There is no doubt that inequality is one of the defining challenges of our time. As we argued way back in Vol. 39, the public discourse around the problem of inequality is too often marked by philosophical imprecision, vagueness, and overheated rhetoric. One result of this confusion is a diminished agency; we know we’re supposed to care about inequality but have few, if any, proposals as to what we can or should do.
This week, we highlight Matthew Desmond’s recent work on the relation of inequality and housing policy in contemporary America. Desmond’s Pulitzer-prize-winning book, Evicted (featured in Vol. 59 and 93), is a unique and compelling work of contemporary scholarship that calls attention to the prevalence of housing insecurity in American life. This week he takes on the question of housing and inequality directly in a piece for the New York Times Magazine titled, “How Homeownership Became the Engine of American Inequality.”
Desmond’s thesis is straightforward:
Almost a decade removed from the foreclosure crisis that began in 2008, the nation is facing one of the worst affordable-housing shortages in generations. The standard of “affordable” housing is that which costs roughly 30 percent or less of a family’s income. Because of rising housing costs and stagnant wages, slightly more than half of all poor renting families in the country spend more than 50 percent of their income on housing costs, and at least one in four spends more than 70 percent. Yet America’s national housing policy gives affluent homeowners large benefits; middle-class homeowners, smaller benefits; and most renters, who are disproportionately poor, nothing. It is difficult to think of another social policy that more successfully multiplies America’s inequality in such a sweeping fashion.
At the center of Desmond’s story is a unique set of decisions made in Postwar America. As he puts it, “ours was not always a nation of homeowners; the New Deal fashioned it so.” More specifically, the G.I. Bill “brought a rollout of veterans’ mortgages, padded with modest interest rates and down payments waived for loans up to 30 years.” This means that “returning soldiers lined up and bought new homes by the millions.”
But these “ladders of opportunity” were not made available to all. In an important passage, Desmond makes plain that Roosevelt’s need to appease some members of his party in the American South led to policies making it easier for white Americans to get on these ladders than others. As he puts it:
[B]oth in its design and its application, the G.I. Bill excluded a large number of citizens. To get the New Deal through Congress, Franklin Roosevelt needed to appease the Southern arm of the Democratic Party. So he acquiesced when Congress blocked many nonwhites, particularly African-Americans, from accessing his newly created ladders of opportunity. Farm work, housekeeping and other jobs disproportionately staffed by African-Americans were omitted from programs like Social Security and unemployment insurance. Local Veterans Affairs centers and other entities loyal to Jim Crow did their parts as well, systematically denying nonwhite veterans access to the G.I. Bill. If those veterans got past the V.A., they still had to contend with the banks, which denied loan applications in nonwhite neighborhoods because the Federal Housing Administration refused to insure mortgages there. From 1934 to 1968, the official F.H.A. policy of redlining made homeownership virtually impossible in black communities. “The consequences proved profound,” writes the historian Ira Katznelson in his perfectly titled book, “When Affirmative Action Was White.” “By 1984, when G.I. Bill mortgages had mainly matured, the median white household had a net worth of $39,135; the comparable figure for black households was only $3,397, or just 9 percent of white holdings. Most of this difference was accounted for by the absence of homeownership.
Little, if anything, has been done to successfully counter this trend. In fact, Desmond argues that this inequality is preserved and multiplied in our day by the Mortgage-Interest Deduction (MID), a policy first passed in the early part of the century and utilized widely in the postwar housing boom. Put simply, the MID is a policy intended to reduce the tax burden on homeowners by allowing them to take deductions on their interest payments for their first or second homes. In 2015, the MID, coupled with other real-estate subsidies, cost the government a total of $134 billion, a figure “larger than the entire budgets of the Departments of Education, Justice and Energy combined for that year.”
Desmond’s claim is both empirical and moral in nature. Because deductions correspond to interest payments, the benefits of the MID are not only reserved for homeowners; they inevitably “accrue to the top,” disproportionately benefitting owners of more expensive homes. As he reports:
In 2014, 1.5 million households earning between $40,000 and $50,000 a year claimed the MID, receiving an average benefit of $14 a month. That same year, 6.5 million households with earnings above $200,000 claimed the MID and enjoyed an average benefit of $391 a month. What this means in aggregate is that households with at least six-figure incomes receive more than four-fifths of the total value of mortgage interest and property-tax deductions.
Desmond provocatively describes these subsidies as “public housing for the rich.” In doing so, he forces us to reckon with the common distinction between subsidies largely distributed through the federal tax code and poverty-alleviation programs administered through state and local governments. Our age, he argues, is marked by intense scrutiny of the latter and little to no attention to the former. And this leaves us with few, if any, social ties between rich and poor. As he puts it: “we tend to speak about the poor as if they didn’t live in the same society, as if our gains and their losses weren’t intertwined.” (To illustrate this point, listen to this unsettling story on the difficulties one mother has faced finding a landlord to accept her section 8 voucher in the suburbs of North Dallas.)
The highly unlikely policy proposal Desmond seems to recommend combines MID reform (perhaps capping deductions at values under $500,000) with renewed investment in public housing assistance. “By one estimate,” he says, “capping the MID at $500,000 would save $87 billion over 10 years, even though less than 6 percent of mortgages nationwide exceed half a million dollars. Those savings,” he continues, “would allow 1.2 million additional families to benefit from housing vouchers.”
In order to further understand the importance of housing security for the most vulnerable we also recommend a recent series from Brooke Gladstone and the team from WNYC’s On the Media. As we argued back in Vol. 39, the problem of inequality in America is not fundamentally that wealth is unequal but that far too many Americans don’t have enough. And, as Desmond says, the overly partisan discussion of inequality is all-too-often bogged down by explanations preventing us from seeing the problem rightly.
In a bracing and compelling series, Brooke Gladstone explores the myths around poverty in America, highlighting the systemic nature of poverty and the public assumptions of how people become and stay poor. Like Desmond, Gladstone approaches the question historically: from Benjamin Franklin and Lyndon B. Johnson to Matthew Desmond and Linda Torado, she gives voices to past and present dialogues about poverty, providing modern anecdotes to debunk the most popular myths surrounding the issue.
Of particular interest is Episode 4 on “The Safety Net Myth.” In it, Gladstone shows just how precarious the life of the poor can be through the story of Margaret Smith, a woman from Athens County, Ohio who is the main provider for her six children. When one of those children becomes the victim of a violent crime and experiences an extended hospital stay, we listen as the family goes from stability (a job with a regular income, timely rent payments in their home, and a degree of peace in the home) to unrest and, ultimately, eviction. It is a story of downward mobility that highlights, among other things, the way housing insecurity fits within the broader failure of our society to adequately protect the vulnerable.
Recalling the ominous warnings of James Baldwin, Gladstone concludes with an unyielding indictment of poverty reduction policies in America. “Current policy,” she suggests, “is based on the premise that the poor require different treatment than we who are not poor, because they are different.” But this, she continues, is a lie. “They love their kids. They crave a life of dignity. They hate poverty. There are ways to fix the safety net, but we have to understand what it is we are fixing, and it’s not poor people.”
Put together, Desmond’s work and Gladstone’s portrayal of the challenges of housing insecurity should drive us to reconsider our fundamental beliefs about poverty. Many of us faithfully defend a safety net that we have never come close to needing. By forcing us to pay close attention to the narratives and ambitions of fellow citizens enduring the indignities of housing insecurity, Desmond and Gladstone reveal the failures of our current system while also provoking imaginative possibilities for a more just future.