interests and humanity, between these divided economic classes.

Third, by establishing something that comes close to Henry George‘s idea for a “single tax,” we could also begin the process of moving the real estate and construction industries away from their speculative boom-and-bust cycle, characterized by dramatic increases in prices, aggressive sprawl, “flipping,” which I would argue are the spiritual kin of the CDOs, ABSs, MBSs, and other tools of financial chicanery that knee-capped our economy back in 2007. This tax would reward long-term investment over short-term speculation, while also helping to redistribute income away from rent-seekers to rent-payers.

- Steven Attewell

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  1. I really liked this post, as it addresses a substantial population left voiceless on a national-level discourse. Any thoughts (or perhaps future posts) on rent control? It’s a topic I’ll be presenting on at the American Sociological Association’s annual meeting in August. I’m curious what your thoughts are.

    • Rent control – hmmm. Interesting topic. It’s an important topic, but too complex for me to make a definite judgment at the moment.

      I’ve certainly read arguments against it from economists that are hard to refute, but I think there’s some merit to it still.

      I’ll do some more reading and maybe do a post just about this topic, but I would like to read your ASA paper as well.

  2. [...] Right to a Home – as I’ve said before, we really need to work on extending this to mean something more than Federal subsidies to middle-class suburban home [...]

  3. [...] Resurrecting Henry George: The Case for National Housing Assistance [...]

  4. [...] also FDR’s Second Bill of Rights and the Progressive Mission and Resurrecting Henry George: The Case for National Housing Assistance. George also gets a brief namecheck on the Huffington Post this [...]

  5. [...] Resurrecting Henry George – the Case for National Housing Assistance [...]

  6. [...] also FDR’s Second Bill of Rights and the Progressive Mission and Resurrecting Henry George: The Case for National Housing Assistance. George also gets a brief namecheck on the Huffington Post this [...]

  7. [...] banking lobby, then a new HOLC for underwater and foreclosed homes, possibly attached to a general housing assistance program would hardly arouse opposition – bankers generally don’t turn down [...]

  8. [...] that there are more ways than rent control for making housing more affordable. In an earlier post, I discussed expanding the Section 8 housing program to what Lyndon Johnson intended it to be – a national rental assistance program that provided [...]

  9. [...] the end of “Resurrecting Henry George,” I argued that a national housing assistance program would “help to make one more of [...]

  10. [...] food security, let alone decent nutrition. Section 8 likewise has never covered everyone who need housing assistance, nor has it been able to ensure affordability and mobility. Outside of a scattered few programs for [...]

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