The Biden administration has just announced a $318 billion “infrastructure” housing plan, conspicuous for its almost total absence of new thinking and for its large investments in failed approaches. The largest single item in the plan is $55 billion in tax credits to stimulate the construction of low-income housing, which it is said may result in the creation of 500,000 to 600,000 new housing units, at a cost of at least $100,000 per unit.
Tax credits might have instead been proposed to encourage the creation of new apartments in the existing single family owner-occupied housing stock, which would be of great assistance to single mothers and the elderly, and whose new-unit cost is about a tenth that for new construction. This approach is important in Germany, Japan, and Finland, and to a lesser extent in Great Britain. The credits would be propagated not through pamphlets issued by bureaucrats, but by lines on tax forms and by tax preparers and the accounting profession.
Tax credits for accessory apartments, if restricted to owner-occupiers, will put pressure on local governments to modify zoning ordinances to allow their use. Relaxation of zoning restrictions in favor of owner-occupiers raises none of the fears about changing neighborhoods that is the usual obstacle to local zoning reform.
Moreover, Biden might have put forward an exemption from income taxation of rentals from apartments in owner-occupied single-family homes, a British approach. Many such rentals currently are not declared or are largely offset by maintenance expenses and depreciation; the incentive to create new rental units would be highly visible and the revenue loss modest. Similar incentives for the creation of duplex apartments and apartments with adjustable walls in new construction could be borrowed from Germany and Japan.
The administration might have proposed modest tax incentives for the creation of cooperative land readjustment districts and land assembly districts in ruined areas of large cities. Land readjustment, which does not involve either private land acquisition or eminent domain, created the largest share of postwar residential construction in Japan, South Korea, and Taiwan, as well as in some European cities.
A large program of federal grants supported by local block-to-block inspections could have been included in the plant to effect the encapsulation of lead paint in private rental housing. Numerous writers have urged for years that this is the single most effective public health investment that can be made in the United States. It is estimated that there are more than 20 million units with lead paint in the United States. The cost of lead paint encapsulation, as distinct from removal, is about $3,000 per housing unit. It is accepted that this measure would not only reduce mental retardation but crime also, an effect also attributed to the prohibition on the sale of leaded gasoline imposed in 1996.
Meanwhile, the Biden plan will stick to tired and self-defeating measures. The tax credits for low-income housing presuppose private investment, resulting in an actual new unit cost in the neighborhood of $300,000 per unit. The units, historically, are not built to particularly high standards and will not have a particularly long useful life. The plan also allocates $35 billion to state and local grants for similar purposes with similar defects.
Biden proposes $45 billion be devoted to a Housing Trust Fund for the very poorest families. This deviates sharply from the Roosevelt administration’s approach, in which necessarily limited housing subsidies were directed at intact families that devoted an unusually large portion of their income to housing, the poorest families occupying private rental housing made available through the market processes of “filtering.”
Moreover, $68 billion is devoted to weatherization and energy efficiency grants and rebates, of dubious effectiveness, but of benefit to certain home improvement industries and manufacturers.
The plan includes $20 billion to be devoted to housing rehabilitation in depressed areas where rehabilitation costs will exceed the present value of housing. This replicates the error of the Community Investment Act which in a misguided effort to make deserts bloom proliferated toxic sub-prime mortgages.
Some $40 billion is to be devoted to upgrading existing public housing. Privatization of it on the British model is no part of this agenda. Meanwhile, $2 billion will be devoted to rental assistance for specific units, as distinct from housing vouchers. This revives a failed approach which in the past produced ghettoes inhabited by socially dysfunctional tenants.
The administration proposes that $5 billion be devoted to a top-down effort to reform local zoning laws. Decades of experience in New Jersey and elsewhere suggests that this will be resented, bitterly resisted, and ineffective. Additionally, $2 billion is to be devoted to new elderly housing construction, funds better spent on encouraging the subdivision of the existing housing stock.
The Biden administration’s program is driven by provider and advocacy group interests. Its subtext is a desire to promote racial and socio-economic integration through social engineering. Its flaw is that it overlooks the extent that since elimination of the “white noose” around large cities by the Fair Housing Act of 1968, there has been a massive black diaspora to both inner and outer suburbs, largely unaided by government. In the United States, where collective boycotts are absent, the dollar is usually the universal solvent. Too many of the Biden initiatives are likely to excite local fears and resentments, and to exacerbate rather than improve race relations. Programs aimed at bottom-up reform by directing incentives to owner-occupier homeowners, are likely to be far more effective.
George Liebmann is president of the Library Company of the Baltimore Bar and author of Neighborhood Futures (Transaction Books) and Vox Clamantis In Deserto: An Iconoclast Looks At Four Failed Administrations (Amazon). This New Urbanism series is supported by the Richard H. Driehaus Foundation. Follow New Urbs on Twitter for a feed dedicated to TAC’s coverage of cities, urbanism, and place.
Read More Feedzy