The United States needs a national housing policy that assists individuals at all rungs of the income ladder, particularly those stuck at the bottom. Here at Urban, we have been examining opportunities to use housing policy to reduce income inequality and promote economic mobility. Two important policy levers are federal rental assistance and federal tax policy.
In a new brief, Gregory Acs and Paul Johnson offer insight into how housing tax and transfer programs affect income inequality. Their analysis of the relationships between housing subsidies, the mortgage interest and real estate tax deductions, and income inequality reinforces two important concepts:
- Housing subsidies reduce income inequality, while the mortgage interest and real estate tax deductions increase it.
- Benefits targeted at low-income households have a stronger equalizing effect than the disequalizing effect of benefits targeted at high-income households.
This interactive chart walks through the authors’ analysis. The research uses calendar-year 2012 data from the March 2013 Current Population Survey adjusted and augmented by the TRIM microsimulation model.
As we look for opportunities to rebalance our national housing policy in a time of constrained public resources, Acs and Johnson’s analysis informs us that targeting funds toward housing assistance and policies that support those at the bottom end of the income ladder may be the most prudent and impactful way to do more with less.
This blog is part of the Housing Assistance Matters Initiative which educates Americans about the vital role of housing assistance. The initiative is a project of the Urban Institute, made possible with support from Housing Authority Insurance, Inc. (HAI, Inc.). The Urban Institute is a nonprofit, nonpartisan research organization and retains independent and exclusive control over substance and quality of any Housing Assistance Matters Initiative products. The views expressed in this product are those of the authors and should not be attributed to the Urban Institute or HAI, Inc.