Housing Policy Exam 1 study guide

Housing

More than shelter; affects health, education, stability, economic opportunity, and inequality.

Why housing matters (human survival)

Provides shelter, safety, a place to sleep, and a legal address.

Symbolic value of housing

Housing reflects social status, wealth, values, and aspirations.

Housing and neighborhood

Housing location affects access to schools, jobs, transportation, safety, and social networks.

Environmental impact of housing

Housing and transportation are major sources of greenhouse gas emissions; higher density lowers emissions.

Economic importance of housing

Major household expense, key wealth-building tool, and contributes about 20% of U.S. GDP.

Four major housing problems in the U.S.

Physical inadequacy, crowding, housing unaffordability, homelessness.

Physical housing inadequacy

Housing that lacks basic standards like plumbing, heating, electricity, or safe structure.

Incomplete plumbing

Lacking hot/cold piped water, flush toilet, or bathtub/shower.

HUD definition of adequate housing

A 'decent home and a suitable living environment.'

Severely inadequate housing

Housing with serious plumbing, heating, electrical, or maintenance problems.

Who is most affected by physical inadequacy

Low-income households, especially renters.

Crowding

Too many people living in a housing unit relative to the number of rooms.

Common crowding measure

One or more persons per room.

Housing affordability

A relative concept measuring whether housing costs are reasonable given household income.

Why affordability is relative

What is affordable for one household may be unaffordable for another.

Housing cost burden

Spending 30% or more of pre-tax income on housing.

Severely housing cost-burdened

Spending 50% or more of pre-tax income on housing.

Why affordability measures are more complex for homeowners

Includes mortgage payments, property taxes, insurance, tax benefits, and home price appreciation.

Consequences of housing unaffordability

Less money for essentials, housing instability, higher eviction risk, homelessness, and economic harm.

Main causes of the housing affordability crisis

Rising housing costs, income stagnation, housing supply shortages, inequality, regulation, discrimination, and financialization.

Housing supply shortage

Household growth has exceeded new housing construction.

Income inequality and housing

Income gains concentrated at the top make housing less affordable for low-income households.

Financialization of housing

Housing increasingly treated as an investment asset rather than a basic need.

Why causes vary by city

Housing markets differ; affordability problems are place-specific.

Housing finance system

The institutions and processes that provide loans and credit for housing.

Why housing finance matters

Enables homeownership, shapes affordability, and affects financial stability.

Primary mortgage market

Where borrowers get home loans from lenders.

Secondary mortgage market

Where mortgages are bought, bundled, and sold to investors.

Fannie Mae and Freddie Mac

Government-sponsored enterprises that support the secondary mortgage market.

Ginnie Mae

Guarantees mortgage-backed securities backed by federally insured loans.

Federal Housing Administration (FHA)

Insures mortgages to reduce lender risk.

Redlining

Discriminatory practice denying mortgage insurance to predominantly Black neighborhoods.

Long-term impact of redlining

Racial disparities in homeownership and wealth.

Tax deduction

Reduces taxable income.

Tax credit

Reduces tax liability dollar-for-dollar.

Mortgage interest deduction

A tax expenditure that primarily benefits higher-income homeowners.

Tax expenditure

Government support delivered through the tax code rather than direct spending.

Public housing

Government-owned, locally managed housing for low-income households.

Who owns public housing

Local Public Housing Authorities (PHAs).

Housing Act of 1937

Created the public housing program.

Why public housing has permanent affordability

Government ownership prevents conversion to market-rate housing.

How public housing is financed

PHAs issue bonds; federal government pays debt service; rents cover operations.

Brooke Amendment

Capped public housing rents at a percentage of household income.

Major criticisms of early public housing

Poor design, concentration of poverty, and underfunding.

Main challenge of public housing today

Aging buildings and lack of funding for preservation.

Project-based housing assistance

Subsidies tied to specific housing developments rather than households.

Tenant-based assistance

Subsidies that move with the household (e.g., vouchers).

Section 8 New Construction/Substantial Rehabilitation

Project-based program subsidizing privately owned housing through long-term contracts.

Key feature of Section 8 NC/SR

HUD pays the gap between tenant rent and contract rent.

Preservation challenge of project-based programs

Subsidies expire and units can convert to market-rate housing.

Low-Income Housing Tax Credit (LIHTC)

A tax credit program that incentivizes private development of affordable housing.

When LIHTC was created

1986 Tax Reform Act.

Who receives LIHTC

Private developers, who sell credits to investors to raise equity.

Who benefits from LIHTC units

Households earning roughly 30%-60% of Area Median Income (AMI).

LIHTC affordability period

At least 30 years.

9% LIHTC

Competitive credits that provide more equity.

4% LIHTC

Non-competitive credits often paired with tax-exempt bonds.

Eligible basis (LIHTC)

Development cost minus land and certain non-eligible costs, adjusted by any basis boost.

Qualified basis (LIHTC)

Eligible basis multiplied by the percentage of low-income units.

Total LIHTC credit

Annual credit multiplied by 10 years.

Qualified Census Tract (QCT)

Area eligible for a 30% LIHTC basis boost.

Preservation challenge of LIHTC

Risk of losing affordability after compliance periods end.

Deep housing subsidy

Covers most housing costs for very low-income households.

Shallow housing subsidy

Provides partial assistance, often serving more households.

Public housing subsidy depth

Deep subsidy.

LIHTC subsidy depth

Shallower subsidy than public housing.

Key similarity: Public Housing & LIHTC

Both provide project-based affordable housing.

Key difference: Public Housing vs LIHTC

Public housing is government-owned; LIHTC is privately owned.

Main policy tradeoff

Deeper assistance vs serving more households.