You Live in Subsidized Housing

Originally published on: 6/14/2006 6:31:13 PM

I overheard yet another person ranting about how they hate "housing subsidies", which, in the context of their conversation, meant Section 8-style welfare housing. This happens often enough, that I normally just roll my eyes and go back to what I was doing. However, in this case, the ranter went on to use his home ownership as an example of how he takes care of it himself, without any help.

Now, while I still just rolled my eyes and went back to what I was doing, something inside snapped and I needed to write up this entry.

See, except for some REALLY rare instances, if you live in the United States, you are already living in subsidized housing: welfare recipient, renter and homeowner alike.

It's always bugged me that the biggest housing subsidy program in the country isn't treated as one. The fact that mortgage interest is tax deductible amounts to a GIGANTIC subsidy for home owners. Combine that with the entire mortgage for landlords being called a business expense and not having to pay taxes on renters rent and nearly every housing payment in the United States is subsidized.

My mortgage is actually set up as an interest only (for a variety of reasons beyond the scope of this posting), meaning that my entire mortgage payment of $1350 is tax deductible. Using the basic rule of thumb that tax deductible means that you get back $0.33 for every dollar you spend. That translates into a 33% discount or subsidy on tax deductible items. So, for the purposes of my mortgage, the government subsidizes $445 of my monthly housing costs.

For renters, your landlord is able to deduct 100% of the money they pay toward the mortgage on your apartment or rented house. And, if your landlord isn't paying a mortgage on it, they are in a very small group of people. Really small.

Now, I'm not saying that the deduction is bad. It's fueled home ownership pretty heavily since WWII and has done more good than harm. But, it's still a subsidy and, unless you tell the IRS "no thanks" every April to that little deduction, you're living in subsidized housing too and have no moral high ground over those who are in dire straits and need some help with their housing costs.

Comments

Garrick Van Buren
commented on 6/14/2006 It's not just housing.

It's a rare product or service that isn't subsidized in some way. From energy, fuel, food, transportation, medication, and the advertising to tell you where to buy them.

For me, the tough part is realizing how expensive things would be if they weren't subsidized - even tougher is realizing we're paying that 'higher' price today and just not knowing it.

J Wynia
commented on 6/14/2006 Absolutely. I guess that's why the arrogant "self-made" men I've been bumping into lately bug me so much. They seem to believe that they haven't benefitted from such rampant subsidies and head starts that come from being born in this country.

They might be higher, but we also might not be paying anywhere near 33% in taxes in the first place, so who knows where the prices would actually end up. After all, the subsidies are technically the elected clowns spending money that was ours in the first place.