Tyler McClelland

A Trust Fund for the Rest of Us

We are by now familiar with the enthusiastically reported spin that the economy is fairing well— that the United States is more productive and profitable than it ever has been. We know too that the majority of us aren’t feeling any of the benefits. Most people would not (perhaps) react so cynically, but for the 99 percent of us who have become startlingly aware that our incomes are not rapidly increasing like the top 1 percent: we may have good reason to. There has been only one time in the past century when income disparity was as great as it is today: The Great Depression. Surprising? Not really, when you consider that the bottom 150 million wage earners in America today are making only 1/440th of what the 300,000 top earners make—a gulf that has become more of an ocean since 1980 when it was just about half as disparate. To add insult to injury, Wells Fargo announced last week that the recess in housing is as bad now as it was during the Great Depression due to an unprecedented number of households defaulting on their mortgages. All of this talk of Depressions is really, well, depressing. Good public policy can, however, be a mighty strong cup of sunshine.

The most obvious solution to our dilemma is to give people more money for their hard work. That’s certainly good policy, but according to a Harvard study, even the recent minimum wage hike, after having fully graduated, will not be enough for a full-time, single-earner household to afford a modest two-bedroom apartment. Housing affordability has eroded significantly since 2003 and mortgage payments or rent comprise more than fifty percent of monthly expenses for half of all low-income earners in 13 States—including New York and California. Families with children are particularly hard-hit, having only $538 on average to cover all other expenses after paying for their housing each month. The current minimum wage increase is just not enough for struggling families. While we hold out for a more robust wage increase—perhaps an actual living wage—the greatest solution to help middle- and low-income households make ends meet is substantially decreasing the cost of their housing and freeing up some of that income they could be using for other expenses. To do this, we need to build more affordable housing and make building affordable housing more affordable. The good news is that urban areas like Boston and New York City can do this with existing vacant or abandoned buildings. In particular, Boston Mayor Thomas Menino has pioneered a successful program for converting vacant buildings into affordable housing.

Another sometime-harbinger of sunshine policies from Massachusetts, Rep. Barney Frank, has written and sponsored H.R. 2895, the National Affordable Housing Trust Fund Act (NAHTFA). I know what you’re thinking, a trust fund for regular people? Trust me, when I hear the phrase “trust fund,” my first reaction is to wrinkle up my nose, curl up my lip, and snarl a little—imagining a soon-to-be eighteen year old heir gaining a portion of the family fortune—an amount of wealth that I will most likely never see. However, the NAHTFA, passed in the House last month with strong bipartisan support, establishes a trust fund valued at $800 million to one billion dollars accessible to States and local jurisdictions to help in the rehabilitation, construction and preservation of 1.5 million units of affordable housing over the next ten years—yes, a trust fund that’s good for most Americans instead of just that 1%. The act stipulates that 75% of funds must go to providing affordable housing for those who make below 30% of the typical income in their State. This is certainly not the wrinkle-up-your-nose kind of trust fund; it is really good, sound, smart public policy—and it’s already been proven in States and cities from Massachusetts to Los Angeles, from Illinois to Nebraska. Providing assistance to groups who want to build affordable housing units works. Without completely sliding into a Kevin Costner moment, you could say that if Congress appropriates, affordable housing developers will build.

Since its inception in 1998, Nebraska’s Affordable Housing Trust Fund has helped build almost 3,000 units of affordable housing and has provided almost 4,000 jobs in the process by awarding only $51 million from its trust fund. Massachusetts has provided almost 5,000 units of affordable housing since the creation of its AHTF in 2001 using only $94 million. The simple truth is, establishing an affordable housing trust fund nationwide could substantially lower the costs of housing for middle- and low-income earners by providing access to the necessary funds for constructing affordable units. The National Affordable Housing Trust Fund Act must still pass in the Senate—but will most likely enjoy the same bipartisan support it received in the House. At least at this time, the House seems to recognize that addressing the housing needs of middle- and low-income earners is a winning strategy. Getting it past the President’s desk, however, is another story. A veto could effectively kill the legislation. Despite popular support, the 264 votes it received are a little removed from veto-proof. Should the NAHTFA make it out of the Senate and get a swift veto from the President, there is a policy alternative we could consider until a new bill makes it to his desk: housing low-income earners in some of the nicest public housing the United States has to offer: the White House.

Tyler McClelland: Author Bio | Other Posts
Posted at 8:00 AM, Nov 21, 2007 in Housing
Permalink | Email to Friend