Category Archives: Housing news

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For Bipartisanship and Affordable Housing, Try MID Reform

The next contentious battle to sweep through Congress looks likely to be tax reform. Already the partisan lines are forming, with a more-than-healthy dose of special interest groups on both sides. But one area where there could be bipartisan agreement is the mortgage interest deduction. It would take serious political courage all the way around, but for the first time in decades progress is possible on one of the American tax codes most costly mistakes.

What is MID?

The mortgage interest deduction, or MID, allows homeowners to deduct interest payments on mortgages from their taxable income. (Translation: lower taxes for homeowners.) Because it’s a deduction and not a credit, it only applies to tax payers who itemize their taxes rather than taking the standard deduction. (Translation: lower taxes for upper income homeowners.)

What is it supposed to do?

With the current version coming from one of Reagan’s tax overhauls in the 1980s, MID has long enjoyed bipartisan support as a way to increase homeownership. The idea is simple—if you give people who buy a home a tax break, you’ll see more people buying homes. It was part of a broader push in the ’80s to move housing affordability into the private sector, which also included the end of building new federal public housing and the birth of the Low-Income Housing Tax Credit.

What is it actually doing?

Answer 1) Not increasing homeownership. Research has shown that while MID may convince someone to buy a bigger home, it almost never is the determining factor in whether or not someone will buy something. That’s in large part because…

Answer 2) MID mainly helps rich families. Because it just applies to tax payers who are itemizing their taxes, only half of all homeowners are able to take advantage of MID at all. And among those homeowners, a hugely disproportionate amount of the overall money goes to the top. MID is a big part of the reason that 75 percent of all federal housing subsidy actually goes to wealthy families. (It really makes you think about who those “takers” are that some on the right rail against.)

That’s why groups as diverse as the CATO Institute and the National Low-Income Housing Alliance have come together in calling for the cap on deductible mortgages to be lowered from $1 million to $500,000. The move would affect just 6 percent of all mortgage holders, but it would save a whopping $241 billion over the next decade.

The Trump Administration has also floated this plan, although it’s not clear how it will fare once the full weight of the real estate lobby comes down against it.

The path forward

Unfortunately, disagreement arises with the question of how those savings should be put to use. While affordable housing advocates would like to see the money moved to lower-income homeowners and renters, congressional Republicans are likely to want the savings applied to their larger plan of tax breaks for the wealthy and increased military spending.

Regardless of how this plays out on a national level, DC has its own version to deal with: the Homestead Deduction, which allows all DC homeowners—no matter how wealthy—to save on their property taxes. It’s another piece of subsidy for the rich that could be fixed with a simple home value limit.

As Congress looks to rewrite our tax code, it’s important to remember who the “takers” really are. With 75 percent of federal housing subsidy going to wealthy households, MID is long overdue for restructuring.

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DC, NYC now offering low-income tenants free legal representation

Image: Tenant rights activists rally in DC earlier this year

Eviction is just about the scariest thing that a tenant can face. It increases your risk of homelessness, poverty, and job loss. It’s more likely to happen to you if you’re a woman, if you’re black, or if you have kids. And it can set your family back for years. That’s why Washington, DC and New York City just implemented laws offering free legal services to low-income tenants facing eviction.

These laws are part of a growing movement across the country, called “civil Gideon,” to provide legal representation to tenants facing eviction. It stems from data showing that while landlords almost always have a lawyer in eviction suits, tenants almost never do. In DC, 94 percent of landlords have legal representation. That’s compared to only 5 percent of tenants.

That gap produces a huge disparity in outcomes, with tenants often being evicted over minimal debts. Sometimes it’s not even a debt tenants are unable to pay–withholding rent is a common last-straw tactic for tenants who can’t get landlords to make necessary fixes. But without a lawyer to guide them, that tactic can end in eviction.

Opponents of New York City’s law, which offers free representation to tenants making up to $50,000, complain about its cost–estimated to be about $200 million each year. But because evictions so often result in homelessness, increased reliance on safety net programs, and other costs to local governments, supporters of the bill decided to run the numbers.

They found that the measure will not only pay for itself, but it will result in over $300 million of additional savings each year. Between saving tenants strife and saving the city money, it’s hard to find a reason to oppose this bill.

The DC Council agrees, and a similar bill put forward earlier this year by Councilmember Kenyan McDuffie (Ward 5) ended up being included in this year’s budget support act. As a much smaller city, the costs for DC’s program are significantly less than in New York City–the budget included $3.9 million in ongoing funds and an additional $600,000 for this year.

Tenant groups and other advocates will be sure to watch this process closely. But with widespread support, plus clear benefits for tenants and the city coffers, DC’s new effort to get free legal representation for low-income tenants should be a great success.

 

Asset Building cover

New Push in DC for Racial Justice Through Asset Building

A bold new report released this month details the disparity of wealth along racial lines in DC, then plots several ways the city can achieve a more equitable future. Its authors hope it’s just the start of a city-wide movement for building wealth in communities of color.

The report, entitled An Introduction to Asset Building in the District of Columbia, was written by the Coalition for Nonprofit Housing and Economic Development (CNHED) and Capital Area Asset Builders (CAAB), two long-time players in DC’s asset building landscape.

The need is clear. According to the report, 40 percent of DC residents don’t have enough net worth to stay above the poverty line for three months if their income disappeared. One in ten don’t even have a bank account—and among those who do a full quarter of residents are still forced to use predatory institutions like payday loan offices.

Asset building stats

It’s a problem that largely falls along racial lines. An analysis of DC post-recession found that the average white household has over 80 times the wealth of the average black household. That’s largely due to a lack of asset ownership, especially homeownership, in black communities.

CNHED and CAAB want to start a new coalition to take this problem on. Because this disparity has been created by several centuries of discriminatory laws and spending, it will take smart new investments by public and private actors to start to shrink this racial wealth gap.

The report outlines four general approaches that an asset building coalition could take, from pressuring the city government to institute new programs for low-income wealth building, to creating and managing new programs through a steering committee made up of members from this future coalition.

Whatever form this coalition takes, DC residents are counting on it to be impactful. Many literally can’t afford failure.

For more info about the Asset Building Policy Project and how to join the coalition, click here!

Asset Building strategies

stop trumpcare

Supportive Housing Could Be First to Go if Medicaid Cuts Pass

Even with a series of recent defections, Republicans are still working to roll back Obamacare. Various versions of their bill have all had a couple things in common—tens of millions would be made uninsured and Medicaid would be slashed dramatically.

Between trying to figure out how many people would die, how many people would lose insurance, and just how much money billionaires would save, there are a lot of pieces of this bill worth investigating. In the turmoil, however, one important component has often been overlooked: housing.

With the expansion of Medicaid under the Affordable Care Act, millions of people across the country gained access to healthcare for the first time. Included in that number (but often forgotten) were many who gained housing or housing stability with the expansion.

Programs like Los Angeles’ Housing for Health program use Medicaid dollars to offer mental health counseling and substance abuse treatment alongside the housing it provides to formerly homeless residents. The two parts work together—patients often can’t keep up with counseling sessions or rehab without the stability of a home, and those who receive housing without supportive services too frequently end up back on the streets.

Supportive housing, which includes a variety of social services that people may need to live outside of an institution, became available to thousands more Americans with Medicaid expansion. These programs offer help to people with disabilities, mental illness, substance abuse issues, and those recovering from homelessness.

Under the Republican plan, however, Medicaid would be rolled back—and not just to pre-Obamacare levels. GOP leadership has pushed to end Medicaid as an entitlement, meaning that states would no longer receive funding based on residents’ needs. Instead, states would get a set amount of money for each resident on Medicaid. It would then be up to the states to decide what to do with that money.

The proposed amount per person is far less than what is needed, and it wouldn’t grow with rising costs. That would create a scenario in which state governments are forced to make more and more painful cuts each year, continually shrinking the number of services they provide to their most vulnerable residents.

And experts have predicted that supportive housing could be among the first services to go.

Disability activists and others have been relentless in organizing opposition to the bill, with actions happening almost every day at the Capitol. On Monday alone, 33 people were arrested in Senate buildings and offices while peacefully sitting in to demand that Republican senators kill the bill–not an atypical day.

Because of these efforts, both the initial Republican bill and a follow-up attempt to repeal the Affordable Care Act without a replacement have  failed. Yet activists warn against complacency. As unpopular as the draconian cuts are with the general public, they have broad support among Republican legislators and continued action will likely be necessary to prevent the bill’s revival.

Anita Bonds

CM Bonds Moves Rent Control Fixes

Councilmember Anita Bonds (At-Large) symbolically closes a rent control loophole at an event in October 2016

DC has one of the strongest rent control laws in the nation. Unfortunately, several landlord-sized loopholes turn lots of ostensibly rent controlled housing into market rate units each year. But Councilmember Anita Bonds (At-Large) is working on passing a pair of bills to fix that.

The problem comes in both cases when a rental unit changes hands.

Currently, anyone living in a rent controlled building (any building built before 1975 that has five or more units) by law sees only modest increases in their rent each year. For people who find an affordable rent-controlled unit and then are able to age in place, the protections are stellar.

But when a unit experiences turnover, as units are liable to do in DC’s fast-paced rental market, landlords are able to raise prices by up to 30 percent—often essentially taking the unit to market rate. One family may leave a home that costs $1300 a month only for the next family who moves in to find themselves facing rent of $1700 a month or more.

One of CM Bonds’ bills, entitled the Rental Housing Affordability Stabilization Amendment Act of 2017, would cap that increase at just 5 percent—an amount that preserves the unit’s affordability and doesn’t incentivize pushing current tenants out the door. Publicly supported by Councilmembers Cheh (Ward 3), Silverman (At-Large), Gray (Ward 7), Grosso (At-Large), and Trayon White (Ward 8), the bill would also limit yearly rent increases to strictly the rate of inflation.

Another tactic landlords sometimes use to raise prices is to make voluntary agreements with tenant associations. It’s a process that involves several steps of abuse.

Landlords can file to raise rent above allowable rates with a “hardship petition,”* claiming that they can’t afford to make necessary improvements (or at least can’t earn enough profit while doing so) without more revenue. If their petition is accepted, tenants have no negotiating power—they can pay the new, higher rates or move out.

But sometimes landlords are unsure whether their petition would succeed or not. If that’s the case, they’ll go a different direction and use the threat of a hardship petition as a bargaining chip. In negotiating with tenant associations, landlords portray the tenants’ choices as this: you can either go through with the petition process and likely see automatic rent increases, or you can sit down with me and work on a deal where you’re guaranteed not to see any increases—but you wave future tenants’ rent control rights.

With the voluntary agreement from the tenant association in hand, landlords are able to make any unit that changes hands into a market rate apartment.

CM Bonds’ other bill, the Preservation of Affordable Rent Control Housing Amendment Act of 2017, wants to stop landlords from pitting current and future tenants against each other. It would outlaw the practice of making deals that only raise prices for newcomers, mandating that any agreed upon increases must be applied across the board.

It was co-introduced by Councilmembers Robert White (At-Large), Silverman, Cheh, and Trayon White.

If passed by the Council and signed into law, both bills would move DC closer to protecting tenants as the District’s rent control law intended.

 

*Another one of CM Bonds’ bills on rent control, this one targeting hardship petitions, was signed into law last December. It succeeded in lowering the return on investment guaranteed to landlords from 12 percent to 5 percent.

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What’s needed to afford housing in DC? $33 an hour

At the current minimum wage of $12.50/hr, Washingtonians need to work 107 hours each week to afford a two-bedroom apartment. That’s according to a new report by the National Low Income Housing Coalition, entitled Out of Reach: The High Cost of Housing.

The report shines a spotlight on the increasing impossibility of affording rental housing in the US, coming during a period where the portion of the population that is renting continues to rise.

It’s a crisis that is truly national in nature: not a single state has an average one-bedroom rent that is affordable to someone working 40 hours a week at minimum wage. (Affordability is defined as requiring only 30 percent or less of a household’s income.)

In the District’s overheated housing market, the situation is particularly dire. As the numbers for a two-bedroom apartment indicate, families have little hope of finding housing while working for the minimum wage. Single people, however, fair little better. The average rent for a one-bedroom apartment is $1,513—more than double what someone earning minimum wage can afford.

And it’s not just those earning low wages that are affected. The average full-time wage paid to a renter in DC still leaves that worker $100 short for rent each month.

Talk of more subsidy for affordable housing is often met with immediate resistance. There’s a sense that the people who need affordable housing aren’t our neighbors, friends, and families—and certainly not ourselves. Rather, they’re some vague unknown other who probably isn’t working as hard as they should be.

Add in the fact that activists are currently fighting simply to preserve what funding there is for low- and moderate-income families, and it can be a complete nonstarter. Besides, our country already spends billions on affordable housing, and it doesn’t seem to be working, right?

As Rep. Keith Ellison (D-MN) notes in his introduction for the report, a full three-quarters of the $200 billion the federal government spends on housing each year goes to wealthy families through the mortgage interest deduction and other tax incentives.

That’s $150 billion in assistance for households who don’t need it. It’s time to take a hard look at our discourse around housing subsidy and redefine the makers, the takers, and the deserving. Otherwise, housing will continue to be out of reach for an ever-growing number of Americans.

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week of action cover

July 26 DC Rally Against HUD Cuts Part of Week of Action

On Wednesday, July 26, at 11am DC residents will rally at the Capitol with Senator Chris Van Hollen (D-MD).

It’s part of an effort to stop draconian cuts that the Trump Administration has proposed for the Department of Housing and Urban Development. Activists are organizing a National Week of Action under the banner “Our Homes, Our Voices,” and thousands across the country are expected to come out for a series of rallies, teach-ins, HUD site visits, and Congressional meetings.

The Trump Administration has proposed $6 billion in cuts for HUD, which would have devastating and wide-ranging effects. Hundreds of thousands of low-income families would lose their rent vouchers and potentially their homes. Public housing, already in a desperate state of disrepair, would further deteriorate, putting children and families across the country in danger.

In DC, funding for the Home Purchase Assistance Program, the District’s impactful first-time homebuyer assistance, is under threat. 80 percent of HPAP money comes from Community Development Block Grants—a program with bipartisan support that the Trump Administration has proposed eliminating entirely.

Action to oppose these cuts will be crucial, as Congress has so far shown that public involvement (or lack thereof) is the determining factor in its willingness to stand up to the Trump Administration.

You can see the full list of local events here! Be sure to let your enfranchised friends know that they need to call their representatives.

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HOTH 2017 2

HAT, Partners Work Against Racial Wealth Gap with Town Hall; Trump Administration Exacerbates It

One-sixteenth.

That’s the average wealth of a black family compared to a white family in America. It’s the result of centuries of racist policy in education, employment, and especially homeownership.

MANNA’s Housing Advocacy Team has long had an explicit focus on closing the racial wealth gap in our communities, and along with our partners at the Coalition for Nonprofit Housing and Economic Development and the Latino Economic Development Center, this past Saturday we hosted a Homeownership Town Hall aimed at connecting low-income families, especially families of color, to homeownership opportunities.

HAT and our partners are proud of the work we do, and we can see the impact that it has in DC. At the same time, however, we realize that there needs to be national progress in order to achieve justice in our country. The Trump Administration, on the other hand, is looking for a massive transfer of wealth from the bottom to the top; one that’s sure to widen America’s racial wealth divide.

The Town Hall

Close to 200 people came on Saturday for a series of workshops, vendor tables, and presenters covering every step of the affordable homebuying and ownership process. Participants learned about how to improve their credit scores, how to connect with organizations like MANNA that can help them find a home, and the wide variety of city programs that can help make affordable homeownership possible.

Current homeowners were able to learn about city property tax laws and legal estate planning, helping to ensure that their homes will be passed on to their children.

MANNA’s Director of Homebuyer Education, TC Caviness, started off the strong lineup of speakers by articulating the extent to which a gap in homeownership holds back wealth building for black families. Even other areas that are typically thought of as wealth builders, like education level, pale in comparison to the impact that homeownership has.

Despite having worked around housing for years, said TC, “I was shocked when I saw these charts.”

RacialWealthGap_1.pdf college RacialWealthGap_1.pdf

A college education, while important for many, many reasons beyond money, does almost nothing to close the racial wealth gap, explained TC. Homeownership, on the other hand, shrinks that gap by more than a third.

Polly Donaldson, Director of the DC Department of Housing and Community Development, and Councilmember Anita Bonds, Chair of the Council’s housing committee, both spoke about the importance of affordable homeownership for building a city where all residents can thrive.

Councilmember Bonds, reflecting on the positive impact of recent increases to DC’s Home Purchase Assistance Program for first time low- and moderate-income homebuyers, told the crowd, “Next year, I want to increase it again!”

Trump Administration’s Reverse Robin Hood

That was in stark contrast to the ideas that are coming out of the White House. The Trump Administration has released a series of tax cuts for the wealthy that would collectively cost around $6.2 trillion over the next decade.

To pay for them, the President has introduced a budget plan that would drastically cut many programs targeting poor families, among which families of color are disproportionately represented.

Here are a few of his proposed tax and budget cuts, juxtaposed for context.

  • $192 billion cut to food stamps pays for $174 billion giveaway by abolishing the Estate Tax
  • $143 billion in cuts to student loans helps pay for $158 billion lost by repealing a tax on the unearned income of the wealthy (interest, dividends, capital gains, etc.)
  • $40 billion in cuts to EITC and the child tax credit vs. $400 billion lost by abolishing the Alternative Minimum Tax (AMT is often the only tax paid by billionaires)

(from Americans for Tax Fairness)

While HAT and others are prepared to continue our push for fair funding in the District, we need help from our national partners and from people all around the country to stop the Trump Administration’s disastrous and immoral plan to take from the poor and give to the rich. We know that the impact of this theft will disproportionately fall on communities of color, causing the racial wealth gap to grow wider and wider.

Looking at our country’s history, it’s certainly not unprecedented. But as MANNA’s work in DC has proven, it’s not inevitable, either.

Poverty Politics and Profit FRONTLINE PBS

Frontline Goes for Flash Over Substance in LIHTC Report

In a recent year-long investigation, Frontline PBS and NPR delved into the affordable housing industry. The result was Poverty, Politics and Profit, an hour-long documentary on PBS, as well as several pieces on NPR and on both organization’s websites. While drawing attention to the nation’s affordable housing crisis is an important goal, in their work PBS and NPR seriously misrepresent the Low-Income Housing Tax Credit (LIHTC), a crucial tool for building affordable housing.

LIHTC works as a public-private partnership, and it was created under President Reagan as a replacement for the old system of government built public housing. It offers a tax credit to developers in exchange for building affordable housing. The developer then sells that tax credit to an investor to raise money for construction, with the resulting units required to remain affordable for 30 years.

The program has produced millions of units affordable to low-income families (14,000 in DC alone), and it enjoys widespread bipartisan support.

Over the past two decades LIHTC funding has grown considerably, from just over $4 billion in 1997 (inflation adjusted) to almost $7 billion in 2014. But during that time, the number of units produced each year has dropped from 70,000 to under 60,000. It’s a problem that’s worth looking into.

Unfortunately, this investigation was more interested in flashy anecdotes than a data driven analysis. Their work repeatedly refers to two cases of fraud found in south Florida, where developers embezzled a combined $38 million. Certainly, any level of fraud is too much, and it’s very possible that more federal oversight of LIHTC could be helpful.

But this represents a drop in the bucket of the program’s multi-billion-dollar budget. The PBS/NPR investigation found no other instances of fraud, and they uncovered no evidence pointing to wide-spread fraud in the industry.

The report also spends considerable time focusing on the commissions that investors and middle-men, called syndicators, make for their work. These payments are portrayed as a ballooning, shadowy industry, complete with images of men in suits laughing into their cocktails.

In fact, in recent decades increasing market competition has cut the rate of return for LIHTC investors by half. Since the mid-1990s, rates have gone from double digits to a more moderate 4 to 6 percent.

So why hasn’t increased money resulted in more LIHTC units? PBS and NPR actually covered all the major reasons in their reporting—albeit with significantly less gusto than the fraud and abuse angle.

Why more money is producing less units

1)      Rising construction costs: Over the same period the report considered, construction costs increased significantly faster than inflation. According to their own calculations, this alone accounts for 50 percent of the change in price per unit.

2)      Cuts in other federal funding: Affordable housing units often have multiple channels of subsidy, with more than one program helping to keep a unit affordable. Two of the biggest programs that supply this extra coverage, the federal HOME grant and the Community Development Block Grant, have been subject to painful cuts during the period in focus. This means that more LIHTC funding is needed for each unit to hit the same affordability levels.

3)      Deeper affordability: At the same time that other funding has been disappearing, officials have been making a push to make units affordable to lower-income families. That’s a great goal, but it costs more money, meaning that fewer units get built overall.

4)      Neighborhood choice: Similarly, in an effort to avoid creating concentrated pockets of poverty, more LIHTC buildings are being built in wealthier areas. It’s another worthy goal that, again, costs more money.

While Poverty, Politics and Profit seems to love the idea of a shadow network of affordable housing political bosses, what emerges instead is the picture of a program that’s consistently producing in the face of rising costs and changing priorities.

Then again, Bipartisan Program Provides Affordable Homes for Millions just doesn’t have the same ring to it.

The GOP Debate at the Ronald Reagan Library

With Cuts, Trump’s HUD Targets Low-Income Families

A leaked copy of the Department of Housing and Urban Development’s (HUD) upcoming budget request presents a grim picture for the future of affordable housing in America. The draft shows over $6 billion being cut, representing almost 15 percent of HUD’s annual budget. If enacted, experts estimate over 200,000 low-income households will lose their rental support, and thousands more will be prevented from moving to an affordable situation.

What makes these cuts even more perverse is the “reverse Robin Hood” essence of their design. Despite the ubiquitous nature of Republican calls for a reduction in federal debt, the Trump administration currently has plans for massive tax cuts for the very wealthy. Along with an additional $54 billion in military spending—almost double what commanders have requested—the picture is clear. These cuts do not represent budget balancing, but rather budget priorities.

The depth and breadth of these cuts is overwhelming, both nationally and for the District. Below we break down several of the top targets for the chopping block and the functions they fulfill.

Community Development Block Grants

Community Development Block Grants, or CDBG for short, provides flexible money for localities to use in community development. In the District, CDBG money makes up 80 percent of the budget for the Home Purchase Assistance Program (HPAP), DC’s mortgage assistance program for first time homebuyers. As we have written countless times before, HPAP plays a vital role in building homeownership among DC’s low-income families.

CDBG actually has strong bi-partisan support. Republicans like it because it gives money back to local communities to use as they please, a core conservative tenet.

HUD’s proposed budget, however, would cut the program’s $3 billion budget entirely. That would leave cities and states across the country scrambling to cover myriad services that their residents depend on. In many cases, poor families would simply fall through the cracks.

Housing Choice Vouchers

Housing Choice Vouchers act as a sort of backstop for many low-income families. Under the program, households are able to find a rental property on the open market and be guaranteed to never spend more than 30 percent of their income on housing—whatever costs go above this are covered by the voucher.

The HUD proposal would cut $300 million from this program, leaving about 200,000 families without assistance. Sadistically, here the Trump administration looks to take money from veterans for the military—included in this program are housing vouchers targeting formerly homeless veterans.

Public Housing

In 2010, HUD released a report describing the desperate state of public housing in America. Those conditions remain unchanged today. Buildings are crumbling, and the conditions many families live in are deplorable. In that 2010 report, HUD estimated that it would need tens of billions of dollars in additional funding to catch up on overdue maintenance.

Instead, President Trump’s HUD has proposed cutting public housing’s maintenance budget by $1.3 billion, a third of its total value. The proposal also takes $600 million from the operating budget, ensuring that more problems will arise even faster as time goes on.

HOME Investment Partnership Program

Like CDBG, HOME represents a pot of money that localities can use in a variety of ways. DC typically uses its share to fund affordable housing construction, like MANNA’s Willowbrook Condominiums.

Yet again, faced with a nationwide affordable housing crisis and a program that gives local governments control of federal dollars, the Trump administration looks to pull the plug. HOME, like CDBG, would be entirely eliminated. Another billion dollars for affordable housing would be lost.

What to do

The good news is that none of this is final. This proposal represents a draft of what the Trump administration will present to Congress. Marshaling the opposition of lawmakers will be crucial, especially among Republicans who see the positive impact that these locally controlled dollars have in their own districts.

You can help make sure that these cuts don’t happen. Call your representatives and let them know that funding bombs and billionaires over low-income families is unacceptable.