Uncovering JAPA

SHELTER: A Redistributive Affordable Housing Policy

Housing advocates in the United States have long sought a fundamental overhaul of the country's federal housing policy to respond to increasing housing costs.

Subsidies on the cost of developing new affordable rental housing such as the Low Income Housing Tax Credit (LIHTC), along with programs that reduce tenants' expenditures on rent, such as the Housing Choice Voucher Homeownership program, are widely used but cannot fully address the extent of the need. When reforms to the housing policy status quo are proposed, however, many include costly measures while failing to consider accompanying new revenue sources. Even fewer proposals mention the allocation of existing revenue sources to new avenues of redistribution.

Income Tax Redistribution for Housing

In "Placing U.S. Federal Housing Policy on a Secure Foundation: The SHELTER Plan" in the Journal of the American Planning Association (Vol. 89, No. 3) author Casey Dawkins puts forth a proposal to redistribute income tax resources to low-income households on a national scale and considers the geographical ramifications of such a program, as well as potential impacts at the household level.

Dawkins asserts that housing markets rest on "a stool supported by three unstable legs of different lengths" of homeownership assistance, in-kind tenant-based subsidies, and supply-side housing production subsidies. The largest leg of the stool, argues Dawkins, is centered on affordable homeownership programs such as the Federal Housing Administration's mortgage insurance program and income tax provisions that benefit homeowners. This "leg" is what Dawkins aims to partially repurpose through his Securing Housing Equality by Leveraging Tax Expenditure Reform (SHELTER) plan.

Dawkins' SHELTER plan builds on previous academic research that suggests that homeownership tax expenditures, such as the mortgage interest deduction, lead to the overconsumption of housing and housing price inflation. As the geography of homeownership tax expenditures is correlated with the geography of affordable housing needs, Dawkins argues for an intervention that considers rethinking this dynamic.

The SHELTER plan is a series of redistributive policy reforms that seek to alleviate the housing cost burdens of low-income households through innovative repurposing of existing homeownership tax expenditures. The plan is threefold and includes:

  1. Reallocating four current federal homeownership tax expenditures to fund both
  2. A universal housing allowance (UHA) in the form of a refundable tax credit to low-income, Housing Choice Voucher-eligible households
  3. An affordable housing block grant (AHBG)

Because the local homeownership tax expenditure budget is the revenue source that funds the other proposed reforms, the SHELTER plan is revenue neutral.

Income Redistribution Plan Tackles Housing Issues

The primary objective of the SHELTER plan is to create a solution that addresses problems of homelessness, housing insecurity, and shelter poverty by guaranteeing a reduction in housing cost burdens for all low-income households status regardless of their geography.

Under the plan, the revenues are equal to the homeownership tax benefits that homeowners would have received under the current tax law and fund both the UHA and the AHBG. Dawkins proposes formulas for fair redistribution based on each community's proportionate obligation and need and advocates for both vertical equity in the form of graduated taxation and horizontal equity by ensuring that those with similar incomes and assets pay the same taxes.

Through a series of simulations utilizing 2019 Public Use Microdata Sample data from the American Community Survey and the National Bureau of Economic Research's TAXSIM model, Dawkins finds that the adoption of the SHELTER plan would reduce the percentage of the nation's low-income renters who are cost-burdened from 75 percent to 39 percent.

The plan would redistribute as much as $226 billion to very low-income households while also creating a new funding source to support affordable housing production in high-cost housing markets. While many U.S. homeowners would lose tax benefits under the SHELTER plan, very low-income households would receive new refundable tax credits in amounts exceeding lost homeownership tax benefits.

Dawkins' SHELTER plan posits an exciting vision of redistribution of existing revenue sources to underserved populations of low-income renters and households. Should the plan come to fruition, SHELTER would shift power from local to federal governments in terms of granting more oversight over affordable housing strategies, but it would also provide local governments with a new tool and flexible funding source for their affordable housing programs and agendas.

To further examine the plan's feasibility, Dawkins mentions the need to further explore modeling simulations, the political viability of a redistributive plan, and how SHELTER would impact people of different demographic groups. However, Dawkins' plan is bold and innovative and merits further discussion about reimagining and repurposing existing affordable housing strategies to best serve populations in need.

Top image: iStock/Getty Images Plus - zimmytws

About the author
Gianina Yumul is a master's in urban planning candidate at Harvard University.

July 13, 2023

By Gianina Yumul