Calls for a new Marshall Plan come up periodically whenever there is a real or perceived crisis. Recently, two presidential candidates have put forth Marshall Plan proposals– Sen. Elizabeth Warren supports a “Green Marshall Plan” and Julian Castro, a former mayor of San Antonio, wants “a 21st century Marshall Plan for Central America.” While I’m sure these are worthy causes, to my mind the persistent, systemic undersupply of housing that people can afford is a crisis in the US that needs immediate attention. It continues to get worse each year. This shortage of housing is having a large human and economic negative effect. Therefore, we propose an equivalent Marshall Plan for affordable housing, the Save Affordable Housing Plan.
The Marshall Plan was an American initiative passed in 1948 to aid Western Europe. According to the four-year plan, the United States gave over $12 billion (nearly $100 billion in 2018 US dollars) in economic assistance to help rebuild Western European economies after the end of World War II. The plan sought to rebuild war-ravaged regions, modernize industry, tear down trade barriers, improve prosperity and prevent the spread of Communism. It required the elimination of many regulations as well as a reduction of interstate barriers, while encouraging. Increased productivity, and the adoption of modern business practices. The Marshall Plan parceled aid to participant states on a rough per capita basis.
In 1948, the year the Marshall Plan was enacted, the U.S. Budget was $39.9 billion. The Marshall Plan’s $12 billion commitment was funded $3 billion/year for four years. The first-year commitment of $3 billion represented about 7.4% of the U.S. Budget that year. The U.S. Budget for 2019 is estimated to be $2.5 trillion with spending of $3.6 trillion. A new commitment of $100 billion (roughly equivalent to the $12 billion in 1948) for the Save Affordable Housing Plan could also be paid out over four years. The first-year funding of $25 billion would represent only 1% of the estimated 2019 U.S. Budget and 0.7% of our projected 2019 spending. Its final cost would be lower when the ancillary economic benefits are included – lower health care and social service costs, less homelessness, better youth education results, less crime, etc.
The goals of the Save Affordable Housing Plan would not be dissimilar to some of the elements of the original Marshal Plan. If carefully designed, it would build and preserve a large amount of affordable housing units; eliminate much of the red tape, delays and costs that are currently impeding new construction; and allocate capital to the states on a per capita basis, the same way LIHTCs are currently allocated. The plan should also include all provisions of the Affordable Housing Credit Improvement Act currently working its way through Congress. Money could be allocated for state level soft financing; offer additional project-based vouchers; and provide services to support mental health and addiction problems.
Whether the suggested amount of the plan would be adequate to accomplish its goals will need further study, but it would certainly put a big dent in the problem. There doesn’t appear to be much disagreement in Congress (or in the country) that there is a real crisis in affordable housing. Millions are paying 50% or more of their income on rent, there is a huge shortage of housing for very low-income people, homelessness is a national disgrace and the supply of existing older affordable housing continues to deteriorate and disappear.
Several presidential candidates have plans to address the problem piecemeal, but while helpful, they are only attacking it at the margin. Time is our enemy. So, if we truly want to make a meaningful change to the affordable housing crisis, we need a Marshall Plan-like, all-out program to really have an impactful result.