Affordable housing in the 21st century
Plus: Assessing the Inflation Reduction Act’s effect on energy prices; and an opportunity to promote—and expand—freedom and progress
Affordable housing in the 21st century: According to a March 2022 survey, more people associate owning a home with the American Dream than having a successful career or being able to retire. Unfortunately, in the last 50 years, home prices have skyrocketed, incomes have remained relatively flat, and the percentage of Americans who own a home has barely budged. Of those who make less than $30,000, most struggle even to find a house to rent. In a new paper, FREOPP President Avik Roy and Research Fellows Roger Valdez and Jon Hartley review the last century of housing policy in the U.S. and make six recommendations for increasing the number of people who can afford to live in a community that expands the opportunities available to them and their families. With most affordable housing advocates focused on state and local changes, the paper’s emphasis on federal reform meets an important need at a critical time for Americans trying to make ends meet.
Recommendation #4: Reform the Low-Income Housing Tax Credit program: One reform Avik, Roger, and Jon identified is simplifying the Low-Income Housing Tax Credit program. Currently, the federal government issues tax credits to state governments, which pass the credits on to private nonprofit developers to build housing with restricted rents. The credits are then sold to private investors to reduce their tax payments after ten years. As Roger put it in an OPPBlog post, “This seems like a very convoluted way of getting poorer folks into decent homes.” Roger wrote to the Senate Finance Committee to suggest a better approach: giving tax credits directly to developers for qualifying projects and allowing low- and middle-income renters to access tax credits that would offset their rents.
Assessing the Inflation Reduction Act’s impact on energy prices and grid resilience: Through the Inflation Reduction Act (IRA), which became law this summer, Congress appropriated $369 billion to support conservation, energy efficiency, and clean energy. But will this influx of federal dollars lower energy prices? Based on FREOPP Visiting Fellow Grant Dever’s review of the bill, in the short term, at least, that’s unlikely. Though there are some incentives in the law that even the playing field for nuclear power, tax-credits for renewables have previously led to overbuilding of non-dispatchable energy sources (which cannot ramp up production to meet short-term excess demand) and drove more stable producers out of business, leading to higher prices and grid instability. A true energy renaissance requires broader regulatory reform, and there, the IRA is a missed opportunity.
→ Another IRA missed opportunity? Paid leave policies. As FREOPP Visiting Fellow Aparna Mathur and Rachel Jacoby write for the Tribune News Service, the IRA is unlikely to reduce inflation, and it ignores important inflation drivers like low workforce participation and the rapid increases in nominal wages that accompany it. Nearly 80 percent of Americans across the political spectrum support sensible family and medical leave policies that could help bring more people into the workforce, and there are viable bipartisan proposals to fund them and address a growing concern for families across the country. This signals an opportunity for cooperation between Republicans and Democrats that could improve economic opportunity for all Americans.
Freedom & Progress 2022: On November 10, 2022, FREOPP will host a conference in Washington, D.C., to unite American leaders in politics, policy, journalism, and philanthropy who believe that economic and political freedom are humanity’s greatest engines of prosperity and happiness. The conference will take place two days after the November midterms—a perfect time to assess the state of freedom and progress—and will include discussion of the best ideas for deploying liberty to help everyone move ahead, tackling challenges like inflation and the rising cost of living; educational choice; affordable health care; reliable energy; and equality under the law.
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