Assets Report 2012Homeownership
When the housing bubble burst, the people who had the least were hit the hardest.
Which households lost most during the recession (2005 to 2009)?[1]
White:
Hispanic:
Black:
The Home Mortgage Interest Deduction is the largest investment in homeownership in the budget, but the families for whom a home is their greatest asset receive the least support.
Which income groups claim the Mortgage Interest Deduction the most?
Which income groups benefit most from the Mortgage Interest Deduction?
Number of returns claiming the mortgage income tax deduction by income group[2]
Average value of the Mortgage Interest Deduction claimed by income group[2]
In the FY 2013 budget, almost $200 billion is spent to support homeownership, little of which goes to families with low or modest incomes.
What can we do?
In the short term, we need measures to decrease the burden on families who are struggling in the wake of the housing market collapse, such as foreclosure mediation and mortgage modifications. In the long run, we need to expand the accessibility and sustainability of homeownership by matching home buyers with appropriate mortgage products and transparent information so families will know what they cost.
Redirecting federal support for homeownership from subsidizing debt to supporting savings would also make owning a home a more secure investment and available to more lower-income families. Rental Assistance Asset Accounts, which would allow families receiving housing assistance to divert a portion of their rent into a savings account that could be used for multiple purposes once they leave the program, including a down payment on a home, is one promising approach.
Entrepreneurship
Small businesses are the engines of job creation and vibrant local economies, but the fuel is running low.
Many small business can't get the money they need to open their doors and keep them open.[3]
How many?
How much?
2008
2010
27 Million Loans
22 Million Loans
$711 Billion
$652 Billion
2007
2009
Bankruptcies
28,332Closures
592,410Openings
668,395Since the Great Recession, credit has seized up, leaving even responsible borrowers with good credit and promising ideas without access to the capital needed to move those ideas to market.
What can we do?
Expand the availability of credit for small business through greater support for community banking and community banking districts that hold public funds in exchange for commitments to increase their local lending.
Retirement
Too few people are saving for retirement and they're not saving enough.
The lower your income, the less likely you are to...
Employer Sponsorship of Retirement Plans by Income Quartile (2008)[4]
Top quartile
Second quartile
Third quartile
Bottom quartile
...have a job that offers a retirement plan...
...participate in a retirement plan...
Employee Participation in Retirement Plans by Income Quartile (2008)[4]
Top quartile
Second quartile
Third quartile
Bottom quartile
Who receives the most tax benefits for pension plans?
Distribution of Tax Benefits from Qualified Pension Plans among Households, by Income Quintile[5]
...benefit from federal spending to support retirement savings.
Over 99% of federal spending to support retirement savings is in the form of regressive tax subsidies.
What can we do?
A Universal 401(k) system would establish a retirement account for all workers and offer matching incentives targeting lower- and middle-income earners.
Savings and Investment
Savings keep an unexpected expense from becoming a financial emergency, but many families are falling short.
How many?
How much?
43%
$4,632
to live at the U.S. poverty line for three months.
Liquid asset poverty rate is the percentage of households without sufficient liquid assets to subsist at the poverty level for three months in the absence of income. Data from CFED, 2012
Income poverty rate is the Percentage of households with income below the federal poverty threshold.CFED, 2012
Roll over the map to see poverty numbers for each state.
No portion of the federal budget supports families saving for emergencies.
What can we do?
The Saver's Bonus is a policy that would leverage the infrastructure and resources of the tax time moment to create an easy way for families to save for a range of purposes, including emergencies.
Post-secondary Education
Many poor families can’t afford the college education that could move their children out of poverty.
Tuition is rising. Low-income families are least able to absorb these costs.[7]
Top quintile
Second quintile
Third quintile
Fourth quintile
Lowest quintile
To attend college, it costs between a third to over half of the yearly income of lower income families, earners in the bottom two quintiles in the United States
Top quintile
Second quintile
Third quintile
Fourth quintile
Lowest quintile
The burden has grown across the board since 2000, but especially for the bottom quintiles.
As a result, far fewer low-income students enroll in college than high-income students.[7]
High Income Students
Low Income Students
2013 budget request spending levels — Post-secondary education
Percentage of
Total Asset Spending
Savings build both the resources and the expectations needed to get more low-income students to college, but most federal spending that supports saving for college benefits higher income families through tax subsidies.
What can we do?
We need to make sure students and their families have access to accounts where they can save for post-secondary educational opportunities. These could be delivered by offering every child a savings account at birth, as proposed by The ASPIRE Act, or making existing 529 college savings plans better savings vehicles for low- and moderate-income families.
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For more information on these topics, please visit the Asset Building Program.
Sources
- [1] Wealth Gaps Rise To Record Highs Between Whites, Blacks and Hispanics (Pew Research Center, 2011)
- [2] Estimates of Federal Tax Expenditures for Fiscal Years 2011-2015 (Joint Committee on Taxation, 2012)
- [3] Small Business Lending in the United States, 2009-2010 (Small Business Administration, Office of Advocacy, 2011)
- [4] Pension Sponsorship and Participation: Summary of Recent Trends (Congressional Research Service, 2009)
- [5] Do Low-Income Workers Benefit from 401(k) Plans? (Center for Retirement Research at Boston College, 2011)
- [6] Assets and Opportunity Scorecard (CFED, 2012)
- [7] The Condition of Education 2011 (Department of Education, National Center for Education Statistics, 2011)