The Big Picture
Answering these questions forthrightly will illuminate the best way forward .
The federal government spends nearly $ 200 billion annually on housing . As Figure D shows , about 70 percent of this spending supports homeownership , while 30 percent supports rental housing .
More than three-quarters of the federal government ’ s spending on housing takes place through the federal tax code in the form of “ tax expenditures .“ Tax expenditures are subsidies to individuals and corporations that are delivered as deductions , credits , exclusions , and other preferences that result in reducing the amount of tax that is owed . 6
As a general matter , to benefit from a tax expenditure , an individual or corporation must take certain actions and meet specific criteria . The primary purpose of tax expenditures is not the equitable allocation of tax revenues but to encourage taxpayers to act in ways that are deemed to promote socially beneficial objectives . Rather than spend funds directly on activities that support these objectives , tax expenditures aim to achieve the same result by providing a subsidy to the taxpayer to encourage certain desired behaviors . 7
Tax expenditures are essentially government spending programs that are administered through the federal tax code . But unlike most spending programs , tax expenditures are generally not subject to built-in cost limitations and operate largely outside the annual appropriations process that allows for routine Congressional oversight . 8
RENTAL
30 %
Total $ 59.1 B
Figure D
Estimates of Federal Tax and Spending Support for Housing ( Fiscal Year 2017 ) ( US $ Billions )
RENTAL Federal Appropriations
• Section 8 Housing Choice Voucher Program 19.6
• Project-Based Section 8 Rental Assistance 10.6
• Public Housing 6.4
• HOME and CBDG rental activities 2.6
• Homelessness Assistance 2.2
• Other HUD Programs 1.6
• USDA Rental Assistance Programs 1.4 Subtotal 44.4
RENTAL Tax Expenditures
• Low-Income Housing Tax Credit 8.5
• Rental Housing Accelerated Depreciation 4.2
• Tax-Exempt Bond Interest Exclusion 1.1
• Credit for Rehab ( historic and non-historic ) 0.9 Subtotal 14.7
Total Federal Support $ 193.8 Billion
Homeownership Federal Appropriations
• HOME and CDBG homeownership activities 1.4
• USDA Programs 0.9 Subtotal 2.3
Homeownership
70 % Total $ 134.7 B
Homeownership Tax Expenditures
• Mortgage Interest Deduction 63.6
• Property Tax Deduction 33.3
• Capital Gains Exclusion 32.1
• Exclusion of Home Debt Discharge 1.2
• Tax Exempt Bonds Interest Exclusion 1.4
• Mortgage Insurance Premium Deduction 0.8 Subtotal 132.4
Source : Tax expenditure numbers from the Joint Committee on Taxation , Estimates of Federal Tax Expenditures for Fiscal Years 2016-2020 ( January 30 , 2017 ). Appropriations numbers reflect FY 2016 levels , as authorized by the Further Continuing and Security Assistance Appropriations Act , 2017 ( Public Law No . 114-254 ). Does not reflect emergency and disaster relief appropriations for the CDBG program provided by the CR . For purposes of calculating federal spending on homeownership , does not include government mortgage insurance and other credit enhancement programs .
8 Money is Policy : How Federal Housing Dollars Are Spent