California Sen. Kamala Harris released a bill last month intended to help Americans pay the rent. The plan would give tens of billions in tax credits to approximately 20 million rent-burdened American households.
The 2018 presidential hopeful’s “Rent Relief Act” is co-sponsored by Democratic Sens. Dianne Feinstein, Richard Blumenthal, and Maggie Hassan, and has the endorsement of an array of fair-housing groups, big-city mayors like Los Angeles’ Eric Garcetti, and housing expert Matthew Desmond, the Pulitzer-winning author of Evicted. Harris’ bill would give renters what homeowners (with mortgages) have long enjoyed: a tax credit based on the value of their home.
Just as deductions for mortgage interest and local property taxes drive up home prices, however, a tax credit for high rents might prop up high rents. If the federal government agrees to cover all your rent payments in excess of $600 a month (as Harris’ plan would, for a low-income tenant in a high-cost city), why wouldn’t you rent a $1,800 a month apartment? Or, more worryingly, why wouldn’t your landlord immediately raise your rent to $1,800 to take advantage of the federal subsidy?
Harris’ bill has some limits that address that issue, but its negative reception among some economic analysts is a reminder of how hard it is to address housing affordability as a national problem. Some cities are growing and some shrinking; in some places houses are too expensive, and in others they are too cheap. Even as Democratic senators argue for a long-overdue expansion in federal rental assistance, some economists say the more fundamental problem is with a historically short housing supply. The housing affordability crisis, which has dominated big-city politics and cropped up in state races in California, New York, and Illinois, is finally becoming an issue for national Democrats—and it’s not going to be pretty.
For Dems, this new focus on the concerns of the base makes a cynical kind of sense. Renters’ costs have abated somewhat since 2016—when this issue played no role in a marathon presidential campaign—but Democrats are newly aware that their Achilles’ heel is voter turnout. Young Americans, left-leaning and vote-shy, are locked out of homeownership by record-high home prices and low incomes, and struggling with rising rents. That is, if they’ve managed to get their own place: A record share live with parents or relatives. A record share also live with friends or strangers. Historically speaking, this is not normal: Nearly half of American renters are cost-burdened today, paying more than 30 percent of their income in rent, up from a quarter in the 1960s. And while the problem is most severe for low-income families, it persists up the wage ladder to include, in the most expensive cities, households making six figures.
Nationwide, rents and incomes are diverging. According to the Harvard Joint Center for Housing Studies annual report, “the median rent payment rose 61 percent between 1960 and 2016 while the median renter income grew only 5 percent.” Making incomes rise is hard. Is making rents fall any easier?
If this bill is any guide, the answer is: no.
Harris includes a sliding income scale in her plan, so that even individuals earning up to $100,000 can get a discount on what they pay above 30 percent of their income in rent. She’s right to recognize that the rent crisis isn’t confined to low-income households. But it’s the low-income rent crisis that’s common to all U.S. cities. The hassle for people making six figures tends to occur mainly in places like New York and San Francisco, and you can imagine why a senator from Missouri might balk at helping out a Facebook employee in Manhattan.
The Harris plan would only apply to rents less than 150 percent of the Department of Housing and Urban Development’s Fair Market Rent, which the department assesses annually for each metro area. This is smart; it means that luxury rentals won’t qualify for subsidy. But the outlay would still vary widely from place to place.
In New York City, for example, the one-bedroom FMR is $1,558; 150 percent of that is $2,337. For Marie J. Tenant, a hypothetical renter making $40,000, affordable rent is anything below $1,000 a month. Under the Harris plan, Washington would cover 75 percent of the difference between that and her actual rent, which could wind up being a subsidy of as much as $12,000 a year. Put another way: For every dollar in rent between $1,000 and $2,337, Marie only pays a quarter to Washington’s 75 cents.
In Cleveland, by contrast, the one-bedroom FMR is $634, and 150 percent of that is $951. No one with an income of $40,000 would qualify for rent relief in Cleveland.
The policy would also create some perverse incentives for tenants and landlords alike, potentially driving up rents as landlords seek to maximize government aid. One precedent for this can be found in the Section 8 policy, where the level of federal subsidy does indeed appear to warp local markets. In 2000, HUD raised its funding limit from the 40th percentile of regional rent to the 50th. Instead of opening up new, more expensive neighborhoods to voucher recipients, the policy wound up “artificially inflating rents in some higher-poverty neighborhoods” where voucher recipients are concentrated. In high-cost cities, the Harris plan would be such a fire hose of cash that the effect would likely be to raise rents citywide—with landlords as the primary beneficiaries. You can see how the plan might spiral out of control. Rising rents would boost the region’s Fair Market Rent, triggering more subsidy. And so on.
In a separate bill released on Wednesday, New Jersey Sen. Cory Booker proposes a similar rent aid program, with many of the same problems—but also tries to take on the nation’s stubbornly low housing supply. In the vein of the Obama administration’s late “Affirmatively Furthering Fair Housing” rule—the one that Ben Carson called “social engineering”—the bill attempts to tackle some of the barriers to housing production that permeate U.S. cities. One issue that’s driving up rents? Despite home prices reaching record highs in many markets, fewer units per capita are being built than at any time in decades.
Under Booker’s Housing, Opportunity, Mobility, and Equity Act of 2018 (HOME Act), jurisdictions receiving some of HUD’s multibillion-dollar pool of Community Development Block Grants must “demonstrate transformative activities” to reduce barriers to housing development. Those include: authorizing high density and multifamily zoning, eliminating off-street parking requirements, establishing density bonuses, streamlining permitting processes, removing height limitations, establishing by-right development, relaxing lot size restrictions, taxing vacant land, and allowing accessory dwelling units.
It’s a program that longtime Slate readers may recognize from Matt Yglesias’ book The Rent Is Too Damn High. Housing prices don’t fall until we build more homes. Unfortunately, requirements that suburbs allow new housing were written into the Fair Housing Act in 1968—as Nixon’s HUD Secretary George Romney put it in 1970, “Suburbs must be open to all”—but have remained totally unenforced ever since. Booker’s bill doesn’t include any more reliable enforcement mechanism. As the senator conceded in an interview with Richard Kahlenberg in the American Prospect, “It is a light touch. … We’re just basically saying, through our legislation, that you have to have a plan. … And the components of the plan are on you.”
Booker should know that’s not enough. But it’s a good start. Nationally, Democrats haven’t thought about cities in a while. They’re rusty, but at least they’re talking about it.