WASHINGTON — Rep. Keith Ellison, citing a lack of housing opportunities for the would-be middle class, said he’s in the process of drafting legislation aimed at fundamentally restructuring the tax code as it relates to homeownership.
Under Ellison’s bill, the cap on mortgage interest-deductions will be reduced from the first $1 million of principal to just the first $400,000. That deduction will then be turned into a credit, so that every cent of mortgage interest paid is refunded by the government. Early estimates indicate the measure would save about $27 billion a year — money that would go to improving housing options for lower-income Americans.
That bill was one of several solutions proffered Thursday at a forum Ellison hosted here on the economy and working class Americans, part of the Congressional Black Caucus Foundation’s annual legislative conference.
“We’ve got to fight for Middle Class prosperity,” Ellison said. “We’ve got to reorder this economy in a way that it gives working class families a chance to succeed.”
The severity of the situation had an exclamation point placed some hours after Ellison’s panel concluded. The Census Bureau released its latest poverty statistics late Thursday — one in seven Americans now live in poverty.
And for those in that bracket, finding housing is a difficult-at-best proposition.
“There is no place in America where a one-bedroom apartment is affordable on a minimum wage income,” said Sheila Crowley, President of the National Low Income Housing Coalition (NLIHC).
The federal minimum wage is $7.25 an hour. Crowley said a worker would have to earn $18.44 an hour to reasonably afford an average two bedroom home (defined as spending no more than one third of income on housing), up from $12.46 an hour ten years ago.
For those who don’t clear that hurdle, she said, housing is hard to come by. Affordable low-income housing just simply isn’t in enough supply to meet demand.
Some 9.2 percent of Americans are in the working poor, making 30 percent of their area’s average income or less. According to NLIHC figures, just six percent of rents are within the reach of their pockets.
And as bad as the situation is on Main Street, it’s even worse on Martin Luther King Street panelists said, stressing the impact of the economic crisis on majority minority communities.
“Not all main streets are created equal,” said Michael J. Wilson, executive director of Americans for Democratic Action. “This is a different kind of unemployment, not the 9.6 unemployment rate or the 16 percent real unemployment rate.”
The unemployment on MLK Street, he said, was actually 16.3 percent. Add in those who want a job but have given up on finding one, and “we calculate that real rate at 20 percent — one in 5.”
“Main Street hasn’t seen a recession like what we’re seeing on MLK Street since the Great Depression.”
Housing and Urban Development Secretary Shaun Donovan said the solution to that is partly continuing targeted stimulative spending on the “areas that need it most.”
Some 60 percent of the stimulus law’s funds went to central cities, he said. A third went to congressional districts represented by members of the Congressional Black Caucus and Congressional Hispanic Caucus, though their districts make up just 10 percent of the population.
In those lower-income neighborhoods, he said, foreclosures are more likely to occur. They reduce property values by 5 percent if you live next to a foreclosure, he said, but can have a multiplicative effect and imperil a neighborhood’s chance of economic recovery.
“It is one thing if you have one foreclosure in a community — it’s another thing if you have a dozen foreclosures on a block.”
For Ellison, the ability to rise above that situation starts with people having a stable housing situation.
“Think of a family as making a cake,” Ellison said. “Then take away the bowl. Making a cake without a bowl is like raising a family without a house.”