Tag Archives: Germany

Tampering with the sacrosanct

affordable housing, economic growth, elected leaders, home ownership, housing crisis, housing subsidies, middle class, mortgage-interest deduction, renters, tax policy, tax reform, , , , , , ,

The presidential candidates have a lot to say about tax reform, but with one exception, they’re not about to get rid the big sacred cow — the mortgage-interest deduction, found on Schedule A of Form 1040:scheduleA (2)

Economists have been complaining about the mortgage-interest deduction for years. It’s a regressive benefit, increasing with income. It enhances inequality, effectively inflates property values and misallocates resources, or so the argument goes. In 2012, the mortgage interest deduction cost the federal government $70 billion, according to the Urban Institute, compared $36 billion for low-income housing subsidies.

But nobody expects that deduction to go away any time soon. It’s a firmly entrenched loophole (aka “third rail”) not only for the wealthy elite, but for the simple majority. The home ownership rate in this country exceeds 60 percent (in Vermont, it’s over 70 percent), and of course the lion’s share of those people are mortgage-holder beneficiaries. IRS2

The ranks of renters are increasing, though, and the more they do, the more seriously they might be taken as a political constituency. Politicians take renters seriously in Germany, where renters are in the majority and the regulatory climate is much more in their favor. Germany doesn’t offer a mortgage-interest deduction, either.

Might the growing numbers of American renters be mobilized to support the elimination of the mortgage-interest deduction — which ostensibly doesn’t benefit them anyway — in favor of increased housing subsidies for low- and moderate-income tenants? That seems like a stretch, unless another Occupy-style movement sweeps the country.

Well, if eliminating the mortgage-interest deduction discourages home ownership, so be it. There’s even evidence that home ownership isn’t necessarily such a wonderful thing, because it damages labor markets:

“We find that rises in the home- ownership rate in a U.S. state are a precursor to eventual sharp rises in unemployment in that state,” write economists David Blanchflower and Andrew Oswald, in a 2013 paper. Why? Partly because higher rates of homeownership curtail labor mobility and lead to longer commutes.

So, who’s the exception among the presidential candidates? Ben Carson. bencarson He’s the only one who has said he’d do away with the mortgage-interest deduction. (Even Bernie Sanders doesn’t go that far – he’d cap it at $300,000.) For a full-throated defense of this Carson stance from someone who doesn’t agree with much of anything else he says, click here. 

More brainstorming: self-building

affordable housing, artists' housing, co-living, cohousing, home ownership, housing, housing subsidies, middle class, presidential campaign, workforce housing, , , , , , ,

The housing-unaffordability problem is too big, pervasive and complex to yield to single, simple remedies. Yes, government at all levels has to play a substantially bigger role than it does now. But without substantial new federal funding and subsidies — which can’t be found on mainstream politicians’ lists of spending priorities — we might as well brainstorm about piecemeal, alternative solutions.

Having touched on co-living and cohousing in the last post, we bring you a continental variant of this idea: collective building.baugruppe1

This intriguing headline in the Guardian, “The do-it-yourself answer to Britain’s housing crisis,” offers an entrée: community members, with help from a land trust, building their own affordable homes. Britain even has an organization, the National Custom and Self-Build Association, to promote such efforts.

Self-building seems to be an even bigger trend on the continent. In Germany, baugruppen, or building groups, are active all over, and reportedly account for 10 percent of new homes built in Berlin. baugruppe3These are groups of people who come together, often with something in common (they might be musicians, say, or share a political philosophy), and take responsibility for acquiring land, hiring architects and contractors, and creating their own housing. For a summary of how it works, click here, or another brief description, here.

The baugruppe is a well-established form of organization in Germany and apparently gets a good deal of institutional support, including financing from a state bank. Whether something like this could work in this country is an open question.

Mike Eliason, a designer who was author of a seven-part series on baugruppen, seems to think it could, at least in a place like Seattle. For the first article, on the website of a Seattle advocacy organization called The Urbanist, click here. As Eliason describes it, baugruppen projects cost less than traditional models because they do without developers and marketing, as well as real estate agents.baugruppe2

It all sounds reminiscent of cohousing, except that it’s commonly done in an urban setting — as the photos in this post reflect. It also sounds like a fairly middle-class phenomenon, considering how much of a personal investment it requires of its participants. Who has the time and energy necessary to do all the meeting and planning and hiring and so on? Probably not someone who holds down two minimum-wage jobs. Not that we don’t need affordable housing, sometimes called workforce housing, for middle-class professional types, too.