Who benefits?

The US Federal government spends about one and a half times as much money helping wealthy households with housing costs as it does helping low income households.

What’s more, the Federal government helps a far greater percentage of wealthy households than it does low income households.

***

Federal help for wealthy family’s housing costs

The Federal government helps wealthy families with their housing costs through the Mortgage Interest Deduction (MID). Last year that deduction cost the Treasury $94 billion. Of that, $56.5 billion went to families earning over $75,000 per year. In contrast only about $5 billion went to families earning less than $20,000 per year.

This happens despite the fact that almost no one thinks that the Federal government should help wealthy households with their housing costs

Federal help for low income family’s housing costs

The Federal government helps low income families with housing costs through giving money directly to those families and through providing low rent housing for them.

There are two main schemes to give money directly to low income families to help them with the cost of housing, the Housing Choice Voucher and Project-Based Rental Assistance (more details here). The Housing Choice Voucher helps about 2 million families a year with the cost of rent and project based assistances helps around 1.3 million families. Together they cost roughly $28.5 billion per year.

Although there is far less public housing in the US than there is in the UK, there is some (more details here). In total about 1.2 million households live in public housing in the US. The cost of maintaining these buildings is partly met through rents. However, the Federal government also provides grants totally about $7.3 billion a year to Public Housing Authorities to help with maintaining and managing these buildings.

When you add up the amount the Federal government spends on vouchers, buildings and the amount of Mortgage Interest Deductions claimed by families earning less than $20,000 per year, you get a total of around $40.6 billion per year.

More support for wealthy family’s and more wealthy family’s helped

Wealthy households are also far more consistently helped with the cost of housing than low income households. To put it another way, a greater percentage of wealthy households get help with the cost of housing from the Federal government than do low income families.

Well over half over families earning over $75,000 per year claimed the mortgage interest deduction. That’s some 21 million high income households being helped with housing costs by the Federal government. In contrast, around 1.8 million low income households claim this deduction.

In fact, the Federal government does not provide most low income families with help to meet housing costs but it does help most high income families.

The effect of this is that, in total, more than 12 million low-income renter households receive no federal housing assistance.

***

A lot of what passes as comment by politicians and media figures on the role of the Federal government in helping people with the cost of housing is completely incorrect. In fact;

  • The Federal government spends more money helping wealthy families pay for housing than it does helping low income families pay for housing
  • The majority of wealthy families receive help from the Federal government to pay for housing
  • A far smaller percentage of low income families receive help from the Federal government to pay for housing

P.S. There are a number of additional ways not discussed here in which the American state helps people meet housing costs. I could have included in this discussion, for example, the role of Fannie Mae and Freddie Mac, the Federal Reserve, efforts by State and City governments such as rent caps, and so on.

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