Reminder: Housing tax credits should go directly to taxpayers, not intermediary groups

Georgia O’Keefe: White House at Night, 1890. Image in Public Domain

Political theorist Sarah Gustafson remarks that smart tax credit systems would directly assist low-income homebuyers by removing “middle man” bureaucracies/organizations. SJ sadly doesn't follow this advice: nonprofits partnering with our Housing Dept receive millions of dollars in grants annually, while our housing market remains dismal, restrictive, and unstable. From the American Enterprise Institute.

Market-based solutions are the only way to bring home prices and rents back in line with median incomes and improve accessibility. ...

Second, create a more stable housing finance market that provides low- and middle-income and minority households a safer, more reliable path to wealth building through homeownership than current policies which have led to over 12 million foreclosures since the 1970s.

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• Require the FHA and GSEs to adopt sound underwriting, pricing, and capital standards.

• Help low- and middle-income families with wealth-building strategies. Stephen Oliner and I developed the Wealth Building Home Loan to offer such a path—the 30-year mortgage does not.

• Repeal the GSE affordable housing goals to end destabilizing competition between the FHA and the GSEs and replace with the Low-income First Time Homebuyer (LIFT Home) tax credit. Lift Home would allow first-time buyers with incomes below 80% of area median income to forgo the interest deduction to receive a one-time refundable tax credit equal to 4 percent of the mortgage loan. The credit would be used to buy down the loan’s interest rate on loans with terms of 20 years or less, loans that provide a safer, more reliable path to wealth building through homeownership.

As an added bonus, LIFT Home buyers would free up an estimated 150,000 existing low-income rental units. LIFT Home’s cost could be offset by reductions in the US Department of Housing and Urban Development’s budget and repurposing other budgeted amounts that support affordable housing by subsidy. Better to direct tax dollars directly to homebuyers instead of having the money siphoned off by bureaucracies and advocacy groups.

More subsidies and credit liberalization only drive up the cost of housing and lead to even larger subsidies and more credit loosening. The answer is economical housing by design and incentives to reduce leverage so as to reliably build wealth, thereby allowing supply and demand to reach equilibrium at lower, more sustainable price points.

This article originally appeared in the American Enterprise Institute. Read the whole thing here.

Related:

• A deregulated housing market opens the door for local privatized mass transportation systems that are proven to work

• Unaccountable Housing Dept drains city coffers while police dept starved

• The fastest and cheapest way to make housing affordable: deregulate

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