Housing instability—referring to inadequate housing tenure or security—can devastate individuals’ lives in the best of times, but it is particularly dangerous in the pandemic because it prevents people from taking appropriate care of themselves. What does a stay-at-home order mean for a person without a home? The public health risk is exacerbated as well when the housing instable cannot practice social distancing. Not only is the housing instability dangerous in the pandemic, but the pandemic exacerbates the causes of housing instability. Housing instability flows from financial distress, and the economic crunch of the pandemic has put large swaths of the population under terrible financial conditions. Unmitigated, this cruel circle will continue compounding the problems.
To prevent this compounding, governments can provide relief targeted at housing instability. In this effort, the Great Recession provides a benefit in disguise: The United States has recently encountered a housing crisis and can learn form its responses to that crisis. As the authors note, however, the Great Recession responses to housing stability problems were not particularly successful. The Bush and Obama administrations both focused on programs designed to encourage lenders to modify loans and developers to rehabilitate distressed areas. However, reluctance on both the part of administrators and lenders tanked the participation rates in voluntary loan-modification programs. Rehabilitation programs, such as expanded low-income housing tax credits and opportunity zones, suffered problems of scale and ineffective administration. Finally, limited programs targeting borrowers and renters were more successful, but also suffered from ineffective administration, often in the form of slow roll outs and inadequate awareness campaigns.
The authors offer a number of takeaways from the Great Recession experience for targeting housing instability that policymakers should bear in mind in our current crisis. First, direct intervention is likely to be more successful than incentive programs. Second, grants are likely to be more effective than tax expenditures. Third, there may still be a place for place-based interventions in areas disproportionately affected by COVID-19. And finally, interventions addressing mortgage and rental obligations should not be voluntary for lenders and landlords (e.g., have robust legal protections against foreclosures and evictions).
Applying these takeaways to existing COVID-19 relief efforts, the authors find that foreclosure moratoriums and eviction freezes have been relatively successful programs, but suffer from a lack of clarity on the back end. What happens when these temporary measures run out? Leaving the question unaddressed leaves room for ineffective administration to disrupt the success of these measures. Similarly, expanded unemployment benefits have been relatively successful, but confusion about how the benefits are accessed in different jurisdictions has allowed for administrative problems to arise. The $1200 stimulus payments may have been the most successful program at mitigating housing insecurity but are limited in nature and have faced difficulties reaching the right people. The PPP program failed to effectively target small businesses, making it difficult for the benefits to reach distressed individuals and communities. Likewise, the expanded charitable contribution deduction does not target charitable organizations addressing housing instability, so there is no guarantee the benefits are going to those organizations rather than other nonprofits like universities.
The authors finish their project by offering policy recommendations to improve on current efforts. First, provide the housing instable with a right to counsel to ensure that they are not inappropriately removed from their homes. This right to counsel enhances private enforcement power to counter lender and landlords that would skirt protections addressing people’s mortgage and rental obligations (though the laws still need to be clearer about the back end consequences of relief). Second, provide vulnerable people with direct rental assistance or mortgage payment relief. Finally, provide place-based incentives for affordable housing, but with rigorous controls to ensure that the incentives are effective.
In these last two recommendations, the authors effectively engage in tax expenditure analysis: having a policy in mind, is it best achieved through the tax code or direct subsidies? To focus on the direct rental assistance or mortgage relief payments, the authors conclude that grants are better than tax breaks because the grants can be specifically targeted and are not subject to the structural limitations of the tax code, like different rate brackets and liabilities. However, the authors note earlier that the stimulus payments were fairly successful, though they were technically tax refunds, so it would be helpful to consider the possibility of a refundable tax credit. Particularly after the stimulus checks, the government might have much better information about and ability to reach vulnerable individuals through the tax code, making it an appealing option. Granted there is a real possibility Treasury has not learned for its mistakes with respect to the stimulus payments. But even if leveraging existing grant programs, as the authors suggest, is the best method, could there also be a benefit to building in a redundancy through refundable tax credits that could be recaptured if necessary? Perhaps I’ve fallen into the complexity trap the authors warn could damage the effectiveness of relief efforts.
The devil is often in the details, and one could quibble over those details endlessly. The value of Layser, De Barbieri, Greenlee, Kaye, and Saito’s paper is not in settling those details but in focusing policymakers on housing instability and the high-level considerations that should guide the design of relief programs. Their analysis and recommendations are timely, thoughtful, grounded, and—perhaps most importantly—helpful. If I might be so bold, given the scale of the housing insecurity problem as the pandemic rages on, the authors’ recommendations might adopt the motto “Go Big, and We All Go Home.”