Paul L. Caron

Friday, July 24, 2020

Weekly SSRN Tax Article Review And Roundup: Holderness Reviews Mitigating Housing Instability During A Pandemic

This week, Hayes Holderness (Richmond) reviews Michelle D. Layser (Illinois), Edward De Barbieri (Albany), Andrew Greenlee (Illinois), Tracy Kaye (Seton Hall), & Blaine G. Saito (Northeastern), Mitigating Housing Instability During a Pandemic:

Holderness (2017)The COVID-19 pandemic continues to wreak havoc on people’s lives, both from a health perspective and an economic perspective. Congress is currently considering additional federal relief packages to support individuals across the country, and states and localities also weigh how they can help their people. Many have found these government responses lacking so far, and Michelle Layser, Ted De Barbieri, Andrew Greenlee, Tracy Kaye, and Blaine Saito add an important and powerful critique in their draft article: Not enough attention has been paid to housing instability (a particularly salient critique to yours truly, whose hometown carries the ignominious rank of second most evicting large city in the country). Policymakers would be wise to learn from the authors’ analysis and heed their advice.

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.”

Here’s the rest of this week's SSRN Tax Roundup:

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Speaking of Coronavirus… We should focus on California for a moment, being in an especially unique position, as the state now has one of the highest Coronavirus infection rates in the USA… Plus, business property owners in that state happen to be on the edge of an economic cliff right now, waiting until Nov. to see if they’ll be paying more property taxes if a CA Proposition 15 property tax passes into law… And if it does pass, all Californians will be looking at paying increased prices on all goods and service across the state, since landlords and commercial property owners will be forced to raise rents on commercial tenants, and guess who that added cost gets passed on to? Consumers, of course.

The rising Covid-19 infection rate in California certainly puts Californians in a very challenging and vulnerable position. Piling new property taxes on top of a California public already struggling with high unemployment caused by the Coronavirus crisis, plus some of the highest gas, income, and sales taxes in the nation. As a matter of fact, the California Legislature just passed policies that have resulted in residents paying 48% more for electricity than the rest of the nation! So adding a new property tax on top of these existing and rising costs will only expand the financial struggle most Californians are going through right now.

With California running particularly high Coronavirus infection rates, as well as even scarier unemployment numbers… they would do well not to pile on more expenses, for example adding the Proposition 15 property tax to the mix. Even if it is supposedly only affecting commercial property owners, and landlords… this spiders out and impacts all Californians at the end of the day.

And if you read up on CA state government sites like the California State Board of Equalization, at, or talk to Californians, or read blogs like or Prop 13 & Prop 58 info-sites like you see very quickly that the great fear is – if the critics of Proposition 13 tax relief are allowed to open the door to unraveling tax breaks for commercial property owners… what is to stop them from going after home owners’ ability to take advantage of property tax transfer benefits, or the transfer of parents property taxes upon inheriting property taxes in general. The anxiety running through the state concerns fear that critics of 1978 Proposition 13 now pushing Proposition 15 (formerly entitled the "Split-Roll tax”) will feel free to go after the right for consumers to avoid property tax reassessment, as well as parent to child transfer, and parent to child exclusion. It is a valid concern.

Posted by: Geoffrey Sadler | Jul 25, 2020 1:45:34 PM